An Introduction to Redundancy

Redundancy is a type of dismissal which employers can use when someone's job or role within their business or organisation is no longer required. This is generally because the business is changing what it does or is doing things in a different way. It could also be because the business is moving location or closing down.

For redundancy to be lawful, the employer must demonstrate that the employee's job will no longer exist. Employers must also have taken steps to avoid redundancy before dismissing an employee.

Here we provide an introduction to the redundancy process. Redundancy is a complex area of employment law, and employers should take professional advice before making any decisions in relation to redundancy.

Employers' legal responsibilities

Employers must fully consult employees about any redundancies that will be made within their business. As best practice, employers making fewer than 20 employees redundant should provide all employees with written details covering:

The reasons for the redundancies.
The numbers and categories of employees involved.
How employees will be selected for redundancy.
How redundancy payments will be calculated.

Employees being made redundant have certain rights. Employers mut ensure that any employees under notice of redundancy have the right to:

Be offered alternative employment within the business wherever possible.
Try out a suitable alternative offer of employment for four weeks without losing their right to a redundancy payment.
Take reasonable paid time off to look for a new job or to arrange training.
A minimum period of notice equivalent to a week for every year of employment, up to a maximum of 12 weeks.
Not be unfairly selected for redundancy.
Statutory redundancy pay after two years' service.
Be given at least the statutory notice period, based on how long they have worked for the business. This ranges from one to 12 weeks.

Redundancy payments

Redundancy pay is calculated as follows:

Half a week's pay for each complete year of continuous service worked up to the age of 22.
One week's pay per complete year of service worked after the employee's 22nd birthday.
One and a half weeks' pay per complete year of service worked after the employee's 41st birthday.

In England, Wales and Scotland, the maximum week's pay is capped at £643 and the maximum statutory redundancy payment is £19,290. In Northern Ireland, the maximum week's pay is capped at £669 and the maximum statutory redundancy payment is £20,070.

Across the UK, the maximum number of years' service is capped at 20 years.

Employers can offer higher payments. Employers can also opt to provide redundancy pay to employees with less than two years' service.

If a business has severe cash flow problems and statutory redundancy payments cannot be made, the Redundancy Payment Service (RPS) can pay employees from the

National Insurance Fund.

Redundancy and unfair dismissal

Redundancy will be regarded as unfair dismissal under the following circumstances:

If any redundancy procedures are not followed.
If there has been unfair selection for redundancy.

There are many reasons for redundancy that are automatically unfair, including selection based upon:

Trade union membership (or non-membership).
Part-time status.
Pregnancy or maternity/paternity-related reasons.
A protected characteristic, including sex, sexual orientation, marital status, disability, race or religion.

Redundancies and business transfers

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as TUPE), employee rights are protected when all or part of a business is bought or sold.

Under the Regulations, the existing terms and conditions of the contracts of employees are protected and will transfer automatically to the new employer. Their length of service with the organisation is continued as if they have always worked for their new employer.

The TUPE Regulations are complex and employers should take professional advice from the solicitor engaged in the sale or purchase of a business before taking any action under TUPE.

Contact Ashored for help and support with your business.