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What Does Redundancy Mean, And When Is Redundancy Fair?

We are Redundancy Solicitors advising on this tricky subject. Employers often get the redundancy process wrong, exposing themselves to unnecessary claims. We will work with you with a view to achieving a good result for you (see When Employers Get Redundancy Wrong). Call today for a free initial chat with an Employment Solicitor on 0207 118 0950.   See our Redundancy Calculator.

What is Redundancy?

Under s139 Employment Rights Act 1996, redundancy arises when the employer ceases or intends to cease the business for which the employee was employed, or when the requirement for the employee to carry out work of a particular kind (or in a particular place) has or is likely to diminish.

Examples of what IS likely to be a real Redundancy Situation:

  • The organisation wishes to close a particular branch or office.
  • The organisation stops producing a particular product, or providing a particular service
  • The organisation’s business has shrunk.
  • The organisation no longer requires employee’s to carry out a particular job or function.
  • the organisation is transferring the role to another part of the country

Examples of what IS NOT likely to be a real Redundancy Situation:

  • The organisation wants to use this as an excuse to remove an employee who is not performing adequately in the role or does not fit in for whatever reason.
  • The organisation wants to replace an employee with someone on a lower rate of pay.
  • The organisation does not like a certain employee, or thinks he/she is underperforming or has been off sick too much recently.

Who does the employer have to select candidates for redundancy from?

The employer should first of all consider the ‘pool’ of employees who they may wish to make redundant. The pool can be selected on amongst other things, the following basis:

  • All employees;
  • All employees within a particular department;
  • All employees with a particular job title;
  • All employees who do not directly generate income for the organisation;
  • All employees outside the core operations of the organisation;

Nb: The employer should not tailor the pool of potential redundancies to encompass the individuals the employer has already decided should be made redundant.

What is consultation on redundancy?

Duty to Consult: Before making any decision with respect to redundancies, the employer has a duty to consult with the employees who may be affected.

Length of Consultation: This is not specified by statute (unless 20 or more employees are being made redundant), but unless there are exceptional circumstances, this should be a reasonable length of time, or at least one week. It should consist of at least one meeting with the employee, plus giving the employee the option of a further meeting at the end of the consultation period.

Object of the Consultation Process: The consultation is to include ways of avoiding the redundancy situation or dismissals, or of reducing the number of dismissals involved and mitigating the effects of the dismissals.

The legislation does not require agreement to be reached but the employer must consult in ‘good faith’ with a view to reaching agreement.

Nb: The employer should not enter into a ‘sham’ consultation process in which the decision to make redundancies has already irrevocably been made, otherwise the dismissal may be rendered unfair.

Possible alternatives to redundancies: Alternatives to making redundancies may include:

  • The employee works fewer hours
  • The employee agrees to a cut in pay
  • Other savings are made

What criteria can the employer rely on to select people for redundancy?

It is essential to ensure that objective criteria are applied to choose which individuals of the potential pool should be made redundant.

It should be possibly to demonstrate how those objective criteria have been applied. This may be on the old fashioned ‘last in first out’ principle, or it may be on a more sophisticated score card approach.

Employers should not decide who to dismiss in advance, and then seek to justify it after the event.

What are suitable alternative vacancies?

During the notice period, it is essential for the employer to consider the employee for any suitable alternative vacancies within the organisation, or the group of companies if applicable.

It is good practice to forward the employee lists of all vacancies within the organisation (or group of companies if applicable). This should be done on a regular basis, either once a week, or when new vacancies arise. This way the employee can choose him or her self which vacancies to apply for.

What is the right to appeal?

It is essential for the employer to give the employee the right to appeal the decision to dismiss him or her. Failure to do so may render the dismissal unfair. Ideally the appeal should be heard by a more senior manager, unconnected with the original decision.

What is the employee’s right to a statutory redundancy payment?

Each employee who has two or more year’s service has the right to receive a statutory redundancy payment on termination of employment. If the employee has been working between the ages of 21 and 41, his or her entitlement is a weeks pay (not exceeding £538 (£525 before 6 April 2020) times full years worked. There is a multiplier of 1.5 for years worked over the age of 41. To calculate this sum online, search use our Redundancy Calculator tool .

What is the employee’s statutory right to notice?

Each employee has a statutory right to receive notice as set out below:

  • All employees with more than three months’ continuous employment have a statutory right to receive one week’s notice.
  • One week’s notice for each full year worked, up to a maximum of 12 weeks.

If the contractual entitlement to notice is greater than the statutory right, then the employee has the right to receive the contractual entitlement.

There is no obligation on the employer to give payment in lieu of notice, although often employers choose to do so. Please note that a payment in lieu of notice may be taxable if the employer reserves the right in the contract of employment to make a payment in lieu of notice (see below).


Do employers have to give enhanced redundancy packages?

Employers frequently opt to offer enhanced redundancy packages but they are rarely obliged to do so, unless there is a contractual agreement to do so?

What is a Settlement Agreement?

A Settlement Agreement is an agreement prescribed by statute to bring to an end certain statutory claims (ie unfair dismissal or discrimination) arising out of the employee’s employment or termination of employment.

It’s essential for the employee to get independent legal advice before doing so. Employers will generally cover the cost to the employee of getting that legal advice before deciding whether or not to sign away their legal rights, or whether to negotiate a better severance deal.

If an employer is offering enhanced severance terms, we would generally recommend that the employer obliged the employee to agree to the terms of the settlement agreement before paying the settlement money.

call us today to speak to one of our redundancy law solicitors on 0207 118 0950 for redundancy advice.

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