Redundancy is a potentially fair reason for dismissing an employee. An employee may be made redundant for several reasons including the following:

  • The business is closing down or relocating;
  • The company has merged or transferred the business to a new employer;
  • A business restructuring leads to a streamlining of the numbers of employees required;
  • The requirement for employees to do the work is reduced because, for example, advancements in technology render certain roles unnecessary, or the nature of the work has changed fundamentally so that an employee’s work has ceased or diminished.

 

Selecting employees for redundancy
An employer is under an obligation to select employees for redundancy fairly and objectively. If a particular business is closing down, it will be obvious which employees will be made redundant. However, it may be necessary for an employer to consider making redundancies by other methods of selection such as:

  • ‘Last in, first out’ is based on selecting those employees for redundancy who have served the shortest length of time, although employers should ensure that this does not indirectly lead to age discrimination.
  • Asking for volunteers, although it is up to the employer who they eventually select.
  • An employer may select a group or section of the workforce for redundancy and then make redundancies based on objective criteria such as skills and competence, experience, disciplinary records, capability etc.
  • An employer may also ask employees to re-apply for their own jobs.

 

An employer must not select employees for redundancy based on personal or discriminatory reasons. If an employee is made redundant for any of the following reasons, then the redundancy is considered automatically unfair and an employee may be able to make a claim for unfair dismissal:

  • Membership or duties of a trade union;
  • Whistleblowing (alleging misconduct of the employer or business);
  • Taking action on health and safety issues;
  • Exercising a legal right such as an employee’s right to minimum wage, leave relating to family reasons including maternity / paternity leave, entitlement to a written statement of terms and conditions of employment or an itemised pay statement;
  • Act of discrimination, harassment and victimisation based on gender (including gender reassignment), sexual orientation, race, religion or belief, disability, age or working pattern (such as part-time or fixed-term employees).

 

Informing employees of redundancy
If an employer is making 20 or more employees redundant within a 90-day period, it should consult all the appropriate representatives of any employees who may be affected, (e.g. the employees’ trade union official). If there are no representatives, the employer must arrange for the employees to elect their own representatives. This is known as “Collective Consultation” with the employer also required to inform the government in the case of 20 or more redundancies.

There are certain procedures the employer must follow including disclosing the reasons for the redundancies, the number of redundancies, descriptions of the employees to be made redundant and the method of selection.

If an employer is making less than 20 redundancies, the employer must inform the employee in writing of the proposed redundancy with an invitation to attend a meeting to discuss the matter. The employee can choose to be accompanied at the meeting by a trade union representative or another employee. After the meeting the employer must inform the employee of its decision and notify the employee of their right to appeal against it. If an employee wishes to appeal the decision, a further meeting must be held and the employer must give the employee its final decision following that meeting.

The employer must give the employee proper notice of the end of the contract. The contract of employment may state the period of notice to be given, if not it is an implied term of any contract that is not for a fixed period that reasonable notice should be given. There is a statutory minimum period which will prevail over any shorter contractual period which is:

  • At least one week’s notice if continuously employed for 1 month to 2 years;
  • One week’s notice for each year if continuously employed for 2 years to 12 years;
  • A maximum of 12 weeks’ notice if continuously employed for 12 years or more.

Sometimes the employer may give an employee a payment in lieu of the notice period.

 

Redundancy payment
An employee with 2 years’ continuous employment will be entitled to a minimum statutory redundancy payment, although the contract of employment may provide for more generous payments. A redundancy payment is intended to compensate the employee for loss of his job. The amount of the statutory payment will depend on the age of the employee, the length of employment and the employee’s weekly gross pay as follows:-

  • An employee aged 18 or over is entitled to half a week’s pay for each year worked;
  • An employee aged 22 or over is entitled to one week’s pay for each year worked;
  • An employee aged 41 or over is entitled to one-and-a-half week’s pay for each year worked.

The total number of years employed is subject to a maximum of 20 and there is a statutory maximum for each week’s pay.

 

Wrongful dismissal
If an employer dismisses an employee in breach of their contract this may amount to wrongful dismissal. Such instances include:

  • Dismissing an employee without giving the employee the notice period as set out in their contract;
  • If an employer unilaterally reduces pay to the employee or fundamentally changes the nature of the job without a provision to do so in the contract;
  • If an employer breaches the contract by bringing a fixed-term contract to an end prior to its expiry date.
  • The remedy for a breach of contract is damages (monetary compensation).

 

Unfair dismissal
Generally, only an employee who has been continuously employed for two years or more will be able to bring a claim for unfair dismissal. If so, they must do so within three months from the date they were dismissed. Apart from those reasons listed above which are considered ‘automatically unfair’, the fairness of a dismissal will depend on whether there was a potentially fair reason for dismissal and whether in the circumstances the employer acted reasonably. If an employee is successful in their claim, they may receive an award of compensation or, in rarer cases, be reinstated to their former position (reinstatement) or offered a different job with the same employer (re-engagement).

 

Settlement Agreement
This is a written agreement entered into between an employer and employee upon redundancy. It usually provides that an employee is giving up all rights to bring a claim against their employer in return for a lump sum payment. In order for the agreement to be binding the employee must seek independent legal advice as to its terms and effect. Please see our Factsheet on Settlement Agreements.

 

This document is for general information only and is not intended to provide legal advice. Dixon Ward accepts no liability in connection with any loss suffered as a result of reliance on the information contained in this Factsheet. If you require further legal advice, please get in touch with one of our specialist lawyers.

Our Business & Employment Law team

Dixon Ward | Business & Employment Law | Dispute Resolution | Leasehold Enfranchisement |Rob Horler| Our Story

Rod Horler

Business Law & Employment / Dispute Resolution
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Dixon Ward | Business & Employment Law | Dispute Resolution | Leasehold Enfranchisement | Sharon El-Nawar

Sharon El-Nawar

Dispute Resolution / Business Law & Employment
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Dixon Ward | Business & Employment Law | Dispute Resolution | Leasehold Enfranchisement | Aryana Odisho

Aryana Odisho

Dispute Resolution / Business Law & Employment
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