Fact Sheet – Handling Redundancy

Redundancy is one of the fair grounds on which an employer can terminate an employee’s employment but whilst it is important to handle redundancies in the context of a dismissal, there is plenty of other guidance and legislation that has to be complied with.

Redundancy situation

The starting point is to establish that it is a true redundancy situation. A redundancy arises where the job that the employee was employed to do ceases or diminishes in the place that the employee was employed to do the work.  It is not always immediately clear whether this statutory definition is fulfilled because redundancies often arise out of restructuring and reorganisation exercises aimed at streamlining and cutting costs, particularly in the current economic climate.

Reasonableness

Employers must at reasonably in making employees redundant.  Reasonableness includes following the proper redundancy process in accordance with the ACAS guidelines and exploring all options before finally settling on dismissal on grounds of redundancy.  Some of the main areas for consideration by the employer are:

Consultation with employees – depending on the number of employees involved there may be minimum statutory consultation periods but even if it is just one employee, the Employer is obliged to fully consult. For consultation to be meaningful, some time needs to be taken over the process and Employers may need to consider ideas or suggestions from employees that the Employee hadn’t envisaged.

Inviting volunteers – employers should try to secure redundancies on a voluntary basis where possible before moving to compulsory redundancy

Selection criteria – where the Employer is streamlining, for example, it may not be a straightforward question of deleting certain posts and declaring the incumbent employee potentially redundant. The Employer may be wanting to reduce headcount in specific areas where several employees have the same role, job title and duties. Here the employer must identify the pool of affected employees and then apply objective selection criteria to select the necessary number of redundancies.

Suitable alternative employment – having identified employees who are at risk of redundancy, the employer must consider whether there is any alternative employment which the employee might be able to undertake within the organisation. This may involve offering some training or making other changes to the contract of employment – which would have to be agreed with the employee.

There is a statutory trial period of one month for both parties to decide if the new arrangements are working. At the end of this period, if things haven’t worked out the employee will still receive the same redundancy terms.

There are often disputes about what is suitable alternative employment. If the employee turns down what the Employer believes to be a suitable alternative role, he or she is treated as having resigned and loses the entitlement to redundancy pay. If it is agreed that no suitable alternative employment exists, the employee’s employment is terminated and redundancy pay may be payable.

Entitlements on redundancy

  • Contractual or statutory notice whichever is greater
  • Statutory Redundancy pay based on age and length of service subject to having 2 years continuous employment
  • Accrued but untaken holiday pay

Enhanced redundancy payments

Employers can enhance redundancy payments either as a contractual entitlement or on a discretionary basis. Enhanced  payments are normally paid through a Compromise Agreement by which the Employee gives up his or her right to bring a claim against the Employer.

Unfair Dismissal

Employees who feel their redundancy was unfair may bring a claim of unfair dismissal in the Employment Tribunal

For more information contact Karen Bulfin at Bulfin & Co on 0208 866 0044 or by email: karen@bulfin.co.uk