Redundancy
A true redundancy situation normally arises from one of the following:
1. Closure of the business
2. Closure of the business at a particular workplace.
3. Diminished requirement for employees to carry out work of a particular kind.
It is vital to note that it is the job that must be redundant, not the individual.
It is most important for the employer to follow proper procedures both before making the decision to dismiss and in terminating the employment. This involves:
1. Giving as much warning as reasonably possible of redundancies.
2. Consulting with affected employees (and trade union or employee representatives where relevant).
3. Having a good selection system.
4. Following statutory procedures for dismissal.
CONSULTATIONS
Fair consultations prior to redundancy selection are an essential part of the process. If making 20 or more employees redundant within a 90 day period it is a statutory requirement to consult with employees representatives (or trade union that employees belong to and which is recognised to negotiate on their behalf.)
Whilst it is not a statutory requirement to consult when making less than 20 staff redundant it is best practice to do so and would be expected by employment tribunals.
“Fair consultation means:
(a) Consultation when the proposals are still at a formative stage.
(b) Adequate information on which to respond.
(c) Adequate time in which to respond.
(d) Conscientious consideration of the response”.
Another way of putting the point is that fair consultation involves giving the employees fair and proper opportunity to understand fully the matters on which they are being consulted and time to express their views on those matters. The employer should then consider any views given both properly and genuinely.
In statutory consultations the employer must provide at the outset to the employees representatives or union official written details of:
(a) the reason for the redundancies
(b) number and types of employees involved
(c) total number of employees of each of these types employed at the establishment
(d) how it is planned to select the employees to make redundant
(e) how the redundancies will be carried out
(f) how redundancy payments will be calculated
In any consultation the employer should consider the possibility of alternative work in the business and whether, with training any involved in the redundancy process could fill other positions. It can be a defence to a redundancy claim that suitable alternative employment was offered to the employee and was unreasonably refused.
The employer must also notify the DTI/Local job centre (HR1 Form) where 20 or more redundancies are involved and this notice must be given at least 30 days before giving notice to employees terminating their contracts of employment.
No dismissals must be made before the end of the consultation period without agreement.
The consultations do not have to end in agreement but they must be property carried out.
Draft letters are available from the Helpline in regard to consultation procedures.
SELECTION
It is essential that the employer adopts and complies with a fair and non-discriminatory system for selecting staff for redundancy. Failure to do so could result in a claim for unfair dismissal on the ground that the employee had been unfairly selected for redundancy. It is good practice to refer employees to the system to be adopted and ask them to confirm (preferably in writing) that they are in agreement with what is proposed.
What the employer has to do is have a method of selection which is fair in general terms and ensure that it is applied reasonably in every case of redundancy by the senior manager responsible for taking the decisions. Care must be taken to ensure there is no discrimination relating to sex, race, disability, age or assertion of any employment rights.
“Graded assessment systems” or “Marking systems” are a well recognised aid to any fair process of redundancy selection. See Staff Handbook for criteria for selection. (Note that the Court of Appeal has ruled that length of service can be a criteria for redundancy provided it is used as one of a range of criteria and not simply the sole reason for making someone redundant)
Those selected for redundancy are entitled to reasonable time-off on full pay for job hunting or to arrange training.
DISMISSALS
In addition to giving notice in accordance with the contract of employment (or statutory minimum notice) it is good practice for the employer to provide details in writing of the reason for dismissal, the evidence leading to that decision, an invite to a meeting and notification of right of appeal. (See under Termination of Employment). Draft letters are available from the Helpline.
REDUNDANCY PAYMENTS
Those dismissed for redundancy are entitled to a minimum statutory payment if they have been in qualifying service for a period of at least 2 years. There is no longer an upper age limit.
The payment is calculated by reference to (a) length of continuous service at relevant date (b) employees weekly pay (but note statutory maximum) and (c) employees age.
The maximum number of years for calculation of continuous service is 20.
The entitlement is:
· for each complete year of work below the age of 21 years – ½ weeks pay.
· between 22 and 40 inclusive – 1 weeks pay.
· 41 and over – 1 ½ weeks pay
Note that for shift workers without “normal working hours” the weekly pay is calculated by taking the average weekly earnings over the 12 week period ending on the last day the employee worked under the contract.
The redundancy payment is free of tax and N.I.C.s
From February 2011 the weekly limit for calculating statutory redundancy pay was increased to £400
All PBS information sheets are designed to provide the detail you need to implement best business and employment practices. They are not a detailed commentary on the current law and where advice is needed in a specific case you should contact the PBS Helpline for more detailed advice.
redundancy