What is Redundancy?

 

Redundancy occurs when an employer dismisses an employee because the business no longer needs the role. This is typically due to restructuring or downsizing efforts to reduce the overall workforce.

Employment law guidelines

 

In the UK, redundancy is regulated by employment law, requiring employers to follow strict guidelines when making redundancies. This involves adhering to proper procedures, such as informing employees about the redundancy promptly. It allows them sufficient time to prepare for the transition.

 Redundancy is often used as a cost-saving measure when a company has too many employees. Employment law in the UK protects employees against redundancy. It provides them with the right to challenge redundancies if they feel they have been unfairly dismissed.

 This guide will provide redundancy information but please contact a solicitor from our team for free redundancy advice for employees and employers to know where you stand.

The redundancy process in the UK

 

The redundancy process is a complicated one and it is important to know the law to ensure that your rights are protected.

 There are three types of redundancies;

  • Compulsory Redundancy: No alternative jobs are available for the affected employees.
  • Voluntary Redundancy: The employee chooses to leave, often after finding a new job, which is different from a settlement agreement.
  • Natural Redundancy: This occurs when a role or department becomes unviable due to a lack of employees, often as a result of restructuring.

UK law requires all redundancies to undergo a formal consultation process. Employers must inform employees of their rights to statutory redundancy pay, provide time off to seek new employment and issue a written explanation for the dismissal.

The redundancy process varies based on the organisation’s size and the number of redundancies made. A statutory, individual consultation must take place to discuss the employee’s position and any potential alternative employment.

Claim for unfair dismissal or discrimination

 

Employees can bring claims for unfair dismissal or discrimination if they feel they were wrongfully terminated or discriminated against by their employer.

 The Employment Rights Act 1996 sets out the basic rights of employees and provides certain statutory remedies for breaches of those rights. Employees can bring a claim for unfair dismissal or discrimination if they believe that they have been unfairly dismissed, discriminated against, or subjected to a detriment.

 The Employment Rights Act 1996 also protects employees who are taking time off work to care for themselves or a family member, time off work on health and safety grounds. It protects them from being unfairly dismissed and sexual harassment in the workplace.

 To claim unfair dismissal or discrimination in the UK the following criteria must be met:

  • The claimant must have been employed for a minimum of 2 years and have worked at least one day in the last 3 months of employment.
  • The claimant must provide evidence that they were dismissed because of their age, sex, religion, race or disability.
  • If they claim unfair dismissal, they must provide evidence that they were dismissed without a fair reason.

Negotiating a better redundancy package

 

If you are in the process of negotiating a better redundancy package, it is important to know the legal rights and obligations of both parties.

 The employer must provide you with a notice period of at least 30 days before they make the decision to terminate your contract. The notice period can be written into your contract or it can be agreed verbally between you and your employer.

 The redundancy package is the amount of money that an employer pays to their employees when they are made redundant. It should include any accrued holiday pay, outstanding holiday pay, wages in lieu of notice and any other contractual payments owed. The statutory minimum redundancy payment is £380 for each year worked up until 10 years of service (£4500).

Negotiating a better redundancy package

 

If you are in the process of negotiating a better redundancy package, it is important to know the legal rights and obligations of both parties.

 The employer must provide you with a notice period of at least 30 days before they make the decision to terminate your contract. The notice period can be written into your contract or it can be agreed verbally between you and your employer.

 The redundancy package is the amount of money that an employer pays to their employees when they are made redundant. It should include any accrued holiday pay, outstanding holiday pay, wages in lieu of notice and any other contractual payments owed. 

Statutory Redundancy Pay Calculation in the UK (2024)

In the UK, statutory redundancy pay is based on the employee’s age, length of service and weekly pay. The current statutory limits (as of 2024) are:

  1. 1. For each full year worked when aged under 22: 0.5 week’s pay.
  2. 2. For each full year worked when aged between 22 and 40: 1 week’s pay.
  3. 3. For each full year worked when aged 41 or older: 1.5 weeks’ pay.

There is also a cap on weekly pay, which is currently £643 (as of April 2024). So even if an employee earns more than that, redundancy pay is calculated based on the £643 cap.

The maximum number of years that can be counted is 20 years, and there is a cap on the total statutory redundancy payment, which is currently £19,290.

Genuine redundancy situation

 

A genuine redundancy situation is when an employer has no need for the employee to carry on working for them. It is not a redundancy situation where the employer needs to cut staff numbers due to financial constraints.

 The UK government has set out a process that employers must follow in order to handle a genuine redundancy situation. Employers must:

 consult with employees and their representatives,

  • provide information about available benefits,
  • pay statutory payments.

Employment tribunal and redundancy

 

The Employment Tribunal is a court in the UK that deals with employment disputes. These can arise when an individual believes they have been unfairly dismissed or treated unfairly at work, for example, if they have been discriminated against because of their age, gender or race.

 In order to qualify for a claim to be heard by an Employment Tribunal, the dispute must be less than one year old. It must not be possible to resolve it through any other employment law procedure.

 The Employment Tribunal will then investigate and try to find out if there has been a breach of either statutory law or an individual’s contract of employment. If the tribunal finds that there has been no breach then it will dismiss the case.

Sham or fake redundancy

 

Sham or fake redundancy is a common practice in the UK. This is where an employer will announce that it intends to make a number of redundant employees, but then never actually go through with the redundancies.

 This can be done for many reasons, such as when an employer has not met its performance targets and wants to avoid paying compensation for unfair dismissal. Alternatively, if the employer needs to avoid giving notice to employees who are close to retirement.

 In order for sham or fake redundancies not to be considered illegal in the UK, they must meet certain conditions. These include:

  • a genuine intention at some point of going ahead with the redundancies 
  • any employee who is made redundant must have been informed about their position before it was announced publicly.

The sham or fake redundancy selection process

 

The UK Government is considering a new law that would give employers the power to force their employees to take a genuine redundancy situation.

 The law will give employers the power to force their employees to take a genuine redundancy situation. The proposed law will make it easier for employers to dismiss staff and replace them with alternative labour.

Is your redundancy selection clear?

 

The law requires that employers are clear about the reasons for redundancy and what is expected of employees in the selection process.

 If you want to make sure that your redundancy selection is fair and transparent, here are some tips: 

  • Be clear about the reasons for redundancy
  • Be clear about the selection process
  • Provide a list of skills needed for each position

Redundancy selection pool

 

In a redundancy selection pool, employees have to be selected for redundancy.

 A redundancy selection pool is a group of people who are being considered for redundancy. These people are usually chosen by a manager and can be from the same department or different departments. The selection process of the employees in the pool is usually based on factors. such as seniority, skill set and performance.

 If there is more than one person in the pool then they are asked to take part in an interview with HR representatives and managers to decide who will be chosen for redundancy.

Redundancy selection criteria

 

The following redundancy selection criteria are not exhaustive, but they are the ones that most UK employers will use.

 Number of employees:

  • Employers assess the total number of employees in the organisation and decide on an appropriate redundancy level based on company size.
  • Example: An organisation with 10 employees may find it inappropriate to make any redundancies, whereas an organisation with 100 employees might consider making redundancies of up to 10%.

Length of service:

  • This criterion is often used alongside other factors and can act as a tie-breaker when multiple employees meet the same qualifications for redundancy selection.
  • Example: If two employees meet the same selection criteria, length of service may determine who is selected for redundancy.

Redundancy selection interviews

 

Preliminary Interviews

  • The employer, typically managers, HR personnel, or senior leadership (CEO or managing director), conducts preliminary interviews with each candidate for redundancy.
  • These interviews aim to identify employees who possess skills and experience that could be useful in other roles within the company.

Pre-Interview Discussions for Redeployment

  • For those identified in the preliminary interviews as having suitable skills, the next step is conducting pre-interview discussions.
  • These talks explore whether these employees can be redeployed to other positions within the company, rather than being laid off.

Allow Sufficient Time Between Interviews

  • Adequate time should be allowed between the preliminary interviews and the follow-up discussions to assess suitability for redeployment.
  • This ensures a thorough evaluation process and gives time to consider other options for those employees not suitable for redeployment.

Redundancy selection discrimination

 

In the UK, employers are not allowed to discriminate between potential employees on the basis of age, disability, sex or race. However, they are allowed to select candidates based on their redundancy status. This is known as redundancy selection discrimination and it is legal in the UK. This is a type of discrimination that is completely legal in the UK.

Unfair selection criteria redundancy

 

Redundancy selection discrimination is a term used in the UK to describe the process of selecting an employee for redundancy. This process is often undertaken by a Selection Committee, which is made up of senior managers and line managers. 

The Selection Committee usually has to carry out a number of tasks. 

These include: 

  • carrying out an appraisal of each redundant employee’s performance record;
  • assessing whether any employees have been unfairly treated in their appraisal;
  • deciding on the order in which employees will be selected for redundancy; and
  • informing those employees that they are being made redundant.

Redundancy consultation

 

Redundancy consultation is a process that helps an individual understand their rights and entitlements when they are made redundant.

 There are many reasons why individuals may be made redundant. These include:

  • Growing competition
  • Changes in the organisation’s market position or strategy
  • Changes in technology
  • External economic factors, such as recession or globalisation
  • Organisational restructuring

 The redundancy consultation process is designed to help an individual understand their rights and entitlements when they are made redundant.

Redundancy consultation period

 

The redundancy consultation period is the period of time between informing the employee of their redundancy and the date on which they are due to leave. This period is usually one month but can be longer if it is agreed by both parties.

 The aim of this consultation period is to ensure that employees receive support in finding a new job and to give employers time to find a suitable alternative worker.

Redundancy consultation meeting

 

A redundancy consultation meeting is a meeting that takes place between a company and an employee or employees to discuss the potential of redundancy.

 The employer should provide information on the following:

  • The number of people who are to be made redundant,
  • The reason for redundancy,
  • The date on which the redundancies will take effect,
  • How much notice will be given before the redundancies take effect, and
  • What arrangements will be made for payment in lieu of notice

Without prejudice conversation

 

A without-prejudice conversation is a conversation that is not based on the belief that one person is better or worse than the other.

 This type of conversation can be difficult to have, especially if you are not used to it. It’s important to be able to have these conversations and understand how they work in order to avoid getting frustrated or angry.

 A without-prejudice conversation differs from a normal conversation in that it is less likely to focus on what you want and more likely to focus on what the other person wants.

Redundancy negotiation as a settlement agreement

 

A redundancy negotiation is a type of settlement agreement where the employer and the employee agree on a severance package or an early termination of employment. For legal advice consult with a redundancy settlement agreement solicitor in the UK.

 The employer will generally offer a redundancy package to the employee to make them look more attractive to other employers. The employee will then negotiate with the employer to find out what they can accept from the offer.

 Redundancy negotiations are common in the UK, where employees are protected by law and have certain rights over their employment contracts.

Considered for alternative work?

 

The UK government is considering introducing a law that will make it illegal for employers to discriminate against employees who are considered for alternative work.

 The UK government is considering introducing a law that will make it illegal for employers to discriminate against employees who are considered for alternative work. The government wants to guarantee equal opportunities in the workplace.

Do you pay tax on redundancy pay?

 

In the UK, redundancy pay is generally tax-free up to £30,000. If your redundancy payment exceeds £30,000, the excess amount will be subject to income tax, but it will not be subject to National Insurance contributions.

Here’s a breakdown:

  • Statutory redundancy pay is always tax-free.
  • If your employer offers an enhanced redundancy package that exceeds £30,000, the portion above this threshold will be taxed as income.

It’s important to note that payments in lieu of notice (PILON), holiday pay, or any outstanding wages are treated as normal earnings and are subject to both income tax and National Insurance deductions from the first penny.

When does redundancy get paid?

 

If you are a worker in the UK, you are entitled to redundancy pay if your employer decides to close down or move the business. The law also states that employers must give notice of redundancy and redundancy pay before they make the decision.

 In some cases, an employer may decide to reduce an employee’s hours instead of firing them. In this case, employees still get redundancy pay for the hours they have worked.

How much redundancy notice should I receive?

 

The UK has a strict redundancy notice law stipulating an employee must receive a minimum of two weeks’ notice.

 One of the most common questions people ask is how much redundancy notice they should give their employer when they are leaving. This is because there is no set rule or standard for how much redundancy notice you need to give your employer. The amount of redundancy notice you need to give your employer depends on the type of work you do and what contract you have signed with them.

 The amount of redundancy notice can also depend on whether you are employed in a permanent or temporary position, and whether your employment was made permanent after it was originally temporary.

Writing a grievance to your employer

 

A grievance is a formal complaint by an employee to their employer. The grievance can be on any grounds, such as unfair treatment, poor work conditions or discrimination.

 The first step in writing a grievance is to identify the problem and provide evidence that it has occurred. It is important to avoid using vague language and use specific examples of the issue you are complaining about instead.

 In the UK, there are two types of grievances: 

  • A statutory grievance – where your employer has broken a law or used bad practice that can be challenged in court
  • An internal grievance – where your employer’s policies have been breached and you want them to change

Resign before redundancy?

 

The UK government is considering a law that will force employees to resign before they are made redundant. This new law is designed to reduce the number of people who are made redundant. This makes it less likely that they will claim unfair dismissal or redundancy payments.

Appealing against your redundancy

 

There are various reasons why people might want to appeal against redundancy.

 Some of the common reasons include: 

  • People who have been unfairly treated by their employers, such as not being given a chance to prove themselves or being fired without a second chance.
  • People who have been made redundant because of the company’s financial problems.
  • People who were made redundant and want to find new work in their field.

What happens to my employment rights if I’m made redundant?

 

When an employee is made redundant, their rights to some employment benefits depend on the type of redundancy. 

There are two types of redundancies: 

1) Permanent redundancy – when the company makes a decision to permanently close down the business or stop trading, and the employee is made redundant as a result. This kind of redundancy is often referred to as “redundancy for operational reasons.”

2) Temporary redundancy – when an employer decides that they can’t continue with their business: they need to make someone redundant because they can’t find anyone else to do the job. This type of redundancy is often referred to as “redundancy for economic reasons.”

 It’s important that employees understand what type of redundancy they have in order to decide what benefits they are entitled to.

How to prepare for a potential redundancy

 

In today’s economy, it is more likely that you will experience redundancy than ever before.

 An employee can prepare for redundancy by accepting it and moving on: Accepting a redundancy can be difficult, but sometimes it is the best option. If you know you are not going to find another job in your field of work, accepting the redundancy may be your best option to get a severance package and start looking for a new job.

How to deal with redundancy as an employee

 

Dealing with redundancy can be challenging, but adopting a proactive approach can help you manage the process more effectively. Here are some key steps you can take if you’re facing redundancy:

  • Be Prepared for the Possibility: Don’t wait for redundancy to happen. Start preparing by updating your CV, expanding your professional network and considering potential job opportunities. Being ready for a worst-case scenario can make the transition smoother.

  • Understand Your Rights: Familiarise yourself with your redundancy rights under UK law. This includes statutory redundancy pay, notice periods and other entitlements, such as unused holiday pay. Knowing your rights will help you navigate the process more confidently and ensure you receive what you’re entitled to.
  • Open a Dialogue with Your Employer: If redundancy is on the horizon, initiate a conversation with your employer. Ask about any alternatives, such as reducing hours, moving to another department, or even delaying the decision. Your employer may be open to discussing options or extending your notice period.
  • Seek Support and Advice: If you’re unsure about your redundancy terms, seek advice from professionals like a solicitor, your HR department, or an advisory service, such as ACAS. Trade unions can also provide valuable support during the process.
  • Focus on Upskilling and Job Search: Use this time to develop new skills or certifications that can boost your employability. Start searching for new opportunities early. Take advantage of career support services, such as outplacement assistance or job-seeking platforms, to help in your transition.
  • Take Control of Your Finances: Review your financial situation, create a budget, and plan for the possibility of reduced income. Understanding your redundancy pay and checking whether you’re eligible for benefits, such as Universal Credit or Jobseeker’s Allowance, can help ease financial stress during this time.
  • Maintain a Positive Mindset: While redundancy can be difficult, it can also present opportunities for a fresh start or even a career change. Stay focused on your future goals, keep your options open, and use this time to explore new paths that might better align with your long-term ambitions.

How to deal with redundancy as an employee

By staying informed, taking action early, and exploring your options, you can approach redundancy with confidence and make the most of the opportunities that come your way.

How to deal with redundancy as an employer

 

As an employer, managing redundancies can be challenging and emotional for all involved. It’s essential to handle the process legally, ethically, and transparently.

  • Understand Legal Obligations: Familiarise yourself with employment law, including statutory redundancy pay, notice periods, and consultation requirements. Ensure you follow UK employment law, such as the Employment Rights Act 1996.

  • Plan Redundancies Carefully: Ensure redundancy is the last resort after considering alternatives like reducing hours or offering voluntary redundancy. Develop a clear plan for how roles will be selected for redundancy based on objective criteria.

  • Consultation Process: If you’re making 20 or more employees redundant within 90 days at one establishment, a collective consultation is required. For fewer redundancies, individual consultation with affected employees is necessary. Be transparent and provide opportunities for feedback.

  • Provide Adequate Notice: Employees are entitled to a notice period based on their length of service, which should be communicated in writing. The statutory notice periods are:

    • At least one week for employees with one month to two years of service.

    • One week for every year worked (up to 12 weeks) for employees with two or more years of service.

  • Calculate Redundancy Pay: Ensure employees receive their statutory redundancy pay or enhanced redundancy if part of their employment contract. Statutory redundancy is based on age, length of service, and weekly pay, with caps applied to weekly earnings and total payouts.

  • Offer Support and Resources: Consider offering outplacement services, career counselling, or training to help employees transition. Providing references and support with job applications can also aid employees in finding new roles.

  • Handle Redundancy with Sensitivity: Redundancies can be emotionally and mentally challenging for employees. Approach conversations with empathy and maintain open communication. Be clear about the reasons for redundancy to maintain morale and trust within the company.

  • Document Everything: Keep detailed records of the redundancy process, including consultation notes, selection criteria, notice letters and payment details. This will protect your business from potential disputes or legal challenges.

By following these steps, employers can navigate the redundancy process fairly and lawfully while minimising negative impacts on employees and the business.

Are you facing redundancy or navigating it as an employer? Get expert advice from our legal team to ensure you’re informed and protected during the process.

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