Redundancy is one of the potentially fair reasons to dismiss an employee pursuant to employment law applicable in England and Wales.


It is very common for employees who are being offered settlement agreements, for redundancy to be the reason why their employer wants to terminate their employment.


Certain employers always hand out settlement agreements to employees who are accepting voluntary redundancy.


The reason for this is those employers quite often want to pay an employee in excess of the statutory minimum entitlement without setting a precedent.


The means to do this is to offer those employees a settlement agreement to enter into so that the payment of a termination payment which exceeds the statutory minimum can remain confidential and will not set a precedent for future employers. 


Employers often want to encourage individuals to accept the offer of voluntary redundancy because this makes matters more straightforward for them and avoids the need to follow a formal redundancy process with those same individuals.


Formal redundancy processes are often more contentious and more likely to lead to claims in the Employment Tribunal.

Redundancy payments

The amount that an employee can expect to receive when being made redundant by his or her employer is directly related to his or her salary level, length of service and age.


An employee typically receives a payment related to statutory redundancy which is subject to statutory minimum weekly amounts per year of service together with a payment in lieu of his or her contractual entitlements.


Contractual entitlements include payments of salary up to the date of termination together with payment in lieu of notice and payment in lieu of any accrued but untaken annual leave.


Individuals being offered a settlement agreement as part of the redundancy process are typically offered this at the outset of the process so that the employer is not required to complete the process and following the settlement agreement being signed by all parties, all claims will be waived.

A fair redundancy

In order for a redundancy to be fair, it is necessary for the employer to show that there is a reduced requirement for a particular role at an organisation.


In addition to this, it is necessary for employers to follow a process which is compliant with employment law which includes the need to consult with the individuals about any ways in which the redundancy may be avoided.


In situations where there are individuals who are carrying out similar roles, there may be a requirement to pool those individuals together and to apply scoring to various objective criteria in order to determine which individual will be selected for redundancy. 


In addition to this, a consultation needs to be followed with each individual provisionally selected for redundancy and ways should be sought to avoid the redundancy. This includes the consideration of any suitable alternative positions that may be available.


It is only in a situation where no way can be found to avoid the redundancy, that redundancy may be confirmed and the right of appeal is offered at that stage to employees, should they wish to challenge their redundancy via the internal appeal process.

Unfair Dismissal and the Employment Tribunal

In the event an employee believes that his or her redundancy is either procedurally or substantively unfair, that person has the right to issue a claim of unfair dismissal at the Employment Tribunal. This claim should be issued within three months of the date of the termination of his or her employment for the reason of redundancy.


Prior to issuing a claim at the Employment Tribunal, the employee should notify ACAS to commence the early conciliation process and obtain a certificate which he or she can then inform the Tribunal about when issuing his or her claim.


Redundancy damages


The damages that an employee who has been made redundant may recover are directly related to the actual loss of salary that he or she has suffered following the date of termination.


If the employee mitigates his or her losses quickly, then the sums of money that may be recovered as damages for unfair dismissal through the Employment Tribunal will be reduced accordingly. 


Waiving your rights


Employees who choose to sign settlement agreements will have waived their rights to pursue any claims in the Employment Tribunal and that option will not be available to them. It is also a legal requirement to seek settlement agreement advice from a qualified employment lawyer.


Individuals who perceive that their employer has either followed a flawed process or that their redundancy is not a genuine redundancy should inform their adviser when taking advice on the settlement agreement and negotiations should factor this in.


It may be the case if there is a procedurally or substantively unfair redundancy, that it is appropriate for the adviser to negotiate an increase on the sums of money being offered, according to the settlement agreement with the employer’s legal advisers.