What Employers Need to Know About Redundancy
Richard Gvero, Joint Senior Partner and Head of Employment and Miranda Mulligan, Associate Solicitor, explain the key considerations for employers when conducting redundancy processes.
What is a redundancy?
The statutory definition of redundancy is set out within section 139 (1) of the Employment Rights Act 1996 which identifies three situations in which redundancy may arise, namely business closure, workplace closure or if the requirement of the business for employees to do work of a particular kind has ceased or diminished.
Will all employees be entitled to statutory redundancy pay?
No, only the employees who have been employed for two years or more will be entitled to a statutory redundancy payment.
What types of claims can arise in a redundancy situation?
If your employees have more than two years’ service, they could potentially claim unfair dismissal if you do not identify a genuine redundancy rationale for the dismissals or carry out a fair consultation process prior to taking the decision to dismiss.
An employee with any length of service could also potentially claim that the decision to dismiss them was not a genuine redundancy and instead was for discriminatory reasons (for example, because of age, sex or race). As such, we would always advise employers to properly consider the rationale for the redundancy (including any indirect implications) before commencing any process.
What do I do if I have more than one employee carrying out the same role but the workload has reduced?
If you have more than one employee carrying out the same type of job (or similar jobs where skills are interchangeable) those employees should be placed in a pool together and an employer should select between them for the available positions. As an employer you should decide on some fair and objective selection criteria to assist you to choose between these employees, for example, these criteria could be based on performance, skills or disciplinary record. Following the scoring process, the lowest scoring employees would usually be selected for redundancy following a consultation process.
Will my employees be entitled to notice even where there is no work?
Yes, your employees will be entitled to receive their contractual, or if greater, statutory notice period. Your contracts of employment may allow you to pay staff instead of requiring them to work their notice periods.
What alternatives are there to redundancy?
Redundancy is usually the last resort. Alternatives should be considered where possible. You could rely on contractual lay off provisions for temporary reduction in workloads or alternatively, staff may agree to reduce their hours or holiday can be used where there are periods of no work. Also, you could try to reduce the head count of non-employed staff such as temp workers or consultants. Another approach is to ask for volunteers or consider alternative roles for staff at risk elsewhere within the business.
Here to Help
Redundancies are likely to present serious challenges for your business. It is essential that you seek expert advice at an early stage so you can ensure that you implement a fair process and avoid being subject to Employment Tribunal claims.
Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.
This article was originally written for Inspire Magazine May 2023.
NLA article not to be reproduced.