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What is redundancy?
Redundancy is the term used to describe a certain type of dismissal. Eligible employees whose roles are made redundant are entitled to certain payments upon termination of their employment for reason of redundancy. A company must ensure that they follow a proper process and engage in a meaningful consultation with the employees who are at risk of redundancy, otherwise the company could be at risk of defending unfair dismissal claims within the Employment Tribunal which are often costly – both in terms of legal fees but also management time.
When will redundancy situations arise?
A redundancy situation can arise in different forms. For it to be a genuine redundancy situation, one (or more) of the following circumstances must arise:
• When a business, or part of it, shuts down completely.
• When a business shuts down at a specific location (even if moving to a new location.)
• Relocation of the business.
• The requirement for employees to do work of a particular kind has reduced or ended.
• The work of an employee is being completed by others.
How do I follow a redundancy process?
A company must engage in a meaningful consultation period with employees who are at risk of redundancy in order for the dismissal to be considered fair. The failure to follow a fair process can result in a procedurally unfair dismissal claim being issued against the company.
For a company looking to make less than 20 employees redundant, there is no legal minimum consultation period. The consultation period must simply be “meaningful”. Rather unhelpfully, there is also no legal definition on what “meaningful” actually constitutes. Regardless of this, case law has assisted us in determining what a fair and meaningful consultation period would look like, which would include as follows:
• Identify the applicable redundancy situation and the employees who would be at risk.
• Apply a fair and objective way of selecting employees for redundancy, which could include creating a redundancy selection matrix. You would scoring each employee contained within the selection pool, however, you must be careful when identifying the criterion to score the employees and ensure not to include any criterion which could be seen as discriminatory – for example, if you scored a disabled person who regularly attended medical appointments and a women on maternity leave as the lowest for attendance, this would be seen as discriminatory. The lowest scoring employees would be at risk of redundancy.
• Inform the employees whose role is at risk of redundancy that a consultation period is due to commence – provide an anticipated timescale for the consultation period.
• Arrange and invite each employee at risk to their first consultation meeting to discuss why the circumstances have arose. Allow the employee to ask any questions they may have.
• Arrange and invite each employee at risk to their second consultation meeting to discuss whether they have any proposed alternatives to redundancy or any ways to avoid the proposed redundancy.
• Carry out a meaningful search into any current vacancies within the business (including any group company) and provide the employee with details of any suitable alternatives which they could carry out and invite them to apply.
• Offer the employee a four week trial period of any suitable alternative role within the business. After this period, should the role not be suitable then the employee can still be entitled to their redundancy package.
• Afford the employees time off to search and interview for a new job.
• If the redundancy cannot be avoided then arrange and invite the employees to their final meeting to confirm the redundancy.
• Offer the dismissed employee a right to appeal against their dismissal and hold an appeal hearing if requested.
During the consultation period it will be best practice to ensure that a paper trail is maintained, notes are taken during the meetings and follow up letters detailing what was discussed are circulated. You will need to ensure that the employee is aware of their right to be accompanied during the meetings by either a work colleague or a Trade Union representative, if applicable.
If a company intends to make 20 or more redundancies at the same time, the collective redundancy rules apply. Such rules are covered within our separate Collective Redundancy note.
What do I have to pay an employee who is made redundant?
An employee who has in excess of two years’ continuous service are entitled to receive the following if their role is made redundant:
• A statutory redundancy payment up to a maximum of £16,320 if the redundancy is made between 6 April 2021 to 5 April 2022. The company can exercise a discretion to pay an enhanced statutory payment if they wish but there is no legal obligation to do so.
• A notice period. This could be a worked notice period or a Payment In Lieu of Notice if their employment contract provides for this. In the absence of any contract, the statutory notice period will apply (1 week for each continuous year of service but capped at 12 weeks).
• A payment of their accrued but untaken holiday pay up until the date their employment contract is terminated. It is possible to request your employee takes their holiday during their notice period, however, check the employment contract provides for this first.
If the redundant employee has less than two years’ service then they will be entitled to their notice and holiday pay only.
What will happen if I don’t follow a redundancy process?
Regardless of whether you have a genuine redundancy situation, if you fail to follow a proper process, the company could find themselves entrenched in lengthy and expensive litigation which can be avoided if a full and proper process is carried out. This can be very costly to a company.
What is an unfair redundancy dismissal?
An unfair dismissal relating to redundancy would arise if there was not a genuine redundancy situation, and therefore a sham redundancy situation arose or if the company failed to follow a fair procedure as set out above.
Can an employee bring an unfair dismissal claim against the company even if we have made their role redundant?
Yes! Employees can issue a claim in the Employment Tribunal if they believe they were unfairly dismissed because the company failed to follow a fair process, even if they have received their redundancy pay. Should a Tribunal make a finding that the company failed to follow a fair process in dismissing their employee, then the Judge can award the employee compensation up to the maximum of a years’ gross salary or £89,493 (whichever is the lowest) if the dismissal takes place between 6 April 2021 to 5 April 2022.
Our team has extensive experience in advising on all aspects of the redundancy process, contact us on 01827 317070 or email kjohnson@pickerings-solicitors.com or pbrady@pickerings-solicitors.com
