Key facts about redundancies

A new survey from ACAS reports that over 40% of large employers and 20% of small and medium sized employers are planning to make redundancies in the next 12 months.

A redundancy situation arises where a business closes, a workplace closes, or where an employer has a reduced requirement for employees to carry out a particular kind of work. Redundancy is recognised in law as a potentially fair reason to dismiss an employee, but the redundancy situation must be genuine and the employer must act fairly to avoid unfair dismissal claims.

Redundancies can be stand-alone (where a single position or an entire cohort of employees are at risk) or they may involve pooling. Pooling applies where there is a reduced requirement for employees who do a particular kind of work but the requirement has not ceased entirely. Employers must act fairly in deciding who to keep. This can be done by applying objective selection criteria to the pool or, in some cases, by way of structured interviews.

Care should be taken to make sure that selection criteria are not discriminatory. Objective criteria are less open to challenge than subjective criteria but are quite restrictive. It may be reasonable to amend the application of selection criteria in some circumstances (for example, ignoring disability or pregnancy related absences when scoring employees against an attendance criteria). Selection criteria should be discussed with employees and agreed if possible as part of the process.

Employers need to have fairness at the forefront of their minds when scoring. Consideration should be given to having more than one person carrying-out the scoring and interviewing against selection criteria to avoid allegations of bias.

In addition to the normal sums payable when an employee is dismissed (notice pay, holiday pay, etc.), those with over two years’ service will be entitled to receive a statutory redundancy payment. This is calculated using a formula which combines age, length of service and gross weekly pay (subject to an annually reviewed cap). Some employers also pay enhanced contractual redundancy pay in addition.

Employers have a duty to consider alternative employment for employees who are at risk of redundancy. Employees can risk losing their right to a redundancy payment if they unreasonably refuse a suitable alternative job.

Employees who are on maternity leave when a redundancy situation arises have additional rights. Specifically, they must be offered any suitable alternative employment that exists in advance of any other employees. This is a rare example of positive discrimination in UK employment law.

Where 20 or more employees are proposed to be made redundant in a 90-day period, special rules apply to the redundancy process including a requirement to consult with representatives for a period of at least 30 days (rising to 45 days if 100 or more redundancies are proposed). This is known as collective consultation.