What is redundancy?

A redundancy occurs when an employer decides to terminate an employee’s contract because there is no longer a need for the work they carry out. This may be due to a number of reasons – the company may need to shut down, downsize, or move to a new location, or the business landscape might have changed. You can find more ‘reasons for redundancy’ below.

It’s important to note that this does not necessarily mean that the work is not required anymore – it’s the need for people to do that work. It could potentially be the case that the work can be done by fewer people.

Is redundancy the same as unfair dismissal?

While both result in the termination of an employee contract, redundancy is no more than a potentially fair reason for dismissal. However, this does not mean that the dismissal was not an unfair dismissal. Employees are usually only entitled to challenge the fairness of the decision to dismiss and/or the failure to find alternative employment.

What are your rights?

You’re entitled to a statutory or contractual period of notice on dismissal. If you’ve been given notice, then you have the right to paid time off to look for work. This does require you to have served at the business for at least two years, and not fall under one of the following categories:

• Self-employed
• Worker
• Merchant seaman
• Member of the armed forces or police service

Can you get another job during the redundancy period?

You can start a new job if you’re still in your notice period for redundancy. However, it’s important to note that you’ll need the agreement of your former employer, ideally in writing. Otherwise, they could argue that you resigned. This could result in you losing your eligibility for redundancy pay.

In the situation that they do agree, you’ll still receive redundancy payments, but you won’t be paid the remainder of your notice period if you leave the company early.

Can you be made redundant if someone else does your job?

The basic premise of redundancy is that the work you do will no longer be needed by the same amount of people. There is also the example of transferred redundancies, commonly known as ‘bumping’. Bumping is where an employee is dismissed to make way for another employee whose position no longer exists.

Can I be made redundant just before maternity leave?

You cannot be made redundant because you’re pregnant or on maternity leave. However, if there is a genuine redundancy and your role is made redundant, your employer must offer you suitable alternative work if they have it. Your employer should give you this as a priority over other employees.

Reasons for redundancy

A genuine redundancy situation includes:

• The work done by an employee is no longer required because there has been a decline in business, a new type of work introduced that needs an alternative skill set, or a new process or system introduced
• The work is being completed by other employees
• The business has stopped trading or become insolvent, or part of it has closed down
• The company, or the work the employee is performing, moves to a different location

However, non-genuine redundancies are sometimes made – whether because it’s cheaper or less time-consuming than a performance improvement process, or because they’re trying to accelerate an employee’s exit from the business. The following are signs of this:

• The employer has recently hired new staff, or plans to soon
• You’ve been criticised about your performance or have a bad relationship with your line manager, and then are told you are at risk of redundancy
• You’re the only person being made redundant, or one of the only, particularly in a large business
• Discriminatory reasons, for instance if you’re pregnant, disabled, from an ethnic minority group, or have a specific gender, sexual orientation, or religion

The redundancy process explained

These are the standard steps included in the redundancy process. More can be involved depending on the circumstances, however – for instance, if you take an alternative role within the company on a four-week trial period but then decide to claim the original redundancy. If you want to know more about the redundancy procedure, speak to our team here at Optimal Solicitors.

Redundancy situation

If your employer is making you redundant, they need to make sure that there’s actually a ‘redundancy situation’. They will need to identify the staff they expect to be impacted, as well as the management team who will potentially select these members. They should be best placed to do this, having the right knowledge of the employees’ work, capabilities, and qualifications.

Selection criteria

Your employer will put together selection criteria to guide who may be redundant, along with the affected employees that perform similar work. This will need to be fully transparent and objective. It should be noted that, if you’re in a unique role or the employer closes their entire business, a selection pool isn’t necessary.

The criteria could include:

• Disciplinary records
• Skills, abilities, and experience
• Standard of work performance

While formal qualifications and advanced skills can also be considered, this shouldn’t be done in isolation.

Selection process

Following this, affected employees will be invited to an individual meeting to talk through whether they have been provisionally selected for redundancy. If you have, it’s likely that this will be your first time hearing about the possibility, and you’ll potentially receive confirmation of this in the form of a redundancy letter.

Your employer will provide you with an appropriate amount of time to consider your provisional selection, and you’ll enter a period of consultation. They will also think about whether you could be offered an alternative role instead. ‘Bumping’ is an option too – this is where a role that is not vacant is taken by an employee whose job was made redundant.

Decision

If your redundancy is confirmed, your employer will then discuss redundancy pay with you, along with any other payments and arrangements. You may potentially be requested to sign a settlement agreement.

What is a redundancy consultation?

Once a redundancy situation is established, your employer should consult all relevant parties as soon as possible. This should be a proper consultation, where you’re told about the situation, any alternatives, and how the process will work. If they do not follow such a process, then it could be classed as an unfair dismissal.

Ideally, there would be one meeting with you at the very minimum. You should be accompanied at this meeting, and this is good practice as it shows that the employer intends to act fairly.

What is the minimum consultation period for redundancy?

There is no maximum period of consultation – however, there is a minimum period. Between 20 and 99 proposed redundancies would necessitate a 30-day consultation period, and 100 or more would require 45 days. If the organisation is making fewer than 20 people redundant, they do not need to conduct a collective consultation unless one has already been agreed.

Potential appeal

Although you have no statutory right to appeal your redundancy as there has to be a degree of finality in the redundancy process, the employer may decide to allow this.

Redundancy payments – are you entitled?

You may have the right to redundancy pay. This relies on a wide range of factors.

How much redundancy pay do you get?

The amount of pay you could receive depends on your age, weekly pay, who your employer is, and how long you’ve worked for them. If it’s over two years, then you’re entitled to a minimum statutory redundancy payment from the business. If they have a contractual redundancy scheme or they simply choose to, then you may receive more.

The statutory redundancy pay table is as follows:

What is your weekly pay?

Your week’s pay should be what you were paid per week at the time you were made redundant. This has a redundancy cap which changes each year as a result. The maximum statutory redundancy payment also changes each year.

If your contract states, weekly pay should include regular overtime pay, along with bonuses and regular commission.

In the situation your earnings vary week by week, then an average of your pay should be applied instead.

Is my redundancy payment taxed?

If your redundancy payment is below £30,000, it will not be taxed. However, if it’s above this, you’ll pay tax and National Insurance Contributions accordingly.

Do I get holiday pay if I am made redundant?

You will be paid for any remaining holiday you have left over. You can potentially take this holiday during your notice period, or your employer may request that you use it up.

Who pays my maternity pay if I am made redundant?

As you’re entitled to maternity pay once you qualify for statutory maternity pay (SMP), then this should be paid for the full 39 weeks by your employer – unless you start a new job.

If your employer is insolvent or refuses to pay all or part of your SMP, then HMRC becomes liable for the remaining amount.

How is my redundancy pay calculated while I’m on maternity leave?

This is based on your usual weekly pay before your maternity leave – not your SMP or contractual maternity pay. It applies if you’ve used all 39 weeks of your SMP too.