Introduction

If you are afraid of being made redundant or in the process of it, one way to feel better is to make oneself familiar with the entire process, reasons for redundancy, what it is, and the redundancy laws in the UK.

What is Redundancy?

The statutory definition of the term redundancy is outlined under Section 139 of the Employment Rights Act 1996 (ERA 1996), which is an Act of Parliament in the United Kingdom. Redundancy is when an employer reduces their workforce by terminating employees from employment due to various business reasons such as poor economic conditions, rescission, or termination of the business. However, losing a job or being laid off from a position that is then filled by another individual is not a redundancy.

The employer must be able to show that the job no longer exists, to successfully prove redundancy. Being made redundant generally stems from reasons outside of one’s ability to do the job. New technology might have made your job unnecessary or the job itself might not exist. It has been estimated that every third company in the UK is expected to make some staff redundant as a financial implication of the pandemic.

To prevent commencing the redundancy process, employers may offer alternatives such as early retirement and a reduction in the employees’ hours.

Selection process

In the process of making employees redundant, employers are required to select who they might want to relieve. Despite being an unpleasant process, it is imperative for employers to be strategic such that they retain an equipped and efficient workforce. It is also crucial for them to follow correct protocol so as to prevent unfair dismissal. This selection process must not be based on any discriminatory reasons including pregnancy, sex, sexual orientation, or gender reassignment.

Reasons might however be based on attendance, discipline, experience, skills, or even time at the company (last in, first out, which is a widely used technique although it is quite controversial. Employees may also volunteer to be made redundant). An appeal process must be in place for those who think they have been wrongfully terminated. If one feels like they were unfairly selected, they may write to your employer explaining why the selection was unfair. They may also be able to make a claim to an employment tribunal against unfair dismissal.

Redundancy Laws

There are certain laws in place that protect employees from being made redundant. They have certain rights which are further detailed below. These rights include a consultation, a notice period, redundancy pay, and time off to look for a new job. They are also entitled to be offered an alternative job if one exists.

Consultation

Before commencing redundancies, employers are required by Uk redundancy laws to consult with employees and stakeholders to attempt to prevent the need for redundancy through processes like restructuring. Employees are also entitled to a consultation as to why they are being made redundant. If an employer is making up to 20 redundancies, there are no rules about how they are to carry out the consultation. The ECJ in the Woolworths case in 2015 decided that for anything below 20 employees undergoing redundancy under one establishment, the dismissals should be conducted independently of each other.

In situations where 20 or more redundancies are being made simultaneously (or within a time period of 90 days or less), collective consultation rules apply (USDAW v Ethel Austin [UKEAT/0547/12/KN]/ Woolworths case). These are that the consultation must take place between the employer and an elected employee representative or a trade union representative. These consultations must discuss possibilities to avoid redundancy, reasons for them, and methods to minimize both the redundancies themselves as well as effects of redundancies on other employees. This consultation duty of the employer may be enjoyed not only by employees undergoing dismissals but other employees who may be affected by the proposed dismissals as well.

There are additional legal requirements of this type of consultation that employers are expected to follow. The ECJ specifies that if between 20 to 99 redundancies are being made, this process must commence 30 days prior to any dismissals taking effect and if over 99 people are being made redundant, this consultation must begin at least ninety days prior to the first dismissal taking effect. When an employer does not follow the appropriate procedure, an employee may make a claim to an employment tribunal.

Notice Period

British statute requires that employees be given a notice period before their employment ceases. Those who have been employed for between a month to two years must receive a notice period of at least one week. This notice period increases by one week for each year of employment above the initial two years (up until 12 years of employment). This period can go up to twelve weeks even when an individual is employed for over 12 years at a particular establishment. This is the minimum statutory requirement. Some employers may provide a greater notice period so check your contract!

Aside from statutory redundancy pay, employees undergoing redundancy must be paid through their notice period or in lieu of notice. A notice pay is based on the average earned per week over the 12 weeks before the notice period starts. An employee’s notice pay is based on their normal earnings even if they were on ‘on furlough’ (granted a leave of absence) and were being paid less due to the pandemic. Employment can be ended without notice if ‘payment in lieu of notice’ is included in one’s contract. In such a case the employer will pay instead of giving a notice period. This payment would include the basic pay that one would have received during the notice period. Additions such as pension contributions or private health care insurance might be included if they are in the contract.

Time off

If one has been employed for a minimum of 2 continuous years by the end of the notice period, they are entitled to time off to look for another job or train to help them look for another job. The amount of time itself depends on the circumstances and the employer. Irrespective of the amount of time taken off, the employer is obligated to pay 40% of one week’s pay.

Redundancy pay

Information regarding the redundancy must be provided to the employees in writing if more than 20 employees are being made redundant. The same two-year continued work requirement makes an employee eligible for redundancy pay. They are also eligible for this payment if they had a fixed-term contract of two years or more which was not renewed on expiry due to redundancy.

The payment is based on the employee’s age. They are eligible to receive half a week’s pay for each full year that they were under the age of 22, one week’s pay for each full year they were 22 or older, but under 41 and one and half week’s pay for each full year they were 41 or older. The total length of the service calculated for the purpose of this payment is capped at 20.

Additionally, if employees were made redundant on or after 6 April 2021, their maximum statutory redundancy pay is capped at £16,320 with this amount being lower if they were made redundant earlier than 6 April 2021. If redundancy pay is under £30,000, it is not taxable.

Further, one can claim statutory redundancy pay if they’re eligible and they have been temporarily laid off (without pay or less than half a week’s pay) for either more than 4 weeks in a row or more than 6 non-consecutive weeks in a 13 week period. To claim the payment, the employee is to write to their employer showing intent to claim the redundancy pay. This must be done within 4 weeks of their last non-working day in the 4 or 6 week period. This claim could be rejected if normal work is likely to start within 4 weeks and continue for at least 13 weeks thereafter.

Alternate jobs

Employers might offer ‘suitable alternative employment within their own organization or in an associated company. If an employer has suitable alternative employment available that they do not offer to their employee on redundancy. This may be grounds for unfair dismissal. Employees who accept an offer of alternative work that is made by their original employer are entitled to a 4-week trial period to decide whether or not that role is suitable for them. If post the trial both the original employer and the employee decide that the role isn’t suitable, they can still claim redundancy pay.

However, if the employer believes the job is suitable but the employee does not share the same belief and refuses to take it, they might lose their redundancy pay entitlement. This suitability may be based on the similarity to the original job, the terms of the job, including pay, and the employee’s skills and abilities. Employees may make a claim to the employment tribunal if they believe that the alternative employment was not suitable. Additionally, if suitable alternative work is offered to an employee and they refuse it without good reason, they are not entitled to statutory redundancy pay.

On receiving the offer of alternative employment, employees have the right to a 4 week trial period. This time could be extended if they need training, but such an extension must be agreed upon in writing before the trial period starts. It is during this period that the suitability of the new job is assessed.

Outplacement

Outplacement is the process by which employers help those they make redundant find new employment. This process helps improve people’s job-seeking techniques. It has become a common component of severance agreements when workers are made redundant although it is not a compulsory service.

In the specific cases of if employees have been made redundant due to COVID-19, the employer might be able to re-employ their employees and pay 80% of their wages.

Conclusion

The above breakdown of the redundancy laws in the UK hopefully familiarised you with the process and all the duties owed by the employer. The support system provided by the law and the duties of the employer towards their employees hopefully help with making the process smoother and less stressful