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Redundancy for Employers

An employee is made redundant if their dismissal was due to:-

  • the fact that the employer had ceased (or intends to cease):-
    • to carry on the business for which the employee was employed
    • to carry on that business in the place where the employee was employed
  • the fact that the requirements of the business have ceased or diminished (or are expected to cease or diminish):-
    • for employees to carry out work of a particular kind
    • for employees to carry out work of a particular kind in the place where the employee was employed.

To qualify for a redundancy payment, the dismissed employee must have been continuously employed by the employer for at least two years at the date of dismissal. However, redundancy payments may not apply if an employee is dismissed for misconduct, if redundant employees refuse suitable alternative employment, or to fixed term workers who have renounced their redundancy rights.

 

Statutory redundancy pay is calculated with reference to the number of completed years' service by the employee. The employee will receive:-

  • 1½ weeks' pay for each year in which the employee was over 41 years of age
  • 1 week's pay for each year in which the employee was over 22 but under 41 years of age
  • ½ a week's pay for each year in which the employee was under 22 years of age.

However, the maximum number of years which may be counted is 20. A week's pay is also subject to a maximum figure and redundancy payments up to a specified level are exempt from income tax.

An employer must give all employees a written statement showing how the amount of their redundancy pay has been calculated. An employee who does not receive their redundancy payment can make an employment tribunal claim within six months of the redundancy. Any claims after six months are at the discretion of the employment tribunal.

Suitable Alternative Employment

An employer can offer suitable alternative employment to employees at risk of redundancy. Whether the alternative employment is suitable depends on the employee's current job, the type of alternative job offered and pay, prospects, conditions and location on offer.

An employee can still refuse to accept a suitable alternative and still be entitled to redundancy payment if their refusal was reasonable, eg due to health, family commitments and similar reasons.

An employee is entitled to a trial period of four weeks in the new job, during which time the employee can still leave and claim redundancy.

If you have any queries regarding redundancy, please contact Ashley Hunt, Carrie-Ann Randall or Vaishali Thakerar on 0116 212 1000 or complete the form on the right.