When can an employee be made redundant?
An employee is made redundant if their dismissal is due to the fact that the employer has ceased (or intends to cease):
- to carry on the business for which the employee is employed
- to carry on that business in the place where the employee is employed
- the fact that the requirements of the business have ceased or diminished (or is 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.
Employers are under an obligation to consult with the employees at risk of redundancy.
The redundancy selection process
When making redundancies the employer must follow the appropriate selection process. A few considerations to think about include;
- Is the selection criteria objective and work-related?
- Is the criteria non-discriminatory
- Have you got evidence to support or justify your criteria?
- Are you being consistent?
- It is important to be aware that if you are looking at making 20 or more redundancies within 90 days you will need to consult the appropriate employment representative about the criteria first.
Employers that do not get the redundancy selection process correct are leaving themselves open to costly employment tribunal claims.
Are all employees entitled to redundancy payment?
To qualify for a redundancy payment, the 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.
How is statutory redundancy pay calculated?
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.
- 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. The maximum weekly amount is currently £489.
An employer must give all employees a written statement showing how their redundancy pay has been calculated.
Offering alternati#ve employment to an employee at risk of redundancy
An employer has to consider the employee for suitable alternative employment if they are at risk of redundancy. Whether the alternative employment is suitable depends on the employee's current job, the type of alternative job offered, salary, prospects, conditions and locations on offer.
An employee can still refuse to accept a suitable alternative and still be entitled to redundancy payment if their refusal is reasonable, e.g. due to health reasons, family commitments or other similar matters. If the role is suitable the employer does not have to pay the employee redundancy pay.
An employee is entitled to a trial period of four weeks in the new job role, during which time the employee can still leave and claim redundancy.
Making redundancies is not a decision that should be taken lightly, it can be very costly and there is a lot to consider. It is recommended that employers seek professional legal advice prior to beginning the process to ensure the correct procedures are followed and the best possible outcomes are reached.
Our employment team are able to provide the appropriate advice and guidance in relation to Redundancy. They offer no-obligation initial appointments and can meet you at any of our office locations in Market Harborough, Leicester or Wigston. You can call the team directly via 0116 212 1000, alternatively complete our online contact form and we will get back in touch with you.