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Redundancy is a form of dismissal from a job.

It can happen when an employee's job no longer exists. This may be due to an employer needing to reduce their workforce, close the business, or where certain work is no longer needed.

Employers and employees need to know the key points.

Employers need to know:

  • What “redundancy” means
  • Under what circumstances they must inform and consult collectively.
  • How to minimise claims for unfair dismissal through fair dealings with employees being considered for redundancy.
  • What the alternatives to redundancy are.
  • An employee’s entitlement to a statutory or contractual redundancy payment.

What does “redundancy” mean?

Redundancy can occur through three types of situations:

  • Business closures
  • Workplace closures
  • Reduction of workforce

Collective consultation

If 20 or more Employees are being made redundant over a period of 90 days or less then an Employer has a duty to inform and consult with appropriate employee representatives and notify the Secretary of State (in practice BEIS).

A tribunal may award up to 90 days’ pay (a protective award) in respect of each employee where there has been a breach of this duty.

The employer will also need to ensure that it has followed a fair procedure in relation to individual, including consulting with them properly, so as to minimise claims for unfair dismissal.

Redundancy and unfair dismissal

An employee who has two years’ service is entitled not to be unfairly dismissed.  Redundancy is a potentially fair reason for dismissal.

Even if a dismissal is genuinely on grounds of redundancy, whether it is fair or unfair to dismiss for that reason depends on whether the employer acted reasonably in dismissing the employee in all the circumstances.

In order for a redundancy dismissal to be fair the employer must:

  • Identify an appropriate pool for selection.
  • Consult with individuals in the pool.
  • Apply objective selection criteria to those in the pool.
  • Consider suitable alternative employment where appropriate, subject to a 4 week trial period.

Alternatives to redundancy

An employer should consider whether it can avoid or refuse making compulsory redundancies. It can do this by:

  • Suspending recruitment.
  • Reducing overtime opportunities.
  • Not renewing the contracts of contractors.
  • Ceasing or reducing the use of agency workers.
  • Reviewing suitable alternative vacancies.
  • Seeking volunteers for redundancy.
  • Considering volunteers for early retirement.
  • Temporarily laying off employees or reducing their hours

Employees with at least two years’ service at the relevant date are entitled to a statutory redundancy payment.

To calculate redundancy pay go to www.gov.uk/calculate-your-redundancy-pay.

An employee may also be entitled to an enhanced contractual redundancy payment set out in their Contract of Employment.

Employment Team

Joan Pettingill
Director & Head of Employment Law & HR Services

Holly Dobson

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