Redundancy

Last updated: 17th May 2023

Your ultimate 8 point guide to redundancy and how to protect your rights

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1. If I am facing redundancy what are my rights?

Whilst employer’s have a legal duty to avoid redundancies and should only consider them as a last resort, unfortunately it is sometimes unavoidable.

As such, under UK employment law, redundancy is one of 5 reasons for which you can be fairly dismissed if your position has become genuinely redundant.

However, where you have 2 year’s duration of service and can demonstrate that you have been made redundant unfairly, under section 98 of the Employment Rights Act 1996, you can pursue a claim for unfair dismissal at Employment Tribunal.

Legislation and case law relating to redundancy is very complex and it is easy for an employer to fall fowl of their obligations and the procedures they need to follow to ensure your rights are protected.

Your employer can start the redundancy process where their need for a particular employment role ‘diminishes’ or ‘ceases’, or is expected to do so. Where they no longer need your role to perform specific tasks within the business, or need less people to carry it out at your place of work, or more generally.

Being made redundant unfairly

There are 2 ways to demonstrate your redundancy is unfair, namely:

1. Where you can show that your role is not genuinely redundant, i.e it is a sham redundancy.
2. Where you can demonstrate that the redundancy procedure followed by your employer was flawed.

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If my role still exists are there any circumstances where I could still be made redundant?

Your employer can only make you redundant where your role is no longer needed, or where you are doing the same role as others, they need less people to carry it out.

Where your role still exists but less people are required to do it, you could fairly be dismissed if, after a fair procedure and selection process, you scored lower than your colleagues.

2. What is a fair procedure?

Whilst there is no strict definition of ‘what is a fair redundancy procedure’, as with all procedures involved in a dismissal, the Employment Tribunal will expect your employer to follow a reasonable procedure.

As quoted by the employment judge in the case of Williams and Ors v Compair Maxam Ltd

“The basic approach is that as much as is reasonably possible should be done to mitigate the impact on the workforce and to satisfy them that the selection has been made fairly and not on the basis of personal whim”

This case alongside that of Polkey v A E Dayton Ltd established what is considered to be a fair redundancy procedure that should be adopted by employers.

Clearly, factors such as the number of staff effected and whether there is the need to establish a pool to select from will be taken into account. However, there are 6 well-established stages that will determine if a redundancy procedure has been carried out fairly.

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The 6 stages of a fair redundancy procedure

1. All staff who could be affected by potential redundancies (not just those deemed ‘at risk’) should be given as much warning as possible by their employer.

This early warning recognises the stress and upheaval that the threat of redundancy poses. It allows you time to understand why it is happening, respond and prepare any future plans you wish to make.

At your early warning meeting, your employers reasons for considering redundancies should be made clear to you, how many people will be affected, and the process they will follow.

Following this, your employer should write to those affected and give clear guidance on each step of this process.

2. Those employees who your employer wishes to place ‘at risk’ should be selected by way of:

• Establishing a pool or group of employees from which the selection will be made
• Establishing an impartial/unbiased selection criteria that will be applied to all employees in that pool
• Applying this criteria fairly to select employees for redundancy

Identifying who to place at risk can often be relatively simple for your employer. Where there is only a single role that is no longer required, then clearly only that person’s job will at risk.

However, where greater numbers of employees are concerned, i.e where there is a need to significantly reduce the headcount within a department, then your employer will need to apply a selection criteria to create a pool of employees.

It is essential that your employer establishes the redundancy pool correctly and fairly.

Getting it wrong can lead to claims of unfair dismissal, for example:

• If no pool is considered
• They select an inadequate pool that does not include all the staff who should reasonably be at risk
• Similarly, they create a pool that is too broad

In essence, a common sense approach should be applied to identifying the redundancy pool. It should follow that the pool should be made up of employees doing either the same, or very similar roles at the corresponding level of seniority.

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Unless your employer is able to prove that the pool they chose was reasonable they could leave themselves open to an unfair dismissal claim. When considering the case the Employment Tribunal would apply the range of reasonable responses legal test.

Having established a reasonable pool your employer must then implement a ‘fair’ selection criteria to each member of the pool. This criteria must be objective with scoring that can be verified. Such criteria could include:

• Good time keeping (punctuality)
• Record of attendance
• Qualifications & skills
• Disciplinary records

They should not include subjective criteria such as teamwork or attitude as one person’s definition of either of these can easily differ from someone else’s.

Your employer could also make their selection based tests or assessments. However, each candidate must be given the same test or assessment. The lowest scorers are then selected for redundancy.

Alternatively, your employer may chose to use competitive interviews to make their final selection.

These are quite often abused by employers. However, such a selection criteria is precarious for an employer as they are hard to verify independently and can be very subjective.

Finally, your employer must score the selection criteria fairly.

In many cases that advance to tribunal, it can be demonstrated that an employer has failed to do this. Please note however, that it is not the Employment Tribunals job to re-score your selection criteria, they simply have the power to determine that your redundancy was unfair where they feel that the score you were selected on was not justified.

In all cases you have the right to be given your scores, consult with your employer on them, or where necessary challenge them. Any lack of transparency on the part of your employer could prove unfair dismissal.

3. Meaningful consultation should then take place either between you and your employer, or all employees deemed ‘at risk’ of redundancy.

The ‘at risk’ employees, or those in the pool may be consulted after your the selection criteria has been applied.

They are also obliged to carry out these meetings in a reasonable and ‘courteous’ manner.

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Consultations that are deemed to be handled insensitively or in a token manner can lead to a finding of unfair dismissal.

Even if you work for a small company, they are still obliged to meet this expectation.

It is also worth noting that whilst you do not have the automatic right to be accompanied at these meeting, it is deemed good practice for you to be allowed to attend these consultations with your trade union representative, or a colleague.

Is there a minimum consultation period?

Whilst there is no minimum period that your employer has to meet, the shorter it is, the easier it may be to argue that your consultation was effectively meaningless, and as such unfair.

4. Where redundancy may affect more than 20 employees, your employer is expected to carry out collective consultation.

Specific rules apply to such redundancies governed by section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992.

Where your employer is proposing to make 20 or more staff redundant they are required to consult with representatives appointed on behalf of these employees.

However, they are only obligated to do so where these redundancies related to a single office/factory, and only where they intend to make these redundancies within a 90 day period.

Where your employer fails in this, they can be liable to pay you (and the other employees) up to 90 days pay under a protective award.

5. Before making you redundant your employer needs to carefully consider suitable alternative employment that they could offer you instead.

It would not be deemed fair and reasonable for you to be made redundant (or more specifically, dismissed) if your employer then went on to employ someone to do a job you would happily have accepted as an alternative to redundancy.

Attempts to find you suitable alternative employment not only apply to when you receive notification of redundancy, but should be continued throughout your notice period.

As previously stated, redundancy should be the last resort of employers.

If you would be prepared to accept a more junior role, you should make your employer aware of this. Unless they know this, they are unlikely to proactively extend their search.

What is bumping?

Although quite an outdated practice, your employer can consider bumping as part of the redundancy process.

This is where a member of staff (most often one with less service) whose role was not under threat of redundancy, is dismissed so that an ‘at risk’ employee can take on their role instead.

6. Lastly, your employer must act fairly by giving you the opportunity to appeal your dismissal if you are made redundant.

Whilst case law does not automatically render your redundancy as unfair if you have not been given the opportunity to appeal your redundancy, your employer would be well advised to allow it.

Your appeal should:

• Be dealt with by an individual not involved in the original decision to make you redundant
• Be subject to a reasonable timeframe. Typically, your employer would ask for your appeal letter within 5 days of their decision to make you redundant

Can I raise a grievance against my redundancy?

You are entitled to raise a grievance with your employer at any point. You should be aware though that once your employment has come to an end, it will largely be up to them if they wish to respond to it.

Ordinarily, where you are unhappy about your redundancy, you would rely on the appeal process, rather than raising a grievance.

Could you be offered a redundancy settlement agreement?

Your employer may opt to offer you a redundancy settlement agreement rather than putting you both through a time consuming redundancy process.

This would involve you signing a document setting out agreeable terms to bring your employment to an end.

You would expect such an agreement to give you more than you would expect form your basic statutory redundancy pay, as you will be signing away your legal rights to contest your redundancy.

A redundancy settlement agreement can prove beneficial in several ways:

• It offers a clean break to both parties
• The matter is resolved quickly
• It requires minimal management and HR time to implement
• You will receive more money
• You can leave with a favourable reference

PLEASE NOTE: A redundancy settlement agreement should not be confused with your redundancy package.

3. Can my employer make me redundant without consulting me?

In short, no they can’t unless you have been employed for under 2 years.

If you have been made redundant without consultation, this is likely to be deemed as an unfair dismissal.

Your employer could make you redundant without consultation where you have less than 2 years service, as they are aware you will not qualify for making an unfair dismissal claim.

4. What to do if you believe your redundancy was unfair?

In the first instance you should be clear on why you think it was unfair. Was it because your employer failed to follow a fair redundancy procedure, or was it a sham redundancy, i.e your role was not actually redundant?

Once you are clear on this, it should form the basis of your appeal.

You may find it helpful to seek legal advice at this stage, as a specialist employment solicitor can help you draft your appeal letter.

If your appeal is unsuccessful and you are not re-instated, you may wish to advance an unfair dismissal claim at Employment Tribunal.

To advance your claim at tribunal you MUST do this within 3 months (less 1 day) from the date of your dismissal. PLEASE NOTE: the timing starts from the date of your dismissal not the date of the appeal decision.

Where you have a viable case, your solicitor can help with the tribunal process. You may qualify for no win no fee representation.

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5. What other alternatives might my employer offer?

Your employer may well put forward some other alternatives to staff, rather than implementing redundancies.

These could include:

• Withdrawing existing job offers and freezing any new staff recruitment
• Offering staff job shares or flexible working patterns
• Terminating the use of temporary or agency personnel
• Presenting the opportunity for sabbaticals or unpaid leave
• Cancelling or reducing overtime
• Approaching staff who may be willing to consider early retirement
• Approaching staff who may wish to accept voluntary redundancy

6. What am I entitled to if made redundant?

How does this compare to statutory redundancy pay?

You will need to have worked for 2 years to qualify. After this, your statutory redundancy pay is determined by a set formula.

Based on your age, duration of service and current salary, it is calculated based on your weekly gross pay* (capped at £643 per week as at 6 April 2023) as:

• Up to 22 years of age: 1/2 a week’s gross pay for each full year
• Aged 22 to 40: 1 week’s gross pay for each full year
• Aged 41+: 1 & 1/2 week’s gross pay for each full year

*Your weekly pay will be based on a 12 week average before you received notification of redundancy.

The maximum qualifying period is also capped at 20 years service. So, even if you have worked for your employer for longer, you will only receive statutory redundancy based on 20 years.

Is there a minimum redundancy payment?

Whilst there is no minimum as such, the national minimum wage would apply where you have been employed for over 2 years.

What about holiday pay?

When you are made redundant you are entitled to holiday pay. Once your employer has calculated your accrued holiday pay, this will be paid to you alongside your redundancy payment.

PLEASE NOTE: Unlike your redundancy pay, your holiday pay will be subject to the normal tax and National Insurance deductions.

7. How much tax will you pay on your redundancy pay?

If you will be receiving statutory redundancy pay, you will not face a tax liability as the first £30,000 is tax free.

As at 6 April 2023, the maximum statutory redundancy pay you can receive is £19,290.

8. What happens if my employer can’t pay redundancy?

If your employer cannot pay redundancy because they are insolvent you can make a claim to the Redundancy Payments Service (RPS). They will assess your claim and pay you your statutory redundancy payment from government funds.

In some cases they can also pay any outstanding salary (capped at 8 weeks), holiday and notice pay.

If on the other hand, your employer simply will not pay, you can apply to the Employment Tribunal for an order to pay which will be enforceable against them.

Are there any circumstances where they can refuse to pay?

There is a circumstance under which your employer can refuse to pay redundancy.

This is where you have refused an offer of suitable alternative employment. But, they would need to demonstrate the ‘suitability of that offer’ if challenged at tribunal.

If the alternative involved a reduction in status or salary, that could indicate the role was not suitable. As such, you should be able to reasonably decline it and expect to receive redundancy pay.

It will be for a tribunal judge to determine whether you are owed redundant based on section 164 of the Employment Rights Act.

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What to do next if you have a case for unfair redundancy

Our employment law specialist solicitors have helped thousands of employees bring successful unfair redundancy/dismissal claims .

If you feel you have a case you should speak to us today. Where we feel you have a viable claim, our highly skilled solicitors can represent you on a no win no fee basis.

Call our team on 0203 838 0781 or 0203 838 0781 for a preliminary assessment of your case. Alternatively, you can submit details to us for review using our quick and easy online enquiry form. Once we receive your information we will respond to you within 48hrs via phone, email or text.