Redundancy

Redundancy

Dealing with redundancy can be difficult for both employers and employees: employers need to ensure that they follow correct procedures and apply them fairly. Employees have a number of rights in a redundancy situation and both parties need to understand what these are.

What is redundancy?

Redundancy is dismissal from your job, caused by your employer needing to reduce the workforce.  Potential reasons may include: new technology or a new system has made your job unnecessary, the job you were hired for no longer exists, and the need to cut costs means staff numbers must be reduced or the business is closing down or moving.

Employees who are dismissed by reason of redundancy may be able to challenge the termination of their employment as an unfair dismissal, however, assuming correct procedures have been followed redundancy is one of the potentially fair reasons for dismissal.

Employers should be aware that:

  • They should use fair and transparent selection criteria in a redundancy situation – relevant factors may include length of service, absence and disciplinary record.
  • They must consult with employees in the redundancy pool before making them redundant. The consultation should aim to provide the employee with information as to why they have been selected and present an opportunity to discuss and consider any potential alternatives to redundancy and/or whether any suitable alternative employment exists.
  •  Women who are on maternity leave at the time of the redundancy situation are afforded special protection and specific advice should be sought in these cases.

Redundancy payments

All employees with two or more full year’s service, who are dismissed by reason of redundancy, will be entitled to a statutory redundancy payment – this is calculated using the employee’s gross weekly wage (currently up to a maximum of £490 per week), the employee’s full length of service, and a multiplier based on their age at the time of being made redundant.  If the employer fails to make a statutory redundancy payment either because it is insolvent or it simply refuses to do so, the employee may apply be able to apply for payment out of the National Insurance Fund.

Additionally, employees may have a contractual right to an enhanced redundancy payment and should always carefully check their contracts of employment for such a right.

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