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A redundancy situation
A redundancy situation is one where:
1. An employer’s business no longer operates in the area in which the employees to be made redundant work.
2. The business as a whole has ceased to exist.
3. There is no longer a need for the work carried out by employees being made redundant, or this is about to happen.
If an identical workload is to be handled by less employees this is still redundancy as the spotlight here is on the requirement for employees.
Employees have certain rights in a redundancy situation. These include the right:
– To be allowed to work out a notice period or receive a payment in lieu of notice (the choice is the employer’s not the employee’s).
– To receive a redundancy payment where there are two or more years of continuous service with that employer. The payment is calculated as £430 per week for each year worked, multiplied by a figure based on age (0.5 for those 22 and under, 1 between the ages of 22 and 40, and 1.5 for those 41 and over).
– To receive any enhanced redundancy payments, as set out in the contract of employment. This must be either an express contractual term or one that is implied by a constant, well-known and uniform method used by the employer to calculate redundancy payments.
– Where there is a redundancy of more than 20 employees in one place within 90 days, employees have the right to the specific statutory collective redundancy procedures being followed by an employer. (For more information see Collective Redundancy.)
An employee may be offered a compromise agreement in which redundancy rights are signed away – signing this might be a condition of that employee receiving enhanced redundancy.
Redundancy procedure
There must be a genuine reason for a redundancy and the procedure should not be used as a way to remove employees from the company who are not liked. There must no longer be any genuine need for the employees and where an employee has a lot of work to do, feels they are being made redundant so that someone else can have their role, or where there is no clarification of how that employee’s work will be carried out after the redundancy, then the situation may be a sham redundancy.
Where there is a genuine redundancy situation, the selection procedure for choosing the employees to make redundant must be a fair one. This requires that a number of employees doing the same kind of job be included in a ‘pool’ and from this pool, candidates for redundancy are selected from those who score the lowest against a set of redundancy criteria – such as ability, skill and experience. The selection criteria should be objective as much as possible and steer clear of anything that could be viewed as discriminatory, for example using a sickness record as a criteria might discriminate against a woman on maternity leave or someone with a disability.
The criteria for redundancy selection must be justifiable by an employer to avoid questions of whether someone has been chosen because they are simply not liked or don’t fit in. Membership of a trade union, someone’s sexual orientation or religion are not objective criteria. Length of service can be used – as long as it can be justified as a relevant criteria (if not, this may constitute age discrimination).
Once the criteria are decided, the consultation process should be open in terms of how the scoring is done – this would include disclosures such as telling employees which documents were used in the scoring process (for example, appraisal documents). Employees should be spoken to individually and given plenty of warning of a redundancy situation, as well as the opportunity to suggest other job options for themselves that would avoid redundancy. If there is a right of appeal and an employee is not happy with his or her score, this should be exercised straight away.
Suitable alternative employment should be offered within a business wherever possible – before the dismissal is effective (this can be within the notice period). These will be existing vacancies within the company, which an employee could be right for – there is no need for an employer to dismiss another employee to create a vacancy. An employee can only refuse the alternative employment if there is a good reason to do so, or the employee will lose the right to redundancy pay. Whether the offer is reasonable will depend on a number of factors, such as an employee’s current pay and status. Whether the refusal is reasonable takes into account the employee’s personal circumstances – for example if the job is elsewhere in the world and the employee cannot move because he or she has a family. Any new role will have a four week trial period during which the employee can decide whether they want to leave and take redundancy after all, or not.
Different types of employees and redundancy
1. Flexible or part time employees. Employers should not treat flexible or part time employers less favourably during a redundancy process because they are flexible or part time – unless this can be objectively justified. An example of an approach that could not be objectively justified is offering less favourable enhanced redundancy terms than are offered to other employees.
2. An employee cannot be made redundant because of pregnancy or maternity as this will amount to discrimination and will be an automatic unfair dismissal. A woman on maternity leave should – like other employees – be included in the consultation process as far as possible and is entitled to be offered suitable alternative employment (i.e. similar work and capacity, in the same place, on no less favourable terms and appropriate in the circumstances). An employee on maternity leave can be given priority – via ‘positive discrimination’ – over other employees who are also in the redundancy pool and a vacancy may be offered even though there are others who are better suited to it (Regulation 10 of the Maternity and Parental Leave Regulations 1999). The vacancy should have no interview process but should be offered before the previous employment comes to an end. Non-compliance by an employer opens up that employer to an unfair dismissal and/or sex discrimination claim.
The right of a woman who is pregnant or on maternity leave to statutory redundancy pay or enhanced redundancy pay should not be affected, unless her employment ends before the 15th week before the week of the due date (although for enhanced redundancy pay this will depend on what the contract states).
Where a redundancy is not correctly carried out
– Where an employee has not been allowed his or her right to a notice period or an enhanced redundancy payment there may be a claim for breach of contract. Depending on the contractual terms, there may also be a claim if a bonus is not paid in accordance with those terms. An employee who loses his or her bonus because he or she is made redundant can also claim this as part of the loss used to calculate compensation due for other claims, such as unfair dismissal or a discrimination claim.
– Where a redundancy would be regarded as a dismissal that is not fair and/or the redundancy procedure used was not fair, this may open an employer up to a claim for unfair dismissal – which has a maximum compensation amount of £72,300. Examples of a situation in which this could arise would be where there was no adequate consultation or the selection criteria used for decide on the employees to be made redundant was unfair.
– Where a redundancy might be less favourable treatment on the basis of race, religion, age, sex (including marital status and pregnancy), philosophical belief, or sexual orientation, or in the case of an employee with a disability where no attempt has been made to accommodate the disability, this could be direct discrimination. Where the redundancy selection criteria has a negative impact on the employee in question, as well as on a group of employees of the same race sex, etc this may be indirect discrimination.
Making a claim
– A claim for a statutory redundancy payment should be made within six months less one day from the last day of employment.
– A claim for unfair dismissal or discrimination should be made within three months less one day.
Where a discrimination issue is raised, there is usually a requirement to follow the ACAS Code of Practice on Discipline and Grievance Procedures (www.acas.org.uk). This aims to resolve workplace disputes before court proceedings are initiated so where a situation requires the Code is followed first, it is unwise to ignore it. There are some serious penalties for both employers and employees who don’t follow the Code – for example any compensation an employee receives from an Employment Tribunal may be reduced by up to 25% if that employee has not followed the Code, or increased by 25% if any employer has not followed the Code.
