What is an employment redundancy?
Redundancy happens where the employer has either a reduced need for work of a particular kind, or work at a particular location, and therefore makes the decision to dismiss employees to reduce the workforce size. Redundancy can arise from workplace restructuring or reorganisation of the business. Possibly arising from the complete closure of the business too.
What is the difference between voluntary and compulsory redundancy?
There are two distinctive types of redundancy routes in the UK, both of which eventually implicate the termination of an employee’s contract.
The two types of redundancy procedures are referred to as compulsory or voluntary redundancy.
If you are looking to carry out a redundancy process under the Redundancy Payments Acts 1967 – 2014 then this will be called a compulsory redundancy.
To ensure the compulsory redundancy process complies with redundancy legislation, you must be able to demonstrate the following:
- There’s a genuine need for the redundancies within your company
- You practiced a fair and transparent selection policy in choosing employees for redundancy.
- The consultation process for the redundancies is fair.
- Employees selected receive their full statutory redundancy pay.
Voluntary is where you ask employees if they’d like to volunteer for redundancy.
You must have a fair and transparent selection process even in a voluntary redundancy situation and tell employees they will not mechanically be selected just because they applied for the voluntary redundancy.
What steps should an employer take to avoid compulsory redundancies?
Here are some steps an employer can take to avoid compulsory redundancies:
- Ask employers if they would like to apply for voluntary redundancy or early retirement
- Check whether existing staff can work flexibly
- Eliminating self-employed or freelance staff before permanent workers
- Refraining from using casual labourers
- Not allowing over-time work
- Offering employees other vacancies in the business first
- Offer a temporary lay-off
- Furlough staff so that you can rehire them when you are in the position to do so
How does consultation work for potential redundancies?
It is essential that employers consult employees in order to discuss their proposals and to discuss any ways in which redundancies may be avoided, or reduced. Consultation process can take place collectively with an elected staff representative if 20 or more employees are to be made redundant. Or if it affects less than 20 staff, consultation can be directly with the affected individuals. Furthermore, there is no set time limit for how long the period of consultation should be for, but the minimum duration is:
- 20 to 99 redundancies – the consultation has to start at least 30 days before any dismissals happen.
- 100 or more redundancies – the consultation has to start at least 45 days before any dismissals happen.
How are employees selected for redundancy?
There is no outlined process. The legal requirement is that the process must be reasonable and not discriminatory. What is reasonable may differ widely between small family employers and large corporate organisations. This is where an employment law expert can advise you.
What is collective Redundancy?
Collective redundancy is when more than 20+ employees are made redundant within a time frame of 90 days or less. Where an employer has planned to make more than 20 employees redundant within a period of 90 days or less they must consult with representatives of the employees and inform the Department for Business, Innovation and Skills (BIS).
Where fewer than 100 redundancies are planned, consultation must begin within 30 days before the first dismissal. For more than 100 employees, consultation must take within 45 days.
If an employee is made redundant, what payments are they redundancy what payments are they entitled to receive?
If your employee has been employed with you for a minimum of 2 years and you have dismissed them due to redundancy, then they are entitled to a tax-free statutory redundancy payment, calculated depending on age, length of service, and capped at a maximum weekly payment of £538.
Should your employee earn less than this per week, then the statutory payment will be made up of their actual weekly earnings.
An employee will also be eligible to either work their contractual or statutory notice period (whichever is the higher) or receive a payment in lieu of working their notice. An employee will also be entitled to receive a payment for accrued untaken annual leave to the date of dismissal.
As an employer, you may decide to make enhanced redundancy payments above the statutory redundancy payment amount. In such conditions, you may ask your employee to sign what is called a settlement agreement. It is a legal condition that an employee must take advice (normally from a solicitor) on the terms and outcome of signing a settlement agreement. An employer usually will make a contribution towards the legal costs in providing that legal advice.
What is a Protective Award?
A Protective Award is an award of compensation of up to 90 days’ gross pay, that can be awarded by an Employment Tribunal, for the failure of an employer to collectively inform and consult its employees where the employee has been dismissed on the grounds of redundancy. This applies to dismissals of 20 or more employees, within a 90-day period.
It is important to note that, unlike with redundancy payments, your staff do not need to have been employed for two years to make a Protective Award claim.
Where can I get legal advice if I want to make my staff redundant?
For all legal matters related to Redundancy Law, contact JMR Solicitors, employment law specialists on 0161 491 3933.