If you’re facing redundancy, it can be a trying and difficult time. Here’s the Howells essential guide to the redundancy process:
What Is Redundancy?
Redundancy occurs when your employer dismisses you after deciding that your job role is no longer needed within the business.
There are a number of common reasons for getting made redundant, but it can include:
- New technology making your job unnecessary
- The role you were hired to perform no longer exists, or the need for such a role has diminished
- The employer decides it needs to cut costs and restructure some or all of the business, resulting in a reduced need for certain job roles
- Companies folding, moving to a new area, or being sold to other companies with different aspirations
These won’t automatically lead to your compulsory redundancy, though, so you should take advice from a specialist if you’re unsure, or if you’re not convinced by the rationale.
Redundancy is very rarely to do with the employee’s ability to do the job. However, you’re entitled to know exactly why you’re being made redundant as part of the employer’s obligations to consult with you.
Your employer should consult with all individuals who are at risk and is required to do so if 20 or more redundancies are being made at the same time. Consultation will typically involve consideration of any alternatives to redundancy and whether dismissal can be avoided.
In the event of your employer looking to make reductions in staff numbers (for example, if they are looking to reduce the number of admin staff they employ from 5 to 3), all admin staff should be pooled together and scored against objective criteria, e.g. attendance record, lateness record, and disciplinary offences on record.
Many employers fail to deal with scoring fairly, therefore putting them at risk of making an individual redundant unfairly and having to deal with a potential claim for unfair dismissal.
If an employee is selected for redundancy for a discriminatory reason that is to do with a protected characteristic (such as age, race, disability, sex) the employee may also have a case for discrimination.
The employer must also consider alternatives to redundancy. For example, a job-share may be something two employees are interested in, or there may be suitable alternative work the employer can offer instead.
What Is Voluntary Redundancy?
Voluntary redundancy is where an employee chooses to put themselves forward for redundancy before they are compulsorily selected for redundancy.
Once some members of staff have indicated that they’d be willing to take voluntary redundancy, the employer will select which individuals to proceed with. Just because you volunteer for the process, it doesn’t mean you’ll definitely be selected. Your employer will have the final say and is fully entitled to keep you on.
Employees are entitled to the same notice period, redundancy payment and other rights if their application for voluntary redundancy is accepted.
In some cases of voluntary redundancy, the employer will offer more than the statutory minimum payment in order to make the process more attractive. However, this may be subject to you signing away any potential claims under a Settlement Agreement.
Click here to see our full guide on Voluntary Redundancy
Redundancy Notice Periods
If you’re being made redundant, your employer is required to give you notice and confirm your leaving date. This is known as a notice period.
The minimal length of the notice period varies by statute in accordance with how long you’ve been in your place of work:
- 1 month to 2 years – 1 week’s notice
- 2 years to 12 years – 1 week’s notice for every full year employed
- More than 12 years – 12 weeks
It is recommended that you check your contract of employment as sometimes you may be entitled to more than the statutory minimum notice.
Depending on what your contract says, your employer may be entitled to bring forward your leaving date so that it comes before your notice period is completed. In this instance, you’ll receive any outstanding pay that’s due to be paid (including pension, healthcare and other contributions) over your notice period in a lump sum. This is known as a Payment in Lieu of Notice (PILON) and it may even cover the entire period of notice if your employer does not need you to work for any of your notice period.
If your employer is paying you PILON, it is advised that you check whether your contract allows employers to make such a payment. If PILON is not provided for within the contract, the employee is entitled to receive other benefits, such as holiday entitlement, that they would have earned had the employee worked their full notice. It may also give you the right to claim that the notice period should be paid to you without any tax or National Insurance deductions.
The employer may also have the right to place you on ‘garden leave’ for your notice period. During garden leave, you would not be required to attend work and your access to your employer’s work, systems, staff, and customers may be removed or strictly limited.
You would need to remain reasonably available to your employer and you would remain bound by your other terms and conditions of employment until the end of garden leave.
Redundancy Payments
Some people are entitled to redundancy pay, with a written statement that details the payment. It comes in two forms:
- Statutory redundancy pay – set down in law by the UK Government
- Contractual redundancy pay – set down in some individual contracts by employers, these are usually more lucrative than the statutory minimum
Statutory Redundancy Payments
To be eligible to receive a statutory redundancy payment, you need to have at least 2 continuous years of service. Service from a previous employer may count if your contract of employment has transferred under the rules that govern transfers of undertakings.
How much money you receive from your statutory redundancy depends on your age and how long you’ve been employed. You’re entitled to:
- 1.5 weeks’ pay for every year of employment after your 41st birthday
- 1 week’s pay for every year of employment after your 22nd birthday
- Half a week’s pay for every year of employment before your 22nd birthday
The length of service is capped at 20 years.
You’re also entitled to any holiday pay that you’ve accrued but not used. However, your statutory redundancy payment is capped. The amount of weekly pay is capped at £643. The maximum amount of statutory redundancy pay is £19,290. These figures apply for redundancies on or after 6 April 2023.
If you would like help calculating your statutory entitlement, please get in touch.
Contractual Redundancy Payments
Your employer has the discretion to offer you enhanced redundancy pay. Many employers offer private payment schemes in your employment contract. To see whether you would be eligible for extra payment you should check your contract.
Even if you have no entitlement to contractual redundancy pay, your employer may decide to offer you an enhanced redundancy package as a condition of signing a Settlement Agreement and waiving your right to pursue legal claims against your employer.
It is a legal requirement to take advice from a solicitor (or other ‘relevant independent adviser’) on the terms of a Settlement Agreement.
If you require this service, please contact us or call us on 02920 404026. Provided you eventually sign, your employer will usually cover your legal costs.
Is Redundancy Pay Taxable?
Your redundancy pay is tax-free up to £30,000. What’s more, there wouldn’t be any employee national insurance contributions to pay.
If you stand to earn more than £30,000 from your redundancy, it’s worth talking to an employment expert.
Claiming Benefits After Redundancy
If you’ve been made redundant, you’ll likely be able to claim benefits under Universal Credit. This system has replaced and incorporated the following:
- Child Tax Credit
- Housing Benefit
- Income Support
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Working Tax Credit
You can make a claim for Universal Credit after both redundancy and voluntary redundancy. All benefits depend on your personal circumstances after being made unemployed and so it’s worth making enquiries to check your eligibility.
Redundancy Disputes
Being made redundant can be a very stressful time. It’s very common for people undergoing redundancy to dispute certain aspects of the situation. Common disputes include:
- Unfair dismissal and discrimination cases
- Payment disputes
- Tax issues
Every employer should have an appeal procedure in place for you to contest any dismissal on grounds of redundancy about which you disagree. Depending on the circumstances, you may also decide to raise a grievance – for example, to complain about any discriminatory treatment you may have suffered.
Talk to Howells About Redundancy Today
Howells Solicitors are dedicated to helping you through the difficult times in life. If you’ve been offered voluntary redundancy or are facing a redundancy process, our experienced team of employment specialists can help you with their expertise.
Find out how we can help – book your no-obligation meeting today, get in touch by calling us on 02920 437484 or email employment.department@howellslegal.com.
