Redundancy occurs when:
- The business in which the employee works has or will cease to exist;
- The business has or will cease to exist in the employee’s place of work; or
- The requirements of the business for employees to carry out work of the particular kind carried out by the employee either generally, or at the place where the employee works, have ceased or diminished or are expected to cease or diminish.
An employee who has been continuously employed for at least two years has the right to receive a statutory redundancy payment if they are made redundant. Redundancy payments are calculated by reference to the employee’s age and length of service and the statutory amounts payable are reviewed each year. As usual, an employer may decide to be more generous in the amount of redundancy payment paid, although care must be taken not to discriminate on any of the protected grounds. If the employee refuses suitable alternative employment, they forfeit any right to a redundancy payment.
In order for a redundancy to be fair, the employer must show that it followed a fair procedure. This will include, but not be limited to a fair method of selection of who is to be made redundant, genuine consultation with employees “at risk” of redundancy before making a final decision and considering alternatives to dismissal, including whether there are any suitable jobs elsewhere in the business or wider Group.
The law requires an employer that ‘makes a proposal’ to dismiss 20 or more employees by reason of redundancy over any 90 day period at one establishment (i.e. a collective redundancy situation) to consult with appropriate representatives of affected employees. There are minimum consultation periods depending on how many redundancies are proposed. Where the number of redundancies is 20 – 99, a 30 day period applies; where it is 100 or more, it is 45 days. An employer proposing to make 20 or more employees at the same establishment redundant within a period of 90 days or less must also notify the Secretary of State of the plans. The employer is required to give the representatives the following information in writing:
- Reasons for its proposals.
- Numbers and descriptions of employees whom it is proposed to dismiss as redundant.
- Proposed method of selection.
- Proposed method of carrying out the dismissals.
- Proposed method of calculating redundancy payments.
The consultation must discuss ways of avoiding, reducing the number and mitigating the consequences of the dismissals and must be undertaken with a view to reaching agreement with the representatives.