Factsheet: Legal Advice for Employees Dealing with Redundancy

1. Qualification for a redundancy payment
2. Redundancy provisions – who is covered?
3. What is redundancy?
4. What does not constitute redundancy?
5. Transferred redundancy (bumping in redundancy)
6. The correct procedure
7. Advanced warning
8. Fair selection: selection pool
9. Redundancy selection criteria
10. Consultation
11. Alternative employment
12. Collective redundancies
13. Want to talk to our redundancy solicitors?

Written by our specialist redundancy solicitors, this factsheet sets out what needs to happen in a redundancy situation and what your rights are. It covers all aspects of redundancy, including transferred redundancy (often called redundancy bumping).

If you are being made redundant, you are entitled to be satisfied that redundancy is the real reason for your dismissal. Redundancy is a potentially fair reason for dismissal, but your employer must both ensure the process is fair and use the correct procedures. Specialist redundancy solicitors can advise on the legitimacy of any redundancy situation or redundancy process.

Qualification for a redundancy payment

If you are dismissed by reason of redundancy and have been continuously employed for two years or more, you are entitled to a statutory redundancy payment. The amount is based on weekly gross pay, age and length of service. It is subject to a cap of £450 a week and 20 years’ service. Some employers provide for an enhanced redundancy payment contractually or on a discretionary basis.

Redundancy provisions – who is covered?

All employees are covered by statutory redundancy provisions. An employee is defined as an individual who has entered into or works under a contract of service. Although you need at least two years’ continuous employment to claim a redundancy payment, you only require one year’s continuous service to bring a claim for unfair dismissal. However, where your employer selects you for redundancy for a discriminatory reason, you can bring a claim of discrimination without any qualifying period.

What is redundancy?

You are regarded as redundant where a dismissal is wholly or mainly attributable to:

Move of place of business

When a business moves from the place where you were employed, the distance between the old and new premises and inconvenience to you are used to decide whether the move is sufficient to warrant a redundancy. The test is where you worked, not where you could be required to work under your contract of employment.

Cessation of business

This is where your employer has ceased, or intends to cease, the business for the purpose for which you were employed. It also applies where the part of the business where you work is closed, but the rest of the business continues.

Surplus labour

Work re-organisation or new labour-saving devices can lead to redundancies where fewer workers or different skills are needed. Where fewer employees are needed for existing work or there is less work for existing employees, an Employment Tribunal will consider the work you could be required to do under the contract of employment, not simply the work you actually did at the time of dismissal.

What does not constitute redundancy?

You would not be regarded as redundant where a dismissal is wholly or mainly attributable to:

• Transferring night workers to day workers
• Changes to a shift system to promote efficient working
• Reduction of overtime

Transferred redundancy (bumping in redundancy)

Bumping in redundancy is where an employee, whose own position is redundant, is transferred to another position, making the holder of that second position redundant. Redundancy bumping is legally permissible provided the correct procedure is followed in respect of the bumped employee.

By linking a dismissal to a diminution in the need for employees, a redundancy situation arises for the bumped employee, notwithstanding that it may not be a diminution in the work which the dismissed employee carried out or could have been required to carry out.

The correct procedure

Your employer must follow the correct redundancy procedure or risk an Employment Tribunal ruling that a genuine redundancy is unfair dismissal. Employers will often consult specialist redundancy solicitors to ensure they are following a fair process.

Advanced warning

You should be given sufficient warning of an impending redundancy situation and the fact it may affect them. If you are currently absent, for whatever reason, including maternity and disability, you must also be contacted.

Fair selection: selection pool

In most cases your employer should identify a pool of employees from which to select those who are potentially redundant. However, where only one employee is potentially affected, for example where only their role is not needed, there is no need for a selection pool.

The pool must relate to the reason for the proposed redundancy so the type of work employees do is important. For example, it would be inappropriate to include canteen or administrative staff if your employer needed to reduce shop floor numbers.

Your employer is entitled to choose the make up of the pool. This can be challenged if you do not feel that the pool is wide enough or if your role was not relevant to the pool. Sometimes there will be more than one pool to reflect redundancies being made in different parts of the business or at different levels.

Redundancy selection criteria

Once the pool has been agreed, your employer will determine how employees will be selected from that pool. A list of criteria should be drawn up to reflect your employer’s business priorities in order to retain the best employees.

Criteria must not be discriminatory and must stand up to objective assessment or measurement. Care is needed to avoid indirect discrimination. If criteria have a disproportionate adverse effect on an ethnic or gender group or a disabled person, this could be found to be an act of discrimination. For example, criteria based on working hours’ flexibility might adversely affect single parents and, as most lone parents are women, this may constitute indirect sex discrimination.

Criteria must also make sense from a business perspective. They should not be created to enable your employer to select people unfairly. For example, ‘willingness to embrace change’ can be a difficult criterion to justify objectively, but could be fair if the business is in transition.

Last in first out, or ‘LIFO’, has previously been a popular sole selection criterion. While this method is both simple, and on the face of it fair, it may not produce the desired result for the employer. By using this method, employers may lose the employees best able to drive the business forward in the future. It may also indirectly discriminate against younger employees. Length of service should therefore only be used as one of a number of potential criteria and should certainly not be given the greatest weight. (Criteria can be weighted according to priority).

A dismissal is automatically unfair where you are selected for an inadmissible reason, for example because you are pregnant. In cases where you have been selected for an automatically unfair reason, no qualifying period of continuous employment is needed to bring a claim.

In addition, selection criteria which penalise a pregnant or disabled employee – for example, counting sickness related to disability or pregnancy – can be discriminatory. If this results in that person being selected for redundancy, it is not only unfair dismissal due to an unfair selection process but could also be discrimination. Redundancy solicitors can advise.

Common point scoring selection systems include:

• Skills needed to take the business forward
• Performance
• Flexibility
• Disciplinary record
• Sickness record (discounting any absence for disability or pregnancy related reasons)
• Length of service

Consultation

Your employer needs to ensure proper and meaningful consultation with employees selected for potential redundancy. This two-way dialogue should aim to find ways of avoiding dismissal if at all possible. Options might include job sharing, sabbaticals or a reduction in hours.

Alternative employment

Your employer must make genuine efforts to find out if suitable alternative employment exists within the employing entity and in any associated company. If available, this should be offered to you during the consultation process. Finding out what transferable skills you have and what jobs you would consider is part of the consultation process.

Only after the consultation process is complete – 30 days if more than 20 employees are being made redundant – should you be given notice.

Your employer should inform you of their decision and notify you of your right to appeal. Failure to do this might make the dismissal unfair on procedural grounds.

Collective redundancies

Where your employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, they must follow a collective information and consultation procedure in addition to the redundancy procedures above.

The law requires your employer to consult about the dismissals with all ‘appropriate representatives’ of those who may be affected by the proposed dismissals. The consultation should cover and seek to reach agreement about ways to:

• Avoid the dismissals
• Reduce the numbers of employees to be dismissed
• Mitigate the consequences of the dismissals

In addition, your employer should disclose in writing to the representatives:

• Reasons for their proposals
• Numbers and descriptions of employees they are proposing to dismiss as redundant at each and every establishment
• Proposed method of selecting the employees who may be dismissed
• Proposed method of carrying out the dismissals, including the period over which they will take affect
• Proposed method for calculating any redundancy payments

Where special circumstances render it not reasonably practicable for your employer to comply with these requirements, they need to take all reasonably practicable steps in the circumstances.

The failure of your employer to follow collective redundancy consultation obligations leads to additional awards known as ‘protective awards’.

Want to talk to our redundancy solicitors?

Our specialist redundancy solicitors can help if you believe your employer has not followed the correct redundancy procedure (including rules on transferred redundancy or redundancy bumping) or if you believe redundancy is not the real reason for dismissal or you have been unfairly selected for redundancy.

To find out how we can help you with a redundancy, contact us today on 01273 609911, or email info@ms-solicitors.co.uk.