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Redundancy

If you are an employer then one of the less enjoyable tasks that you may come across at some point in your career is making somebody redundant. With an issue as important as this, it is vital that you complete the procedure in accordance with the law.

Some of the basic rules that you need to adhere to when making somebody redundant include:

  • An employer must have a genuine reason for a redundancy
  • A fair and proper procedure must be adhered to, involving a consultation
  • No decision should be made until the procedure has been exhausted

If these rules are followed then you can dismiss staff that are no longer required without the risk of being taken to a tribunal at a later date by an employee who feels that they have been mistreated by your company.

The following is a basic overview of redundancy but please bear in mind that it is best to book a free consultation with a lawyer for more individually tailored advice.

Reasons for redundancy

Some of the most common reasons for making employees redundant are the following:

  • new technology means that the job is no longer necessary
  • an employer needs to cut costs and reduce the number of staff
  • the employer needs to close the business completely
  • the employer is changing their line of business so your skills are no longer relevant
  • the business has been taken over

How long must an employee have been employed for redundancy to occur?

For an employee to be made redundant they do not need to have worked for the company for a particular length of time; an employee may be made redundant after 10 years or 10 days.

However, to be eligible for a redundancy payment they will need to have worked for the same company for at least 2 years.

Likewise if the employee wants to challenge the justice of their dismissal then they must have been working continually for the employee for at least 2 years – this applies if they were employed on or after 6th April 2012. (They need to have been employed for 1 year if the work commenced before that date.)

Where an employee argues that they were unfairly dismissed because they asserted their statutory right – for example they exercised their right to request flexible working –they do not need to have worked for the company for a specified length of time.

Procedure

Let us now assume that the purpose for the redundancy is legitimate; this is where the process of redundancy begins.

To begin with, the employer needs to carry out a consultation with the employee (a “collective consultation” takes place where more than one employee is made redundant). Bear in mind that if this stage is missed out it is more likely than not that the dismissal will later be taken to an employment tribunal.

While the consultation may not end in agreement, it needs to be made with the intention of coming to one.

Throughout the procedure the affected employee will be advised that their position is at risk of redundancy but that no decision has yet been made.

During this time the employee will be consulted and informed in relation to why the redundancy situation has arisen, and given an explanation of the ways that are being explored to potentially avoid redundancy, e.g. alternative suitable employment.

In the consultation you will provide them with:

  • information to the individual about the planned redundancy
  • time to consider it, and answer any of their questions
  • notices containing the agreed leaving date
  • issue redundancy notices afterwards.

At this stage employees have the right to be accompanied by a trade union rep or work colleague and it may be necessary to have a further meeting for the purposes of reporting back any findings and/or the decision.

There will be an appeal meeting and the decision will be confirmed after the employer has reflected on the points raised. The final decision will subsequently be confirmed in writing.

Employees with two years’ service will receive contractual pay and a statutory redundancy payment

Voluntary redundancy

An employer may ask for employees to volunteer for redundancy and may offer a financial inducement to do so.

If this is accepted, the employer will most likely ask the employee to enter into a Settlement Agreement (formerly known as a Compromise Agreements) - a confidential document that records the terms of settlement.

This will seek to prevent an employee from pursuing employment rights in return for a financial package. In this scenario it is a requirement that an employee takes this agreement to an independent solicitor like Lanshaws, and a contribution towards legal fees will usually be made by the employer.

What to do if made redundant?

If you have been made redundant and would like to take further action, seek legal advice as soon as possible with regards to whether a claim might be issued at an Employment Tribunal for unfair dismissal (in addition to any other relevant claim at the time of issue).

Claims should be issued within three months of the termination date which is why it is important to act quickly.

Pursuant to new mandatory ACAS rules, a claim cannot now simply be issued at an Employment Tribunal without them first having been consulted.

If you have any questions about redundancy please contact our solicitors and we will be happy to discuss your situation with you in more detail so that we can reach a resolution that is best for you, your company, and your employees.

This information is intended to provide a general and generic overview only and is not intended to represent comprehensive legal advice. It should not be relied upon without first obtaining detailed legal advice.