Redundancy

Redundancy

What is the legal definition of redundancy?

Redundancy occurs when an employee is dismissed due to any one of the following:

the closure of the business 
the closure of the place where the employee was employed 
reduced requirements of the business for employees to do work of a particular kind

Who is entitled to a statutory redundancy payment?

Generally, employees who have at least two years’ continuous service with their employer are entitled to a statutory redundancy payment.

An employee will lose their entitlement to a statutory redundancy payment if they unreasonably refuse an offer of suitable alternative employment.

How is the statutory redundancy payment calculated?

For each full year of service at the age ranges below, the employee receives:

up to age 22 – half a week’s pay
age 22 to 40 – one week’s pay
age 41 and over – one and a half week’s pay

There is a maximum weekly cap of £643, even if the employee earns a greater amount.

Also, employees can only receive statutory redundancy for a maximum of 20 years’ service and the maximum statutory redundancy payment is therefore £19,290.

To dismiss fairly, what are the key procedures that the employer should be following?

the employer should consult with the employee prior to a decision being taken
if appropriate, the employer should carry out a fair selection process
the employer should search for suitable alternative roles
depending on the number of proposed redundancies carry out collective consultation

Although, generally, employees need at least two years’ continuous service to bring an unfair dismissal claim, employees could bring other claims such as for discrimination. It is therefore sensible to follow a fair process, regardless of the employee’s length of service.

What is the maximum compensatory award for unfair dismissal?

The maximum compensatory award is normally the lower of 52 weeks’ pay or £105,707.

When does the duty to consult collectively apply?

The duty applies when the employer is proposing to dismiss as redundant 20 or more employees from one establishment within a 90-day period.

How long should collective consultation last?

Where 20 to 99 redundancies are being proposed there must be a minimum consultation period of 30 days before dismissal and where 100 or more redundancies are being proposed there must be a minimum consultation period of 45 days before dismissal.

What is the maximum award for breaching collective consultation obligations?

90 days’ gross pay for each dismissed employee.

MATT GINGELL

PARTNER

Matt is the founder of Lombards and advises employers and employees on all aspects of employment law. Matt has built up exceptional experience and knowledge from his time at leading employment law firms, including at a well-known City employment law firm. Matt is an accomplished legal commentator, regularly appearing on Sky News to talk about employment law issues that affect both employers and employees and his employment law articles are featured in The Guardian and The Independent.

Email:    mg@lombards.co.uk