Redundancy- Employees’ Rights
With businesses restructuring and adapting to face a post-COVID era, it is vital for employees to be aware of their rights when it comes to redundancy. As company resources shrink and employers look to streamline their operations, part of the response could involve making redundancies. In this short blog, we set out the ways in which an employee can protect themselves and ensure their statutory rights are upheld throughout the redundancy proceedings.
The Coronavirus Job Retention Scheme was introduced on 20 March 2020 and businesses were offered financial support to assist with the economic consequences of the global pandemic which has affected the heart of industry and commerce across the world. Further details of this scheme can be found at https://www.gov.uk/government/collections/coronavirus-job-retention-scheme. As the scheme is phased out and comes to an end on 31 October 2020, employers will need to assess their operational staff costs and may turn to redundancy in due course.
If you are being made redundant, then provided you have been employed continuously for 2 years under ‘employee’ status, there are a number of key rights you are entitled to.
What is Redundancy?
Redundancy is a form of dismissal and generally arises when an employer needs to reduce the size of their workforce in order to save costs. This could be the business as a whole or within a particular site, business unit, function or job role. As well as the economic impact of Coronavirus, there may be a number of other factors which lead to an employer making redundancies. Typical factors include a change in business priorities, a downturn in profit or even the introduction of new technologies which change the traditional organisational structure of a business and reduce the need for certain roles.
The Redundancy Process
An employer should always look to avoid redundancies where possible given that the workforce of an organisation is often its most valuable asset. This may be done by offering flexible or reduced working hours to existing staff, restricting recruitment or banning overtime or filling vacancies elsewhere in the business with existing employees.
2. Compulsory Redundancies
Employers are under a duty at this stage to identify which employees will be made redundant and to ensure the process is fair. Fair reasons for redundancy include the following:
- Skills, qualifications or aptitude;
- Standard of work and performance;
- Attendance; and
- Disciplinary Record.
An employer should use a fair and objective method of selecting employees for redundancy. Reasons based on certain characteristics such as age, sex, disability and race will not be fair reasons and can give rise to a claim in unfair dismissal. Selection due to maternity leave, jury service, whistleblowing or exercising your statutory rights are other reasons which will be deemed unfair.
3. Redundancy Consultations
In order for a redundancy to be fair, an employer must consult with their employees as a matter of law. The first step is to notify all employees that there are going to be redundancies and the reason behind this. The following information should be given:
- The number of redundancies to be made;
- Which parts of the business which will be affected;
- How employees will be selected for redundancy;
- How the redundancies will be carried out; and
- How the redundancy payments will be calculated.
If the number of redundancies is between 1 and 19 then there is no set consultation procedure. However, if there are 20 or more redundancies, then the collective redundancy rules must be followed. This requires the appointment of an employee representative and a minimum period of consultation. The minimum consultation periods are as follows: –
- 20 to 99 redundancies: the consultations must start at least 30 days before any dismissals take effect; or
- 100 or more redundancies: the consultations must start at least 45 days before any dismissals take effect.
Following this, any employees who are specifically at risk of redundancy should be notified by way of an ‘at risk of redundancy letter’.
4. The offer of suitable alternative employment
If there is other suitable alternative employment available within the organisation, then you employer must offer this to you. Failure to do so can give rise to a claim for unfair dismissal. Whether or not a role is considered a suitable alternative depends on a number of factors, these are:
- how similar the work is to your current job;
- the terms of the job being offered;
- your skills and abilities and circumstances in relation to the job; and
- the pay (including any benefits), status, hours and location.
Employees should carefully consider alternative job offers, as any unreasonable refusal could result in the statutory right to redundancy pay being lost.
Even if you are being made redundant, you are still entitled to be given notice. Notice periods will be determined in accordance with statute or your contract of employment, whichever is greater. Statutory notice periods are as follows: –
- at least one week’s notice if employed between one month and 2 years;
- one week’s notice for each year if employed between 2 and 12 years; or
- 12 weeks’ notice if employed for 12 years or more.
If the contract of employment provides for a longer notice period, then the employer must give notice in accordance with the contract; they cannot, however, give less than the statutory minimum.
Garden Leave – If you were in a particularly sensitive role, dealing with commercially sensitive information for instance, your employer may require you to serve your notice period at home.
6. Notice Pay
In addition to your statutory redundancy pay, your employer should either: –
- Pay you throughout your notice period; or
- Pay you in lieu of notice.
If your employment contract includes a clause which allows payment in lieu of notice (a PILON clause), then your employer can terminate your employment without notice; provided pay is provided in exchange of notice.
7. Redundancy Pay
Employees who are made redundant may be entitled to a ‘statutory redundancy payment’ if the individual is an employee working under a contract of employment with at least 2 years continuous service. This is calculated in accordance with your age, salary and length of service. For redundancies made after 6th April 2020, the statutory award is capped at £538 per week, regardless of your salary. The length of service is capped at a maximum of 20 years and the maximum statutory redundancy pay is £16,410.
Finally, if you are being made redundant then your employer should allow you a reasonable amount of time off in order to find alternative work. During such periods of leave, your employer is only required to pay you up to 40 percent of your weekly wages.