The law which applies when an employer wants to make staff redundant is complex and it is easy for organisations to make mistakes.
Retail giants Tesco and Sainsbury announced recently they were making significant numbers of staff redundant. It is sadly all too common at this time of year, to hear of staff being laid off, particularly in the retail sector where Christmas trading may have been disappointing.
Individuals who have been employed for two years or more can make a claim to the employment tribunal for unfair dismissal where they have not been properly selected for redundancy or their employer has failed to follow a fair procedure in carrying out the redundancies. An employment tribunal can also order an employer to pay a statutory redundancy payment.
In cases where collective consultation should have been carried out, but the employer has not done so properly (or at all), employees may be awarded a “protective award” of up to 90 days’ actual pay.
If you find yourself in a redundancy situation, here are our top five questions to ask:
1. Is this a genuine redundancy situation?
The law recognises that a genuine redundancy situation happens only in three scenarios: where an employer’s business is closing down altogether, or moving location or the employer’s need for employees to do a particular type of work has stopped or reduced. For example, if a big order was lost so there is less work to do or a particular process has been automated so fewer people are needed.
Employers sometimes try to circumvent what is really a performance or other workplace issue by calling it a “redundancy”. However, if the employer gets the label wrong then it will be at risk of an unfair dismissal claim.
2. Have you been fairly selected for redundancy?
Where an employer is not closing down all together but is simply reducing headcount in some departments, it will need to carry out a fair selection process to decide who to dismiss and who to retain. This is often done using a scoring system looking at things like skill set, attendance, disciplinary record and experience.
Any such method of selection must be objective and free from any taint of discrimination – for example, penalising someone for disability or maternity related absence. Very basic selection methods such as “last in, first out” are unlikely to be lawful.
Scoring needs to be backed up by evidence such as the most recent appraisal rather than just being the subjective view of one manager. An employee should be given enough information about why they rather than someone else was selected for redundancy so that they can challenge their scores if need be.
3. Has your employer followed a fair procedure?
The procedural requirements for a fair dismissal where there is a redundancy situation are stringent. Employers need to give as much warning as possible and to have meaningful consultation with those affected. Employers must have properly considered all alternatives to making redundancies as well as possible alternative employment within the company/group for those selected. It is usually best practice to ask for volunteers for redundancy before imposing compulsory redundancies.
4. If more than 20 employees are affected by the redundancy proposal, has your employer consulted collectively?
Where it is proposed that 20 or more employees are to be made redundant within a 90 day period then there is an additional legal requirement on employers to consult collectively with appropriate representatives for a minimum amount of time – up to 30 or 45 days depending on the numbers of people affected. Appropriate representatives will be either trade union or other existing employee reps. or representatives specially selected for the redundancy process.
5. Are you being paid everything you are entitled to?
If you have been employed for more than 2 years you will be entitled to a statutory redundancy payment. This is calculated using a formula which takes account of your age, completed years of service and weekly pay (capped at £489 per week) – the current maximum available is £14,670. You will forfeit your right to statutory redundancy payment if your employer offers you suitable alternative employment and you unreasonably refuse this.
You may also be entitled to a contractual redundancy payment if this is a term of your contract but not all employers offer these.
Redundancy payments under £30,000 are payable tax-free.
If you are not working your notice period then your employer will need to pay you in lieu of notice. Check whether your contract requires basic salary only to be paid in lieu or whether the value of other benefits you would have enjoyed during your notice period such as pension contributions and private medical insurance should be included.
You will also be entitled to be paid in lieu of any holiday which has accrued but which you haven’t taken.
If you are at risk of redundancy and want to check your employer is getting it right then speak to one of our employment law experts today who can guide you through the process.