Redundancy is a reason for dismissal that arises when there has been, or is going to be, either a closure of the business, the closure of the workplace, or a reduction in the need for employees.
In order to make someone redundant, without it being unfair, the reason must genuinely be redundancy and the Employer must follow a fair and reasonable procedure. Some employers will have a redundancy policy that sets out the process they will follow when making employees redundant.
What should a fair redundancy process look like?
While the exact process can vary depending on timescales and/or the number of employees being made redundant, businesses should adhere to the following steps:
- Establish a genuine reason for redundancy and identify those employees at risk of redundancy. If more than one, “pool” all employees that carry out similar work.
- Invite volunteers for redundancy or early retirement.
- Consult with employees individually (or if 20 or more employees are at risk of redundancy within a 90-day period the employer must conduct collective consultation with a trade union or, where there is no union, elected employee representatives).
- Apply fair and objective selection criteria such as: skills or experience, qualifications, disciplinary records and performance.
- Consider whether there is any suitable alternative employment available to offer employees at risk of redundancy.
- Allow employees who have been made redundant the opportunity to appeal the decision.
What rights do employees have on redundancy?
All employees, regardless of length of service, have the right to contractual notice, subject to a statutory minimum.
Employees with 2 years’ qualifying service have the right:
- Not be unfairly dismissed. This can be due to:
- No genuine reason - if an employee can show that the reason for the redundancy is not genuine (an unrelated reason, such as performance) then the dismissal may be unfair.
- Unreasonableness – employers must warn and consult employees, adopt a fair selection process and criteria and consider suitable alternative employment.
- To a statutory redundancy payment. An employee may also be entitled to a contractual redundancy payment if there is an implied or express term in the contract of employment.
- To time off to look for work or arrange training.
What if an employer is insolvent?
Employees have the right to apply to the National Insurance Fund for unpaid employer's payments. This includes statutory redundancy payments and certain sums due under contracts of employment.
Sometimes, employers offer employees an enhanced redundancy package under a settlement agreement. A settlement agreement is a contractual agreement between an employer and their employee, whereby the employee agrees to sign away their employment rights (including those relating to redundancy) in exchange for an ex-gratia compensation payment. For more information, please refer to our guidance on settlement agreements or get in touch with a member of our employment team.