Everything you need to know about being made redundant

As we head forward, hopefully, towards a post-Covid world there is still a great deal of uncertainty about what this may entail. One area that is particularly hard to predict is how the world of work will look in future.

Since March 2020 many businesses have been shielded from the harsh economic realities of the pandemic, as have many of their employees, by the Government’s furlough scheme. Of course, many haven’t been so lucky with a wide number of businesses having to close forever and a correspondingly high number of people being left without jobs.

Unfortunately, many economists and other commentators agree that when the furlough scheme is eventually brought to a close there could be more casualties along with a potentially large number of redundancies. If you’re concerned about job security, it’s important to know your rights.

What is redundancy?

As part of working for any business or organisation, employee and employer are bound together by a legally-binding contract. However, from time to time some circumstances may arise when the employer needs to break that contract by making staff redundant.

Redundancy is generally defined as being when the particular role or job ceases to exist. There may be a number of reasons for this including:

The business or organisation closing down.
The role carried out by the employee being no longer needed.
The need to reduce the workforce on economic grounds
The relocation of the employer’s business to another place.

Redundancy is not the same as dismissal, for example for breaching a contract in some way, and anyone who is being made redundant has a number of rights that must be observed by their employers.

Understanding the redundancy process

Employment law means that there is a defined process that employers must follow for redundancy to be carried out legally. This touches on a number of areas from how people to be made redundant are selected to the amount of pay and notice that is due to them.

Selection

There is no set way that the selection process for redundancy works. But it must be carried out consistently and in a fair and objective way.

In cases where a single person’s role is being made redundant or the whole organisation is closing down there is no selection process, but where this is not the case, various methods are commonly used these include:

Last in, first out in which the most recently employed are selected first for redundancy.
Disciplinary records in which employees who may have committed infractions in the past are selected.
Staff appraisals which may also include skills, qualifications and relevant experience

There may also be a period before enforced redundancies that staff are invited to volunteer for redundancy. Often, this option is taken up by employees who may be nearing retirement or looking for a major life change of some kind.

There are a number of grounds that are not allowed to be used in the selection process and, if they are, it could form grounds for a claim of unfair dismissal. These include your:

Gender
Marital status
Sexual orientation
Race
Disability
Religion
Age
Your membership or non-membership of a trade union
Being pregnant or a maternity or paternity leave

An employer’s responsibilities

As well as having to follow an open and transparent selection process, all employers also have a number of responsibilities that they have to adhere to throughout the redundancy process. So if you ever find yourself being involved as an employee it may be well worth keeping a record of what happens and when to ensure that the proper procedure is being followed.

Consultation

Anyone who is being made redundant has the right to a consultation. This is generally run by the HR department and gives employees the chance to put a number of questions to their employer. These include why the redundancy is taking place, the selection process used and what alternatives there may be to redundancy.

Where 20 or more redundancies are being planned then there is the need for a collective consultation that should be headed either by a union representative or elected employee representative. As well as the points mentioned above, these discussions should also include ways to minimise the number of redundancies.

There are also stipulated minimum time periods for a collective consultation. When between 20 and 99 redundancies are planned it must start at least 30 days before they take effect, for 100 or more it should be 45 days.

The offer of alternative employment

Employers should be able to show that they have tried to find “suitable alternative employment” as an alternative to redundancy. If an opportunity arises that:

is similar to the current job
suits the skills, abilities and circumstances of the employees
has similar the pay status, hours and location

an employer is obliged to offer them that job. Equally, an employee can lose their right to statutory redundancy pay if they don’t take up a reasonable offer.

They do, however, have the right to a four week trial period, plus a possible extension for additional training – but this needs to be agreed in writing before the start of the trial period. If it transpires that the job is unsuitable then the employee has the right to give notice and still be eligible for statutory redundancy pay.

Statutory redundancy pay

This is only applicable for people who have been employed for at least two years before the date of their redundancy. Individual organisations may agree, on a case by case basis, to pay more than these limits, but these are the payments that are due by law.

Half a week’s pay for each full year an employees was under 22
One week’s pay for each full year they were 22 or older, but under 41
One and half week’s pay for each full year they were 41 or older

There is a cap of 20 years’ service and the weekly pay is calculated as the average amount earned over the 12 weeks leading up to the redundancy service, with a cap of £544 per week. This means that the most statutory redundancy pay anyone can receive is £16,320 and it will be free of tax, although deductions may be made on holiday pay and wages outstanding.

For employees who have come out of furlough only to be made redundant, the statutory pay is calculated on full, not furlough, wage levels.

Notice periods

It is also a legal requirement that employees receive a notice period between being informed of redundancy and employment ending. Unlike statutory redundancy pay which is only available to employees with two or more years’ service, everyone has a right to notice. This is as follows:

One week for employees who have been employed for between one month and two years
One week for each year of employment between two and twelve years
A capped level of 12 weeks’ notice for any periods longer than this

By mutual agreement, or if it’s stipulated in a contract, there is the option to take payment “in lieu of notice”. This is often the best option as it provides a clean break with an employer, a lump sum, and the opportunity for the ex-employee to start a new job search straight away.

Time off to seek new employment

That said, it is also a responsibility of an employer to allow a certain amount off to any employee with at least two years’ service to look for another position or undergo training. However, employers are not obliged to pay more than 40% of a week’s pay for the time spent doing this, even if more than 40% of the week – two days – is spent looking for work or training.

Unfair dismissal

In certain circumstances, employees being made redundant may find that they have a legitimate claim that they are victims of unfair dismissal. There are certain grounds that they can cite and these include the selection process not being run fairly and the process not being followed in the correct way.

Often, it is a case of an employee feeling that they have been singled out for redundancy based on subjective grounds or victimization. Provided there are sufficient grounds for a claim, it is up to an employment tribunal to examine the facts in line with employment law as it stands and to decide whether or not the redundancy has been fair.

Generally, tribunals will only consider cases in which the claimant has been continuously employed for two or more years, but there are exceptions. These include instances in which redundancies are possibly “automatically unfair” such as when the employee is pregnant or has been a whistleblower of any kind.

However, it can be a long and drawn-out process so seeking experienced legal advice such as is offered by Eatons is essential.

If the tribunal finds in a claimant’s favour then there is generally either the choice of being reinstated by the organisation or receiving compensation. Unsurprisingly, most successful claimants choose the latter.

Dealing with redundancy

While redundancy may be an essentially legal process it’s impossible to ignore the fact that it has major emotional effects on those who are going through it.

As well as the financial worries that suddenly losing income may cause, there is the upset of feeling rejected and the feeling that all the hard work carried out for the employer in the past has gone completely unappreciated.

A good HR department will acknowledge these issues and put help in place, for example, counselling and career planning advice.

For people who don’t feel they are being provided with the support that they need, the Citizen’s Advice Bureau is a good place to start. As well as being able to advise on the legal aspects of redundancy they can also point people towards the benefits that they may be entitled to. They may also have contacts with support groups for people who have been made redundant.

One important piece of advice that may do more good than any other is that even though it may seem like redundancy is a very personal trauma, to the company that has shed employees it has been a business decision.

Thinking of it in these terms makes it a little easier to move on, and maybe even to start thinking about a complete life change too.

Numerous life coaches and other authorities have always made the point that being open and honest about feelings is a great help in dealing with the trauma of redundancy. So sharing fears and disappointments with family and friends can release a great deal of the pressure.

It is also a good idea to be open with the bank, mortgage lender and credit card companies about changed circumstances – and far better to bring it up sooner rather than later when finances may be starting to be stretched.

A new beginning?

It’s also well worth remembering that for many people being made redundant has not proved to be the end, but a new beginning. It can provide a natural break in a working life in which there’s the chance to take a step back and reassess objectives and priorities. Often, redundancy money can also provide that nest egg needed to head off in a new and exciting direction.

It can also provide the impetus to get out and start networking with ex-colleagues and other contacts which can lead to new openings suddenly appearing.

Taking care of your mental health

Above all, it’s important to take care of one’s mental health and try, if at all possible, to keep a sense of perspective. At a time when very many people are likely to find themselves in the same situation, the (wrong) stigma of redundancy should be starting to mean less and less.Understand more about employment law.

At Eatons, we help many people each year not just with the legal elements of redundancy but like to believe that we also offer someone to talk to and reassure our clients.

So if you believe that we can help in any way at all, please don’t hesitate to get in touch.