Redundancy

Key points

• A redundancy situation can exist where business, or part of it, is shut down completely, shut down at a specific location (even if moving to a new location) or the requirement for employees to do work of a particular kind has reduced or come to an end.
• There are numerous legal claims employees might bring in relation to redundancy, which is why it is important to plan all redundancy exercises carefully.
• There is a duty to consider if there are alternative measures to redundancies that could be implemented.
• If you propose to dismiss between 20 and 99 employees within 90 days or less, the obligation to notify the Redundancy Payments Service on Form HR1 is triggered. Whether this has to be done 30 days or 45 days before dismissals take effect will depend on how many employees are involved.
• Employers are required by legislation to inform and consult with 'appropriate representatives' of any employees who may be affected, where it is proposed to dismiss at least 20 employees at any 'one establishment' within a period of 90 days or less.
• Where fewer than 20 redundancies are proposed, you are not required by statute to consult collectively, but it is worth considering doing this to assist in showing a fair procedure has been followed for the purposes of the unfair dismissal regime.
• 'Appropriate representatives' are either recognised trade union representatives (where a union is recognised) or representatives elected by the potentially affected employees in an election.
• There are minimum periods for collective consultation. When it is proposed to make between 20 and 99 redundancies consultation must begin at least 30 days before notice of dismissal is given. Where 100 or more employees are affected this is increased to 45 days.
• The consultation clock doesn't start ticking until certain information has been given to the appropriate representatives in writing.
• Consultation needs to take place when the plans are at a sufficiently formative stage that the employees can influence the process. It should include discussions about ways to avoid dismissals; ways to reduce the number of employees being dismissed; and ways to mitigate the consequences of dismissal on the affected employees.
• Avoid telling any employees they are 'safe' unless their category of employee is completely unaffected.
• You will need to define the method of selection, unit for selection and selection criteria you intend to use. You have considerable freedom to frame the redundancy process in the manner which works for you provided that it falls within the 'range of reasonable responses of an employer'' and you can justify why you have chosen a particular methodology.
• Individual consultation should take place in all cases.
• Avoid issuing notice of dismissal before both the collective and individual consultation periods have closed. All redundant employees will need to be given appropriate contractual or statutory notice to bring their contract of employment to an end.
• Throughout the redundancy process, and during any period employees at risk of redundancy are working out their notice, an employer has a duty to consider alternative employment opportunities for them.
• Once notice has been issued, the employee has the right to reasonable paid time off to look for work or undertake training.
• All selected employees have the right of appeal against selection.
• Any employee with two years' service at the date of termination of their employment by reason of redundancy will be entitled to a statutory redundancy payment. This is calculated with reference to their length of service, age and weekly pay, in line with a statutory formula.
• Employers often make payments in excess of the statutory redundancy pay scheme. These enhanced schemes may be contractual or become contractual as a matter of custom and practice.
• Redundancy payments are tax free up to £30,000.
• Draft regulations capping public sector exit payments at £95,000 were published in November 2015 but have not yet come into force.

Recent developments

Following a consultation, the government has confirmed that redundancy protection for new parents will be extended. Currently, those on maternity leave who are at risk of redundancy must be offered suitable alternative roles in advance of others. This protection ends once the employee returns to work.

Furture changes will mean that this protection starts from the date the employee informs her employers that she is pregnant, whether verbally or in writing, and will last for a further six month period once the employee returns to work.

The extended protection will also be available to those on adoption leave and shared parental leave, although further guidance will be released on how this works due to the differences in the shared parental leave scheme.

The date these changes take effect has not yet been confirmed. More information can be found in our news article.

In a recent case, Newcastle NHS Trust v Haywood, the Supreme Court ruled that where there is no express contractual provision outlining when written notice becomes effective, there is an implied contractual term which states written notice runs from the date it is received and read by the employee, or the date there has been a reasonable opportunity to read this.

To ensure certainty in the date written notice of redundancy takes effect, employers may consider amending contracts of employment, giving notice verbally and confirming this in writing, or hand delivering written letters of dismissal.