Dealing with redundancy can be very stressful for both employers and employees.

Employers must make sure that they follow correct procedures.  Employees have a number of rights in a redundancy situation and would benefit from understanding what they are.

Employees who are dismissed by reason of redundancy may be able to challenge the termination of their employment by claiming unfair dismissal.

Definition of 'Redundancy'

  • The term Redundancy is defined in the Employment Rights Act 1996.
  • To fall within that definition, a dismissal must be attributable to the employer:
    1. Stopping or intending to stop carrying on business for the purposes of which the employee was employed (“business closure”); or
    2. Stopping or intending to stop carrying on that business in the place where the employee was so employed (“workplace closure”); or
    3. Having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (“reduced requirement for employees”)

Collective Consultation

Where twenty or more employees are being made redundant over a period of ninety days or less, an employer is obliged to inform and consult appropriate employee representatives.  They must also notify the Secretary of State.

If this consultation does not take place, an Employment Tribunal can award up to ninety days pay in respect of each employee.

Redundancy and Unfair Dismissal

An employee who has at least two year’s continuous employment is entitled not to be unfairly dismissed.

Redundancy is a potentially fair reason for dismissal.

Even if a dismissal is genuinely on the grounds of redundancy, it will still be unfair if the employer fails to act reasonably in dismissing the employee in all the circumstances.

A redundancy dismissal is likely to be unfair if the employer fails to:

  1. Consult with individuals; or
  2. Identify the correct pool for selection or to apply objective selection criteria to those in the pool; or
  3. Consider whether there is any suitable alternative employment and, if there is, offer this to the employee.

Redundancy Payments

Employees who are dismissed by reason of redundancy may be entitled to a statutory redundancy payment.  Additionally, they may have an express or implied contractual right to an enhanced redundancy payment.

Statutory redundancy payments are available to all employees with more than two years continuous employment. The level of payment depends on their age and length of service.

If you are involved in a redundancy situation and need some advice, please contact Richard Stephens on 020 8370 2875.