What is redundancy?
Redundancy arises when an employee is dismissed in circumstances where:-
- The employer has or intends to cease the business in which the employee worked altogether or at the location in question or,
- The employer requires fewer employees to carry out work of a particular kind in the business – or at a particular site where the employee is located.
Who can claim redundancy?
An individual may claim entitlement following redundancy if:-
(a) They are an “employee” – see separate note.
(b) They have two years continuous employment with the same employer.
(c) They do not fall into certain limited categories of excluded employees – this includes for example share fishermen.
(d) They are dismissed by reason of redundancy – see above.
(e) The claim is presented within the time limit broadly six months of dismissal but this point requires care.
Compensation for redundancy is defined by statute. It is modest and calculated by reference to a formula. Sometimes the basic entitlements are enhanced by the individual’s contract of employment.
The calculation is A x B x C where:-
A equals number of complete years service to a maximum of 20.
B equals one week’s gross pay subject to a maximum ceiling revised annually (£479 per week in 2016) The maximum possible payment is £14,370
C equals a multiple based on age:
Each year of service up to age 21 equals 0.5
Each year of service whilst aged 22 to 40 equals 1.0
Each year of service aged 41 to 65 equals 1.5
Redundant or unfairly dismissed?
Redundancy may mean that a dismissal is “fair”. An employer must satisfy the tribunal that there was a genuine redundancy situation and that he acted reasonably. In order to justify this an employer must:-
- Warn and consult employees and their representatives in advance of the final decision.
- Identify who should be within the “pool” of individuals from which selection should be made.
- Adopt an objective set of criteria to determine who to select for redundancy and select fairly.
- Attempt to locate alternative employment within the organisation otherwise the redundancy may become unfair dismissal.
Dealing with redundancy is a dispiriting and difficult area. Employers can easily make mistakes and it is wise to take advice before acting. Employees are devastated that they have lost their jobs, often through no fault of theirs.
Lawson Lewis Blakers can provide specialist employment advice to employers and employees in relation to issues of redundancy and unfair dismissal.