Author: Jacqueline Penfold. Litigation and Employment, Partner
With the Government’s furlough scheme (‘the Coronavirus Job Retention Scheme) coming to an end on 31 October, there has been much speculation in the media that this will lead to a surge in redundancies.
Whilst the Government have introduced alternative schemes to help employers, such as the new Job Support Scheme, this is a less generous scheme and the pandemic continues to have a negative impact on the economy.
Many employers find themselves in the unenviable position of having to consider whether they will have to make redundancies.
Neither the employer nor the employee will want to find themselves facing a redundancy situation but if you are in this position, it is important to understand the law surrounding redundancy and the procedures that should be followed. Although we are in extraordinary times, the rules and procedures relating to redundancy have not changed; the ‘normal’ rules apply. There must be a genuine redundancy situation and a fair process followed otherwise a claim for unfair dismissal could be made.
We set out below a few points that you should consider if you find yourself either being made redundant or making an employee redundant.
What is redundancy?
The first thing to think about is whether there is a genuine redundancy situation. There will be a redundancy situation if:
- the employer ceases carrying on the business in which the employee works
- the employer ceases carrying on the business in the place in which the employee works, or
- the business needs fewer people carrying out work of the kind which the employee performs.
What is a fair Redundancy procedure?
An employer must follow a proper and fair procedure when making an employee redundant. If the employer fails to do this, the employee may be able to bring a claim against the employer for unfair dismissal.
A fair procedure generally involves:
- Identifying the group of employees from which the redundant employees will be selected – this is called the selection pool.
- Selecting the employee from the pool in a fair way. This is done based on a fair and objective selection criterion e.g. based on experience and capability.
- Consulting with the employee – given the pandemic, it may be necessary to undertake the consultation remotely.
- Considering if there is any alternative employment within the business for the employee or if there are any alternatives to redundancies.
If 20 or more employees are being dismissed, there are additional statutory requirements and the employer must follow the collective consultation procedure.
How do you calculate a Redundancy payment?
Employees with 2 years continuous employment or more are entitled to a statutory redundancy payment. This is calculated using a formula based on the employee’s age, pay (subject to a statutory maximum) and length of employment (subject to a maximum of 20 years). The formula is:
- 1½ week’s pay for each complete year of employment in which the employee was not below the age of 41.
- 1 week’s pay for each complete year of employment between the ages of 22 to 40 inclusive.
- ½ week’s pay for each complete year of employment in which the employee was under the age of 22.
A week’s pay is capped by statute at £538 and a maximum of 20 years employment is taken into account.
Get in touch
If you would like employment advice regarding a redundancy situation or any other employment issue please contact us on 01323 727321 to arrange an appointment.
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Please note the above is for information purposes only and is intended to be a short summary. It should not be treated as a comprehensive guide and should not be acted on without qualified legal advice.