EM Law are experts in advising on redundancy procedures. Our lead employment lawyers Helen Monson and Imogen Finnegan have partner-level experience from leading City and national firms as well as in-house experience from global businesses. We act for employers as well as employees on a wide range of employment law matters.
Employees who are dismissed by reason of redundancy may be entitled to a statutory payment and they may be able to challenge the termination of their employment as an unfair dismissal. It is therefore important for the parties to understand the process and how it should be followed.
The statutory definition encompasses three types of situation: business closure, workplace closure, and reduction of workforce. The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” the employer:
Where 20 or more employees are being made redundant over a period of 90 days or less, an employer has a duty under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) to:
A tribunal may award up to 90 days’ pay in respect of each employee where there has been a breach of the information and consultation duty. An employer may be fined if it fails to notify the Secretary of State.
Whenever there is an obligation to consult collectively, the employer will also need to ensure that it has followed a fair procedure in relation to individuals, including consulting with them properly, so as to minimise claims for unfair dismissal.
An employee who has sufficient qualifying service is entitled not to be unfairly dismissed (section 94, ERA 1996). Redundancy is a potentially fair reason for dismissal.
Even if a dismissal is genuinely on grounds of redundancy, whether it is fair or unfair to dismiss for that reason normally depends on the application of the general test of fairness in section 98(4) of ERA 1996, namely whether the employer acted reasonably in dismissing the employee in all the circumstances.
A redundancy dismissal is likely to be unfair unless the employer:
In certain circumstances, selection of an employee for dismissal on grounds of (genuine) redundancy will be automatically unfair, for example, selecting an employee for a reason connected to pregnancy, or because the employee has refused to sign a working time opt-out agreement.
At the outset of a fair redundancy procedure (and throughout the consultation process), an employer should consider whether it can avoid making compulsory redundancies or reduce the number of compulsory redundancies. If the employer is undertaking collective consultation, this is one of the matters over which it has a statutory duty to consult the employee representatives. It should also consider this during individual consultation as part of a fair procedure.
Employees who are dismissed by reason of redundancy may be entitled to a statutory payment. Additionally, they may have an express or implied contractual right to an enhanced contractual redundancy payment. In circumstances in which an employer is liable to pay an employee a statutory payment, if the employer either fails to make the payment because it is insolvent or refuses to do so, the employee may apply to the Secretary of State for payment out of the National Insurance Fund.
Under section 135 of ERA 1996, employees with a least two years’ continuous employment at the relevant date are entitled to a statutory redundancy payment if they are dismissed by reason of redundancy.
In addition to a statutory payment, an employee may also be entitled to an enhanced contractual redundancy payment. This entitlement may be either express or implied:
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