In general, employees dismissed by reason of redundancy have rights to:
a redundancy payment
the application of a fair redundancy procedure
reasonable time off work to look for alternative employment
For the purposes of entitlement to a redundancy payment, and fair dismissal, an employee is dismissed by reason of redundancy if the reason for dismissal is:
the employer ceases carrying on the business in which the employee worked
the employer ceases carrying on the business in the place in which the employee worked, or
the business needs fewer people carrying out work of a particular kind
Redundancy payments are made to compensate employees for losing their jobs.
A statutory redundancy payment is payable when an employee with two years’ continuous employment is dismissed because of redundancy. This can include where:
a fixed term contract comes to an end without renewal
circumstances operate to terminate the contract
an employee volunteers to take redundancy
an employee who is paid according to work done earns less than half their usual week’s pay for a period of time
The payment is calculated according to an employee’s age, the employee’s weekly pay (subject to the statutory cap) and the number of years of continuous employment the employee has.
An employee can lose their right to a redundancy payment if:
they are reinstated or re-employed in suitable alternative employment within a certain period of time (ie the employee is treated as not having been dismissed)
the employee unreasonably refuses an offer of suitable alternative employment or tries out a new position and unreasonably terminates it during the trial period
There are also various technical exclusions from a right to a redundancy payment, relating either to classes of employee, or other matters such as pension entitlement, failure to serve out a notice period or striking during the notice period.
If an employer cannot or will not pay a redundancy payment, the employee may apply to the Department for Business, Energy and Industrial Strategy (BEIS) for payment. An employee may also have a contractual entitlement to a redundancy payment
Redundancy is a statutory fair reason for dismissal. However, as with other potentially fair reasons, the fairness of a dismissal is to be determined by the test of whether an employer’s decision to dismiss falls within the band of reasonable responses of a reasonable employer in those circumstances and in that line of business. Failure to follow a fair procedure will normally render the dismissal unfair.
A fair procedure comprises a number of stages:
warning and consultation
fair basis for selection
consideration of alternative employment
Please feel free to contact us and arrange a free consultation, I can then see if I and the team are able to help.
David has an LL.B (Hons) degree in law. He was voted one of the UK’s most influential aspiring lawyers. He was also directly involved in the protection of workers’ rights as respected Union Rep for Usdaw, and he is the Non-Executive Legal Director for the Humber Taxi Association.
Questions about redundancy
Can I take time off to look for other work or arrange training?
An employee who has been given notice of redundancy may be entitled to time off to look for alternative employment, as long as the employee has two years’ continuous employment and certain other criteria are met. The employee will also be entitled to be paid up to two days’ pay for this time off. In practice, this means employees are entitled to request reasonable time off and employers may not refuse it unreasonably.
My employer is going bankrupt?
An employee may apply to BEIS to pay the statutory redundancy payment out of the state guarantee fund (the National Insurance Fund) if they are unable to obtain the payment from their employer because: the employer refuses to pay, or the employer is insolvent.
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