Redundancy is one of 5 potentially fair reasons for dismissal.
It's widely accepted that redundancy should be used as a last resort and only after all alternatives have been explored. It's one of the most distressing events an employee will likely experience which requires sensitive handling to ensure fair and consistent treatment.
Redundancy legislation can be complex so employers must do all they can to understand not only their obligations but the rights of those that they employ.
Is the Redundancy Fair? Whilst redundancy is a potentially fair reason for dismissal (Section 98(2)(c) of the Employment Rights Act 1996) the fact an employee is dismissed for redundancy doesn’t automatically make the redundancy fair.
The fairness of the decision will be determined by whether or not the decision meets the overriding test of fairness set out in Section 98(4) of the Employment Rights Act 1996.
Any and every tribunal will apply Section 139 of the Employment Rights Act 1996 to establish if redundancy is the reason for dismissal whilst trying to establish whether:
· Employees were treated fairly at all times,
· Policy and procedure was followed,
· Appropriate timescales were adhered to, and;
· A fair and objective selection process (if required) was used.
Is the Role Redundant?
Under Section 139 of the Employment Rights Act 1996 an employee is dismissed by reason of redundancy if it is wholly or mainly attributable to the fact that:
· the employer has ceased or intends to cease to carry on the business for the purpose for which the employee was employed, or;
· the requirements of the business for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish.
Automatically Unfair Reasons for Redundancy No matter the work an employer puts into a redundancy process or the procedure they follow there are reasons that are automatically unfair, if they form the basis for the redundancy. These include:
· Pregnancy, including all reasons relating to maternity;
· Acting as a trade union representative;
· Acting as an employee representative;
· Acting as an occupational pension scheme trustee;
· Joining (or not joining!) a trade union;
· Health and Safety;
· A request in relation to study or training;
· Sunday working, or;
· Pay and working hours, including NMW, WTR and annual leave.
There are various direct and indirect costs associated with redundancy that employers need to be aware of. Direct costs include contractual or statutory redundancy payments: dismissed employees with 2 or more years service are entitled to a minimum statutory redundancy payment (explained below)
Statutory redundancy is normally available to employees who have been employed continuously for 2-years or more.
Weekly redundancy pay is capped at £538, with the maximum statutory payment being £16140.
Weekly pay is the average per week over the 12-weeks before the day the redundancy notice was issued.
Redundancy pay, including severance pay, is not taxable under £30000 however tax and NICs should be deducted from any accrued holiday pay that is being paid.
As well as statutory redundancy pay - contractual notice, or payment in lieu of notice (PILON) must also be settled.
Notice must be given before ending someone's employment in a redundancy situation whilst it is critical to follow a process of consultation before ending any employment relationship.
Statutory notice periods are defined as follows by length of service:
· 1-month to 2-years’ service attracts 1 weeks’ notice,
· 2-years to 12-years’ service attracts 1-weeks’ notice for each year employed, and;
· 12+ years’ service attracts 12-weeks’ notice.