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How to deal with redundancy
Job cuts are happening everywhere. So what are your legal moves should you be let go? We get the experts to explain.
When faced with economic turbulence, companies start to look at restructures and redundancies to reduce costs. Joseph Lappin and Charlie Thompson, partners in Stewarts’ Employment law team, outline the basics of redundancy and provide tips for employees finding themselves in this position.
What are my rights as an employee at risk of redundancy?
Your legal rights as an employee come from two places – your contract and statute.
If your employment is terminated, you are entitled to notice pay under your employment contract. Your contract (and related policies) may also entitle you to pro-rata commission and bonus on termination.
If you have deferred remuneration or equity, the underlying contractual documentation (such as the plan rules and award letters) may set out your entitlements on termination. In some cases, an employer might have a contractual redundancy policy which sets formal requirements in terms of procedure and enhanced payments to redundant employees.
Under statute, employees with at least two years of continuous service are entitled to a statutory redundancy payment, which is calculated based on the employee’s age, length of service and weekly pay.
Employees with two years of continuous service also have protection from unfair dismissal. This means that in order to dismiss you fairly for redundancy, your employer must establish that there is a reduced requirement for your role, and follow a fair selection and consultation process before dismissing.
Employees have other statutory employment rights, such as protection for whistleblowers and protection against discrimination. An employee’s selection for redundancy may sometimes breach one of these rights.
Employers also must meet certain formal requirements when dismissing more than 20 employees at a single establishment for redundancy within 90 days. Failure to do can make the employer liable to pay up to 90 days’ salary to each affected employee.
Settlement offers
Employers will often make a settlement offer to employees before, during or after a formal redundancy consultation. The typical premise of such an offer is to “buy out” the employee’s potential claims in a settlement agreement, often through the promise of an enhanced payment above the statutory and contractual minimum. Employers may also seek to impose further obligations on employees, such as in relation to confidentiality.
What should I do next?
If you are at risk of redundancy, it is vital to understand your legal and commercial position quickly, as this will help determine your strategy – in particular, whether to contest the redundancy and/or how best to negotiate a settlement offer.
Although redundancy is very common, it is not something that those affected are always open about. In reality, many people who are “taking a career break” or “looking for a new challenge” have been made redundant. It would be a mistake, therefore, to think that there is any genuine stigma about being at risk of redundancy. Given that you face some vitally important decisions in the coming days and weeks, it is sensible to consider speaking to family or friends, who may be a useful sounding board.
Should I challenge the redundancy?
Employers will always insist that their redundancy consultation is fair and objective, and not pre-determined. However, in reality many often employers already have an idea of who they want to make redundant before commencing the process, so there is commonly at least a degree of reverse-engineering.
A key question for an employee is whether to contest the redundancy, and if so, how. In working out an answer that question, it is sensible to first identify why you are challenging the redundancy – is it to avoid the redundancy altogether or is to negotiate a more favourable exit package?
It is also important to work out what your last resort is – if you are made redundant or cannot reach an acceptable deal with your employer, are you prepared to take them to the Employment Tribunal? You will typically need to commence any such case within three months of dismissal.
Every case is different, but the key factors in many cases involving redundancy involve:
- Whether there genuinely was a reduced need for work of a certain kind in the employer
- Whether there is an underlying reason for the dismissal other than redundancy
- Whether the employer selected redundant employees fairly
- Whether the employer followed a fair period of consultation, including considering alternatives to redundancy.
- In cases where the employer failed to follow a fair process, whether a fair process would have yielded the same result
Check you’ve got all the money you’re entitled to
Your employer should provide a clear breakdown of the payments you will receive on redundancy.
This includes your wages or salary, any redundancy pay you’re entitled to (see below), any pay in lieu of notice (if you’re not working your full notice period), as well as any holiday pay you’re entitled to and any outstanding bonuses, commissions or expenses (if payable).
A statutory redundancy payment is payable to anyone dismissed for redundancy after 2 years’ continuous employment. It is usually possible for the first £30,000 of any genuine redundancy payment to be tax-free.
Taking time off to look for new work
If you have been made redundant after two years of service, you’re entitled to take time off to apply for jobs, attend interviews, or take training courses, and your employer cannot ask you to make the time up.
You can take off up to 40% of one week’s work with full pay during your notice period. It’s best to ask your boss for the time off with a reasonable amount of notice and a reason for the request. Being open with your employer helps keep the relationship amicable and may result in them being more amenable to additional time off, should you need it.
If your boss doesn’t respond positively, your first step should be to talk to them and highlight the legal rights of employees made redundant – you can point them to this guide. You can, if necessary, escalate this to early conciliation or an employment tribunal.
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