Redundancy Procedure
Legal background
The Employment Relations Act of 1996 defines redundancy as a dismissal due to the employer ceasing to carry on the business for the purposes of which the employee was employed or if the employer is ceasing to carry out the business in the place where the employee was employed. This technical definition is narrow, in fact redundancies also cover a lot of other situations.
Fair or unfair dismissal
In theory dismissals by redundancy are fair however it will usually be up to the Tribunal to decide whether the employer has acted reasonably and whether the redundancy was within a range of reasonable actions available to the employer. In this area, procedural fairness, being seen to have carefully and objectively considered all options, is paramount for employers. Everything should be docvumented to show a genuine consultancy exercise hjas taken place with employees.to dismiss the employee.
The Employment Relations Act 1996 laid out statutory redundancy pay and a formula for how this is to be worked out. Half a weeks pay is awarded for each year worked between an employee’s 18th and 22nd birthday, one weeks pay is awarded for each year worked between 22nd and 41st birthday and one and a half’s week pay is awarded for each year worked after 41st birthday. In working out this formula, only the most recent 20 years are to be taken into account. If an employee is to receive contractual redundancy pay, this will be in conjunction with their statutory redundancy award.
For an employee to be considered for redundancy pay they must have at least two years continuous employment.. The statutory maximum amount of pay that will be awarded to an employee is £400 per week. If an employer is wishing to encourage voluntary redundancies they may take the step of offering more than £400 in order to incentivise some of the volunteers.
An employees’ service before their 18th birthday will not count towards any awards for redundancy, the same is in effect for any periods of work an employee carries out over the age of 65.
Employer good practice
In order to reduce the risk of having an action of unfair dismissal brought against the employer, it may be wise for the employer to identify a pool of people to include in the redundancy process. However, when doing so it is pertinent to ensure that the pool of people were selected fairly otherwise the employer risks the dismissals being seen as unfair. It is not advisable to simply rely on length of an employee’s service as the sole criteria for the pool of people for many reasons including the fact that that older people may have been employed by the company for the longest and therefore it could be seen as being age discriminatory against younger people.If an employee is offered alternative by the employer or other suitable employment and refuses this he becomes ineligible for statutory redundancy pay. It also works in the alternative such as if an employer has alternative work and fails to offer this to the employee than the redundancy process would be deemed to be unfair and the employee would be entitled to a greater compensatory award.
Selection of employees who are employed part-time should also be carefully assessed. Part-time workers are entitled to the same employment rights as full-time workers. Redundancies are a last resort for companies and it is an action which should be taken after all other avenues have been explored by the company. It is not permitted for the company to keep paying overtime or hiring staff elsewhere in the business as the same time as going through a redundancy process.
TUPE & Redundancy
If an employer is buying another business it is very important that they are aware of the TUPE regulations in relation to the employees of the business that they are buying. If the business is to be bought by an asset purchase, the TUPE regulations will apply. If this is the case the only way for the employer to dismiss an employee would be under an ‘ETO’ exception. An ‘ETO’ exception is an exception on the grounds of an economic, technical or organisational reason. It is advisable for an employer to seek legal advice if they believe that they may have triggered the TUPE regulations.
