A guide to Employee Rights during Redundancy

Redundancy is a legal right. In this blog, Lawrence Ofori, solicitor in the employment team at Morrish Solicitors looks at the specific processes and protections for employees to be aware of who are placed at risk.

In the UK, redundancy is a form of dismissal which occurs when an employer needs to reduce its workforce due to a variety of reasons such as: financial difficulties, business restructuring, or technological changes.

Definition of Redundancy:

According to the Employment Rights Act 1996, redundancy occurs when:

1. The employer is stopping the business or no longer needs the work the employee does.
2. The business is closing or moving to a different location.
3. The employer needs fewer employees to do the same type of work.

In all cases, the key factor is that the dismissal is due to a business decision rather than the employee's conduct or performance.

The Redundancy Process:

Employers must follow a fair and transparent procedure when making employees redundant.

This process typically includes:

1. Consultation: Employers are required to consult with employees before making redundancies, especially if a large number of redundancies are proposed. If fewer than 20 employees are to be made redundant, consultation must take place individually or in small groups. If 20 or more employees are affected within 90 days or less, collective consultation with employee representatives or a recognised trade union is required.
2. Selection Criteria: Employers must use a fair, objective criteria to select employees for redundancy. Theis criteria might include length of service, performance, skills, and attendance. It is essential that the employer avoids discrimination and uses a consistent method for all employees.
3. Notice Period: Employees must be given notice of their redundancy. The length of the statutory notice period depends on how long the employee has worked for the employer. If an employee has been with the company for more than one month but less than two years, they are entitled to at least one week’s notice. The statutory notice period increases with length of service, up to a maximum of 12 weeks. Employees may have greater contractual notice periods.
4. Alternative Employment: Before making employees redundant, employers must consider whether there are any suitable alternative roles within the company.
5. Redundancy Pay: Employees who have been continuously employed for at least two years are entitled to statutory redundancy pay. The amount of statutory redundancy pay depends on the employee's age, length of service, and weekly gross earnings (subject to a statutory maximum). The basic formula is:
   • 0.5 week’s salary for each full year the employee was under 22.
   • 1 week’s salary for each full year the employee was between 22 and 41.
   • 1.5 week’s salary for each full year the employee was 41 or older.

However, redundancy pay is capped at a maximum weekly amount (currently £700 as of April 2024). Employees may have  contractual rights to improved redundancy terms.

Employee Rights during Redundancy

• Right to be Treated Fairly: Employees have the right not to be unfairly selected for redundancy, and the redundancy must not be due to discriminatory reasons.
• Right to Appeal: Employees can appeal the redundancy decision if they believe it was unfair or based on incorrect criteria.
• Right to Time Off to Look for Work: Employees who have at least two years of continuous service are entitled to reasonable time off to look for new work or attend interviews.

Possible claims in the Employment Tribunal and Time Limits

Redundancy dismissals are typically not considered unfair if they follow the correct procedure, are not discriminatory, and are based on legitimate business needs.

Employees who feel they were unfairly selected for redundancy, or if the process was flawed, may seek redress through a claim in the employment tribunal.

Claims for statutory redundancy pay must be lodged within 6 months less 1 day from the date the employee’s job ends, subject to any extension that may be obtained from correct use of the ACAS Early Conciliation process, if appliable.

All other claims based on the redundancy (e.g. contractual redundancy pay, notice pay, unfair dismissal, discrimination etc.) must be lodged within 3 months less 1 day from the date the employee’s job ends, subject to the same possible extension from ACAS Early Conciliation.

Click here to sign up to the webinar.