The Basics of Redundancy

Many employers do not realise that making someone redundant is a form of dismissal. If you are making someone redundant, you must bear this in mind – it is very important to be fair and follow the proper procedures. Doing so will ensure that you avoid being taken to any tribunal claims.

An employee is considered dismissed because of redundancy if they lose their job for one of the following reasons:

  • The fact the employer is changing where they do business
  • Because the employer intends to cease or has ceased to continue trading in the business for which the employee is employed
  • Because of a diminished need for, or no need for the services an employee currently provides, in their current workplace

Before you make anyone redundant it is important to familiarise yourself with the basic legal requirements outlined below. Our Your Responsibilies guide provides additional insight of how to make someone redundant and do so legally.

If you are dismissing someone using redundancy, you must use a fair dismissal procedure and establish that you are genuinely dealing with a redundancy situation.

As soon as you realise you may have to make people redundant you need to consult with your employees.

If you are planning to make more than 20 employees redundant, you have to consult the relevant employees’ representative and do so immediately. This is a statutory requirement. The Department for Business, Innovation and Skills (BIS) also has to be notified. This must be done before you actually make anyone in the group redundant. If you do not do so, you could be fined.

A firm needs to be able to demonstrate that their consultation process was meaningful and adequate. An employer may also be asked to prove that they used a fair, objective and non-discriminatory selection criterion to decide who would be made redundant. They also have to demonstrate that they tried to offer employees alternative employment.

Any employee who has been employed continuously for more than two years is entitled to SRP – Statutory Redundancy Pay. Anyone who qualifies for SRP and does not receive it can take his or her former employer to an Employment Tribunal. However, they must do so within six months of their termination date.

If an employee who has been continuously employed for the required qualifying period believes that they have been unfairly dismissed they can go to an employment tribunal where they can make an unfair dismissal claim. The qualifying period varies depends on the date on which an employee’s employment started. For those employed prior to 6th April 2012 the qualifying period is only a year, and for those whose employment started after that date, it is two years.

Should someone be selected for redundancy for an inadmissible reason, his or her dismissal will be considered ‘automatically unfair’. Examples of this include people being made redundant because they are pregnant, on maternity leave, have pointed out health and safety issues or have exercised one of their statutory rights. If an employee is selected for redundancy for what is considered an ‘automatically unfair’ reason they can bring an unfair dismissal case without having completed a specific period of continuous employment.

Employee shareholders have no right to claim unfair dismissal. The only exception is in the situation where they have been dismissed for an ‘automatically unfair’ reason. To learn more about what constitutes an automatically unfair dismissal see our Automatic Unfair Dismissal section.

No company is legally required to have a redundancy policy. However, if you do have one you need to ensure that it is included in your staff handbook and displayed on your notice boards. If you do have such a policy, it is very important that you follow it.

To find out more about the legal requirements surrounding redundancy see the section titled Rules and Regulations.

For more detailed advice contact us at Hylton Potts by email or by calling us on 0207 381 8111.