With the current economic climate characterised by post-Brexit uncertainty, the prospect of redundancy is becoming an increasing reality as many businesses consider scaling down or moving their UK bases abroad.
But what exactly is redundancy? And what should a diligent employee do when they receive that phone call or email initiating the redundancy process?
What is redundancy?
“Redundancy” is the term used when an employer reduces a company’s workforce due to one of the following:
A Business Closure: where an employer is ceasing or intending to cease the business for the purpose of which the employee was employed.
A Workplace Closure: where an employer is ceasing or intending to cease the business in the place where the employee was employed.
Reduced requirements: where there is a reduced requirement for employees to carry out a particular kind of work or a particular kind of work in the place where the employee was employed.
What to do when you are told that your role is “at risk” of redundancy?
Has your employer offered you a Settlement Agreement?
If your employer has offered you a settlement agreement, you should not feel obliged or pressured to accept it. It is essential to seek legal advice regarding the contents of any settlement agreement before you enter into it. This is not only a legal requirement but will also ensure that you reach an agreement which is beneficial to you and tailored to your needs. Your legal adviser must be independent of your employer.
But what if you have not been offered a Settlement Agreement?
It is vitally important that an employee facing the prospect of redundancy is aware of their rights and the correct procedure that should be adopted by their employer. In certain circumstances, redundancies are inevitable and unavoidable, but knowing your rights will enable you to spot breaches of procedure, identify situations where you may have a claim and ultimately help you to ensure that you are treated fairly.
Your rights on redundancy are dependent on both the length of time that you have worked for your employer and the terms of your employment contract. If you have been an employee of the company for two years, you will have the following rights:
- A right not to be unfairly dismissed. Your employer’s failure to adhere to the steps outlined below may allow you to bring a claim for unfair dismissal.
- A right to time off to look for alternative work or partake in necessary training.
- A right to receive a statutory redundancy payment. It is important to note that statutory redundancy pay is capped at £14,370. However, you may be entitled to an enhanced redundancy payment under the terms of your contract, as implied by custom and practice, or if offered to you as part of any settlement agreement. You may also be entitled to payment in lieu of notice or payment in lieu of holiday, but such entitlements will be subject to your employment contract.
Even if you have not worked for your employer for two years, you still have the following rights in a redundancy situation:
- A right to contractual notice, as per the terms of your contract of employment. This notice period is subject to statutory minimum notice.
- You may still have a claim for unfair dismissal if you believe that the criteria used to select you for redundancy is related to a protected characteristic (such as sex, race, disability, religion or belief, sexual orientation, pregnancy or maternity or age) and/or were because you had previously blown the whistle on particular activities of your employer.
- You may have a right to an enhanced redundancy payment, if you have an express or implied entitlement to such a payment (although sometimes two years’ service is still required).
- If your employer is unable, or refuses, to pay you your statutory redundancy pay and/or certain payments under your contract of employment, you have the right to apply to the National Insurance Fund for these sums.
In addition to respecting your rights in a redundancy situation, your employer must also follow certain steps to ensure that you are treated fairly. The procedure is as follows:
- Selection: The employer must first identify those employees who are at risk of redundancy. From this “pool”, the employer must then apply fair and objective criteria in order to select those employees who will be made redundant. The criteria can include factors such as performance, qualification, length of service and disciplinary record. It is important that the criteria does not include protected characteristics (e.g. sex, race, age, disability, religion and belief etc. and even fixed-term or part-term status).
- Consultation: The employer must warn and consult “at risk” employees about their proposed redundancy. This consultation is your chance to understand the reasons behind your selection, ask questions about the selection criteria used, and discuss any alternative employment options. It is important to note that if your employer intends to make 20 or more employees redundant within a period of 90 days, it is also required to undertake collective consultation (collective consultation is a separate topic in its own right and does not fall within the scope of this article. If you would like more information about collective consultation, please contact a member of our employment team.
- Alternative employment: The employer must consider and offer suitable alternative employment within its company where such alternative employment is available. To ensure that a role is suitable, you are entitled to accept the alternative employment on a trial basis of up to four weeks. This acceptance does not affect your right to statutory redundancy pay should you decide, at the end of the trial period, that the new role is in fact unsuitable. You must, however, be careful when rejecting any alternative positions, as an unreasonable rejection of offers of alternative employment can invalidate your right to statutory redundancy pay and can limit any compensatory award you may receive later if you are successful is bringing an unfair dismissal claim against your employer.
If an employer has not followed these steps, they may not have acted fairly. In this event, it is important that you seek legal advice and explore the options available to you.
When facing the prospect of a redundancy, being aware of your rights and the correct procedure which your employer should adopt is essential in order to recognise when you have been treated unfairly and to understand when you may have a claim or can negotiate a higher settlement. If you are concerned about the prospect of redundancy, or you feel that the correct redundancy procedure has not been followed, please feel free to contact us.
If you have any questions about the issues raised in this blog, please contact Tom Beak or any member of our employment team.