OsCar Systems
Stay within the law when making redundanciesAsk us here if this summary does not answer your question.
For a brief summary of your legal requirements:-
(The information on this page does not apply to
companies in
Northern Ireland.)
It may be the case that the jobs of some or all of your employees become redundant.
This could be because your:
* business stops operating
* business relocates
* employees carry out work that is no longer necessary, eg due to the introduction of new technology.
If this happens, you must not only follow a fair redundancy dismissal procedure, but also keep the affected employees and possibly their representatives, informed.
For a redundancy to be genuine, the job that the employee does must disappear, ie you can still take on new staff but not to do the work the redundant employee was doing.
As long as their terms and conditions of employment allow, you may be able to lay off an employee or put them on short-time working rather than make them redundant.
A lay-off happens when you can't give an employee paid work for a temporary period.
Short-time working, for redundancy purposes, is where the employee's pay is less than half a week's pay.
However, provided they comply with certain time limits, employees can claim a statutory redundancy payment if the lay-off or short-time working runs for:
* four consecutive weeks or longer.
* a series of six or more weeks - of which not more than three were consecutive- within a 13-week period.
If you don't provide the employee with work throughout a complete day during which they would normally be required to work, they are entitled to a statutory guarantee payment. The maximum payment is five days in any three months.
You could take reasonable steps to avoid compulsory redundancies by considering alternatives, such as:
* seeking applicants for voluntary redundancy and/or early retirement.
* seeking applications from existing staff to work flexibly.
* laying off casual or contract staff - provided that they are not fixed-term or part-time employees.
* recruitment restrictions.
* reducing or banning overtime.
* filling vacancies with existing employees.
* retraining employees and then moving them to other parts of the business.
* short-time working or temporary lay-offs.
Consulting with employees can help businesses avoid making redundancies. Employees may have different insights into the way the business operates and can offer alternative solutions.
Effective planning can lead to better job security for employees and it can avoid short-term solutions not suited to the long-term needs of your business.
Even if you have selected an employee for redundancy, you could still avoid dismissals by offering them alternative work - if available.
For an offer to be valid:
The job must actually be offered to the employee, ie
* The employee shouldn't have to apply.
* The offer should therefore be unconditional and ideally in writing.
* The offer must be made before the employee's current contract ends.
* The offer should show how the new job differs from the old.
* The new job must either start straight after the end of the old job or within four weeks.
* Employees who accept an offer of alternative work are allowed a four-week trial period to see if the work is suitable.
Suitability depends on a number of factors, including pay, job status, location, working environment and hours of work.
If you agree that the work is not suitable, the employee may still claim a statutory redundancy payment (SRP). On the other hand, if you think that the job is clearly suitable but the employee unreasonably refuses to take it, they may lose any entitlement to an SRP.
Voluntary redundancy.
You could ask employees if they are willing to volunteer for redundancy and then select those to be made redundant from the resulting list.
Some of the advantages:
* less demoralising for the workforce than compulsory redundancy.
* less disruptive, provided the right people volunteer.
* less work needed to check that redundancy selection criteria are fair.
Some of the disadvantages:
* often more expensive - longer-serving employees requiring higher redundancy payments tend to volunteer.
* you may need to offer enhanced redundancy payments to attract people to leave
* you may get more volunteers than needed - those not selected may react negatively.
* you could end up with an imbalance in the skills and experience of remaining employees.
To prevent imbalances, many companies' redundancy policies maintain management's right to decide whether a particular employee should be allowed to leave.
Early retirement.
Some of the advantages of early retirement:
* often an acceptable alternative to redundancy for employees and trade unions.
* less harmful to employee morale than compulsory redundancy.
* opportunities to promote junior employees if those retiring occupy more senior grades.
Some of the disadvantages:
* can be expensive compared with a one-off voluntary redundancy payment.
* the business may have to fund a long-term pension.
* may be hard to find new staff for specialised jobs if business improves.
Early retirement is not a dismissal as long as:
* both you and the employee agree to it
* the employee has a genuine choice between early retirement and continuing in employment - even if they still might go on to be made redundant.
For early retirement, you do not have to use either the statutory retirement or dismissal/disciplinary procedure.
If you have exhausted all other avenues and you have to make compulsory redundancies, you will need to establish:
• A pool of employees, all or some of whom will eventually be made redundant. For example, these could be employees at a particular site and/or doing a particular type of work. A pool should be as wide as possible, but can consist of only one employee.
Redundancy selection criteria.
The criteria must be objective, non-discriminatory and applied consistently.
Among the variety of criteria that can be used to select employees for redundancy are:
Skills, qualifications and aptitude - these can help keep a balanced workforce.
Standard of work performance - with this method, you need to provide supporting objective evidence, for example from your business' appraisal system. Adaptability - it may be important for your business that employees accept different types of work as needs change.
Attendance/disciplinary record - you must apply this method consistently, and be sure your records are accurate and that you understand the reasons for absences. Do not include absences for maternity, paternity or adoption leave.
To avoid the possibility of unlawfully discriminating against anyone, you should use more than one criterion.
Automatically unfair selection criteria.
Using certain selection criteria will make any subsequent redundancy dismissal automatically unfair; just some reasons include selection due to:
* trade union membership, non-membership or activity.
* legal industrial action lasting up to 12 weeks, or longer.
* certain employee representative reasons.
* actions taken on specified health and safety grounds.
* reasons associated with pregnancy, maternity, paternity, adoption and parental leave.
* reasons relating to regulations on part-time workers.
The redundancy consultation process.
If you fail to consult employees - and their representatives if applicable - in a redundancy situation, the redundancy dismissals will almost certainly be unfair.
Collective redundancy consultation.
If you plan to make 20 or more employees redundant in one place of work within a 90-day period - a collective redundancy situation - you must:
Notify the Department for Business, Enterprise and Regulatory Reform (BERR.)
Consult with workplace representatives. These may be either trade union representatives or, where no union is recognised, elected employee representatives instead. If your employees choose not to elect representatives, you must give the relevant information directly to each individual.
Consultation must start in good time - when redundancy proposals are in their formative stage - and at least:
30 days before the first redundancy where there are 20 to 99 proposed redundancies.
90 days in advance where there are 100 or more proposed redundancies.
What information must you provide?
At the start of the consultation, you must provide written details of:
* the reasons for redundancies.
* the numbers and categories of employees involved.
* the numbers of employees in these categories employed at the establishment.
* how you plan to select employees for redundancy.
* how you will carry out redundancies.
* how you will work out redundancy payments.
Consultation does not have to end in agreement, but it must be properly carried out with a view to reaching agreement, including ways of avoiding the redundancies or minimising their effect.
You should consult employees individually regardless of the number you plan to make redundant.
If you fail to do so, any subsequent dismissals may be unfair.
For redundancy dismissals, the statutory procedures may form part of the consultation process. However, the procedures only apply in non-collective redundancy situations, ie when you plan to make fewer than 20 employees redundant.
Under the standard procedure, you must write to each employee setting out why you are thinking of making them redundant and inviting them to a meeting to discuss the proposed dismissal. The employee has the right to appeal if you still decide to make them redundant.
If you fail to follow the procedure when it applies, any dismissals you make will be automatically unfair.
Financial problems.
If your business would become insolvent as a result of making the statutory redundancy payments, assistance is available from the BERR Redundancy Payments Directorate and Insolvency Service, though you will be expected to repay the debt as quickly as possible.
The directorate can also help if you become insolvent and fail to pay the employer's contributions into an occupational or personal pension scheme or owe pay in arrears.
Rights of redundant employees.
Redundant employees have a number of rights, the main one being the right to receive a statutory redundancy payment (SRP).
To receive an SRP, an individual must:
* be an employee, ie partners, casual workers, agency workers, the self- employed and some directors do not qualify.
* have at least two years' continuous service.
* have been dismissed, laid off or put on short-term working, ie those who opted for early retirement do not qualify.
A redundant employee also has the right to receive a written statement setting out the amount of any redundancy payment and how you worked it out.
How is an SRP calculated?
An SRP is based on:
* the employee's age.
* the employee's amount of continuous service - up to a maximum of 20 years.
* the employee's weekly pay - up to a limit of £330 where the employee's employment ends on or after 1 February 2008 (£350 on or after 1 February 2009)
Currently, the maximum SRP payable is £9,900 (£10,500 for redundancies on or after 1 February 2009).
Redundant employees also have the right to:
* Be offered alternative employment wherever possible.
* Have a trial period in the alternative employment without losing their right to an SRP.
* Reasonable time off on full pay for job-hunting or to arrange training.
* Not be unfairly selected for redundancy. Employees normally need at least one year's service to claim unfair dismissal. However, if an employee is selected for redundancy on certain grounds, their dismissal will be automatically unfair.
Contact us today on 020
7043 1636 to arrange a confidential chat with one of our specialists. oscar@oscar-coach.com