Handling Redundancies

What is redundancy?

Redundancy dismissals happen when an employee loses their job through no fault of their own.

The word ‘redundancy’ has two different legal meanings. The first is used for individual redundancy rights: to a fair dismissal; to access suitable alternative job opportunities; to time off to look for work, and to a redundancy payment when redundancy cannot be avoided. The second meaning, used in the specific context of collective redundancy consultation. When it comes to collective consultation, a redundancy dismissal is any “dismissal for a reason not related to the individual concerned”. This is wider than the definition used to claim unfair redundancy dismissal and redundancy payment, the key difference is that collective consultation obligations can be triggered even if there is no reduction in the number of employees.

Individual redundancies

A worker can be made redundant if the reason for their dismissal is that the employer needs fewer employees to do a particular kind of work, or to work in a particular location. This technical definition of redundancy is found in section 139 of the Employment Rights Act 1996 (ERA). Tribunal judges call this a ‘genuine redundancy situation’ and, for those who qualify, it will trigger the right to a redundancy payment.

Here are some examples of genuine redundancy situations:

• economic pressures have forced an employer to close some retail outlets and jobs are lost
• an employer relocates to a new site
• an employer introduces more efficient technology, removing the need for some jobs and creating new ones
• a large order is lost, leading to a fall in work
• one business buys another, leading to duplication of roles in the new business. There can be a redundancy dismissal even if your job still exists but has been given to another employee whose own job was eliminated as long as, overall, the employer needs fewer employees.

There can be a redundancy dismissal even if your job still exists but has been given to another employee whose own job was eliminated as long as, overall, the employer needs fewer employees.

What if the employer wants major changes to job roles?

Sometimes a very significant change to job roles – where the new job is something completely different from the old one – can be a redundancy situation.

However, members in this position should check with their union as the legal position is rarely straightforward. For example, the employer may disagree as to the extent of the job changes. Or they may argue that the members’ employment contracts allow the employer to insist on making the changes they want, so that the members are not being dismissed for redundancy at all but, instead, for refusing to obey the employer’s ‘reasonable’ order. Even if the two jobs are very different, the new job may be ‘suitable alternative employment’ meaning, again, no redundancy pay.

When representing members in this situation, it is important to remember that job role changes must not breach members’ rights not to suffer discrimination under the Equality Act 2010. And reasonable adjustments must be made for any member with a disability.

Who has redundancy rights?

Only ‘employees’ have redundancy rights. This includes employees on a fixed-term or parttime employment contract and apprentices. Neither ‘workers’ nor the genuinely selfemployed have redundancy rights.

Temporary agency workers don’t have redundancy rights – unless they are direct employees of the employment agency or business they work for.

Employees who are dismissed for redundancy after working for two full years are entitled to a statutory redundancy payment.

Learn more on redunancies in the full guides, here.

What a fair procedure looks like

All employers must follow a fair redundancy procedure before deciding to dismiss for redundancy.

If fewer than 20 redundancy dismissals are proposed within a 90-day period, the formal TULRCA section 188 collective consultation procedure will not be triggered. Nevertheless, employers should still consult the workforce over their proposed selection pool, method, and criteria.

Employers that impose redundancy selection processes without consultation risk carrying out unfair redundancy dismissals. They also risk losing the trust of their workforce, including employees who kept their jobs this time around, by failing to treat them with dignity and respect.

Learn more in our full Handling Redundancy guide

Statutory redundancy pay

An employee dismissed for redundancy must be paid a statutory redundancy payment if:

• they have worked for their employer for at least two years, and
• they have not unreasonably refused an offer of suitable alternative employment.

Statutory redundancy pay is based on weekly wages at the date of the redundancy dismissal notice. This is important for members who cut their hours from full- to part-time, for example on returning from maternity leave. No matter how many years they spent working full-time, all their statutory redundancy pay will be based on their part-time wage.

Statutory redundancy pay is

• half a week’s pay for each full year of employment while aged below 22
• a week’s pay for each year while aged 22–40
• a week and a half’s pay for each year while aged 41 or over.

The government website has an online ready reckoner.

Redundancy pay after furlough

All employees who are made redundant after being furloughed by their employer under the government’s coronavirus Job Retention Scheme (JRS) must have their statutory redundancy pay calculated using their normal ‘pre-furlough’ wages (100 per cent pay). From 31 July 2020, it is against the law (the Employment Rights Act 1996 (Coronavirus – calculation of a week’s pay) Regulations 2020) for employers to pay statutory redundancy pay at the reduced furlough rate.

Employers are not allowed to use the JRS to fund redundancy payments.

Notice or notice pay

As well as a redundancy payment (if eligible), an employee dismissed for redundancy must be given their notice. An employer that does not want employees to work their notice must pay them notice pay (often called ‘pay in lieu of notice’.)

Notice must be at least:

• one week, after working continuously for between one month and two years, or
• one week for each year of continuous employment between two and 12 years, up to a maximum of 12 weeks’ notice after 12 years of work. Some members may have more generous contractual notice rights

Notice pay after furlough

Some employers have been using the government’s coronavirus Job Retention Scheme (JRS) to pay the wages of furloughed employees who are working out their notice after having been made redundant. While this practice goes against the spirit of the JRS – which is to keep people in work – it is not against the law.

The JRS cannot be used to cover lump sum payments in lieu of notice.

Statutory notice pay for furloughed employees must be based on their normal pre-furlough wages. Ask for help from an official at your union if your employer is paying statutory notice pay at the lower furlough wage. This is against the law.

Redundancy and insolvency

When an administrator is appointed 

The appointment of insolvency administrators is an extremely worrying development for staff, especially at a time of economic crisis. But there is an important difference between administration and liquidation (‘winding up’). At its heart, administration is a company rescue procedure designed to help restructure a still-viable company and save at least some jobs (even if this ends up proving impossible). By contrast, liquidation is for terminal cases, where there is no hope of saving the business, with the unavoidable loss of jobs.

Administrators appointed during the coronavirus pandemic have been able to use the JRS to retain employees on furlough, instead of making them redundant immediately.

There are some key collective and individual rights to be aware of in an insolvency.

Read more

Payment from the redundancy payments office

When an employer is insolvent, statutory redundancy pay and certain other payments can be claimed from the Insolvency Service. The claim is made online to the RPO. There is an email address for help: redundancypaymentsonline@insolvency.gov.uk.

The claim can be made as soon as the member is made redundant, but they will need a ‘CN’ (case reference) number from the insolvency practitioner in charge of the employer’s insolvency. No claim can be made without the CN number. The claim to the RPO must be made within six months of the dismissal date, otherwise it will be rejected.

There is an online portal called furlough and redundancy for employees made redundant by an insolvent employer after being on furlough under the JRS.

There are two forms: RP1 for the statutory redundancy payment, wages, and holiday pay; and RP2 for statutory notice pay. The Insolvency Service provides a useful guide to completing the form ‘What to do when you’ve been made redundant’.

Here is what can be claimed from the RPO:

• statutory notice pay
• statutory redundancy pay
• wage arrears, including wages, overtime, bonuses, commission and any protective award (up to eight weeks’ pay in total)
• holiday pay (up to six weeks’ pay).

The eight weeks of pay need not be consecutive: employees can choose the highest-paid weeks of arrears.

Apprentices and Redundancy

In normal times, apprentice redundancies are rare unless a business is closing down.

Apprentices are employees. They have rights to protection from unfair dismissal for redundancy. They also have rights not to be selected for redundancy for a reason that is discriminatory, or unlawful in some other way, for example because they complained about poor health and safety at work. In some situations, they may also be able to claim damages for contract breach, if their apprenticeship contract is ended early for no good reason.

As with all employment claims, tribunal deadlines are very short (just three months, less one day, from dismissal), so it is important not to delay seeking help.

Moving Forward

Learning and training

Employer support for learning and training is a key part of the collective consultation process. TULRCA section 188 says employers must consult collectively on ways of “mitigating the effects” of redundancies. With Covid-19, this is especially important in sectors such as retail that are likely to suffer long-term scarring, or where the collapse of a single employer devastates an entire local economy.

The fact that employees are furloughed or working from home does not diminish in any way the employer’s legal responsibility to consult over reskilling employees selected for redundancy.

Why reskilling matters

Reskilling is vital for members because it boosts their chances of getting another job by improving their skills, qualifications and employability, provides a chance to change career and builds confidence in their ability to find new work.

 It is also good for employers because it improves the morale of staff left behind to see their coworkers treated fairly. Boosting retention and attendance also cuts the cost of agency staff.

It is also important for your union, because members value the work the union does to help them retrain to move forward. They are more likely to stay union members, or to rejoin in their new role.

It is also vital for the UK’s economic recovery from the effects of the Covid-19 pandemic, which is why the TUC is campaigning for a nationwide new jobs guarantee and other measures on skills.

Read the full Handling redundancies guide for union reps.