Redundancy - How It Works
When can a redundancy be said to occur? If someone is dismissed completely or mostly because:
- The employer stopping, or planning to stop, transacting the business at the location or for the purpose for which the employee was hired;
- The requirements for the employer's business having ceased or diminished for employees to carry out work of a particular kind or in the place that the employee was employed.
Who is eligible for redundancy?
An eligible employee dismissed for redundancy will be entitled to receive from his employer a statutory redundancy payment. An employee is eligible if:
- They have two or more year's continuous employment since the age of 18;
- The employee is offered an alternative position and it is reasonably refused on the grounds of suitability relating to salary, location and status and other individual circumstances. It is not common foremployees to lose a redundancy entitlement for this reason.
The advice of any experienced employment solicitors to employers is to take care and sticking to the proper redundancy procedures and, if redundancies are to be made, be sure to adopt and clear and fair selection criteria.
Failure by an employer to follow correct procedure or to establish fair selection criteria can lead to an employee bringing a claim for unfair dismissal. Such a claim, if successful, can result in an award for damages for breach of his employmentcontract. Employees automatically have the right not to be unfairly dismissed once they have completed one year's continuous employment. The employer must establish that any dismissal by way of redundancy is a fair dismissal.
Redundancy can be classed as unfair dismissal if:
- There is no genuine redundancy: i.e. the position has not truly disappeared - this could be established if say a new employee is recruited for the same role
- No consultation before redundancy: The consultation process can become involved whennumerous redundancies are planned.
- Unfair selection process: employees being made redundant must be selected through fair and transparent criteria. It is advisable to agree selections with any union and/or employee representatives.
- The employer failed to provide appropriate alternative employment.
How long does an employee have to make a claim?
Employees have three months within which to bring an Employment Tribunal claim.
How do you calculatea redundancy payment?
Employees dismissed for redundancy reasons must be given a written statement from their employer, showing a breakdown of how their redundancy pay was calculated.
In order to calculate statutory redundancy, you should use the following amounts:
- 0.5 week's pay for each full year of service where age during year less than 22
- 1.0 week's pay for each full year of service where age during year is 22 or above, but less than 41
- 1.5 weeks' pay for each full year of service where age during year is 41+
The maximum length of service that can be applied is 20 years. For statutory redundancy purposes, weekly pay is capped at a maximum of 380 [as at 1 February 2010]. Therefore, the current maximum statutory redundancy payment available is 11,400. The majority of redundancy paymentsup to 30,000 are not liable to income tax.
The main thing is that although your employer might tell you that you are being dismissed for redundancy purposes, this is not always the case. Depending on your circumstances, you may find you have other employment law claims against your employer. Your dismissal which may be worth considerably more than the redundancy pay being offered - so it is always sensible to discuss your situation with qualified employment solicitors.
by: Tim Bishop
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