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What's New? > Is this a fair redundancy situation?

Is this a fair redundancy situation?

Published: 3rd September 2010

As a result of the change in the economic climate, there have been a number of businesses having to make redundancies in order to be able to keep trading.  The economic climate has hit all types of businesses hard and employers are feeling the effects of this and as a result of which, they are needing to make employees redundant.

This is of course a very difficult situation for both employees and employers as nobody wants to make redundancies and nobody wants to be made redundant.

It is however important when making redundancies that the correct procedures are followed and that the redundancies are fair.

An employee who has more than one year's continuous service is protected by law against being unfairly dismissed.  Redundancy is a form of dismissal caused by the employer needing to reduce the workforce.  The reasons for redundancies can include the following:

• New technology or a new system has made the employee's job unnecessary.

• The job which the employee was hired for no longer exists.

• There is a need to cut costs as a result of the downturn in business which means that staff numbers must be reduced.

• The business is closing down or moving usually as a result of having to save costs.

If an employee brings a claim for unfair dismissal, then in order to be able to successfully defend the claim, the employer will need to demonstrate that the employee was dismissed for a fair reason.  It is therefore down to the employer to prove that the employee's position is redundant and that a fair selection criteria and procedure was followed when the employee's employment was terminated.

The normal rule is that a job must have disappeared for the employee to be made redundant, although, the redundancy can be fair if the employer can show that they need to make these cuts in order to continue trading.

Employers must follow procedure when terminating the employee's employment.  If an employer is making 19 or more redundancies in one establishment within a 90 day period, then this is a collective redundancy.  If the employer is thinking about making collective redundancies, then they have a duty to consult with the representatives of employees that could be affected.  The representatives will be the employees' trade union official, however if there is no trade union official, the employer must make arrangements for the employees to elect their own representatives.

If an employer is making more than 19 redundancies then the employer must enter into a consultation period with the employees of at least 30 days.  This does increase to 90 days if the employer is making more than 100 redundancies.

If an employer has to enter into a selection criteria due to a number of employees having the same position and them having to select an employee fairly then they must follow selection criteria.  The basis of a redundancy selection should always be objective, clear and uniform.  The employer must therefore complete a selection criteria and this must be applied fairly and objectively.

Examples of selection criteria are length of service, performance, attendance and skills.  An employer must however not use the length of service as the only selection criteria as this can be seen as age discrimination.

An employer must also not select an employee for redundancy because they are a part time employee, for any health and safety related reasons, because the employee served a statutory right or raised a concern under the Working Time Regulations 1998 or because the employee was pregnant or took maternity leave or because the employee was a member of a trade union or a trade union representative.

What is the employee entitled to receive in relation to payments?
Employees who are selected for redundancy who have more than 2 years service are entitled to a redundancy payment which is calculated with reference to their week’s pay.  This is calculated at £320 per week as of 1st February 2010 and is also calculated by their length of service and age.  Employees are entitled to receive notice pay or pay in lieu of notice and this is usually one week per full year of service up to a maximum of 12 weeks pay or this can be increased if the employee’s contract states that their notice is longer.  This cannot however be reduced by the contract of employment.  An employer may also give a more generous payment if it so desires.

The purpose of consultation
The purpose of entering into the consultation period is to try and avoid the dismissals and it is for the employer to hear the employees' proposals and to see whether the dismissal can be avoided.  The employer should listen to the employees' suggestions and their proposals in relation to trying to reach a satisfactory conclusion.

A satisfactory conclusion to both parties may be as reduced hours or reducing pay temporarily.  This however cannot be done without agreement between the employer and the employee unless there is a term in the contract of employment.  It may however be in both the employer and the employees' interests to agree to this in order to save the employees' jobs.

The law on redundancy is complicated and does depend on each individual case.  I would therefore strongly suggest that any employer or employee who wishes to make redundancies or are currently being made redundant do seek advice from us and please feel free to contact our specialist employment solicitor Anissa Hallworth with any employment related questions on 01553 660033.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.