Employment
and related matters
Redundancy
Procedures
There
have been many changes to employment law and regulations in
the last few years. A key area is the freedom or lack of freedom
to make an individual redundant.
An employee’s employment can be terminated at any time
but unless the redundancy is fair an Employment Tribunal may
find the employer guilty of unfair dismissal.
We set out below the main principles involved concerning the
redundancy of employees. We have written this factsheet in
an accessible and understandable way but some of the issues
may be very complicated.
Professional advice should be sought before any action is
taken.
What
is Redundancy?
Under
the Employment Rights Act 1996, redundancy arises when employees
are dismissed because:
- the
employer has ceased, or intends to cease to carry on the
business for the purposes of which the employee was so employed
or
- the
employer has ceased, or intends to cease, to carry on the
business in the place where the employee was so employed
or
- the
requirements of the business for employees to carry out
work of a particular kind has ceased or diminished or are
expected to cease or diminish or
- the
requirements of the business for the employees to carry
out work of a particular kind, in the place where they were
so employed, has ceased or diminished or are expected to
cease or diminish.
In
other words, the business reasons for redundancy do not relate
to an individual but to a position(s) within the business.
Consultation
- Legal Requirements
Employers
who propose to dismiss as redundant 20 or more employees at
one establishment have a statutory duty to consult representatives
of any recognised independent trade union, or if no trade
union is recognised, other elected representatives of the
affected employees.
Consultation should begin in good time and must begin:
- at
least 30 days before the first dismissal takes effect if
20 to 99 employees are to be made redundant at one establishment
over a period of 90 days or less
- at
least 90 days before the first dismissal takes effect if
100 or more employees are to be made redundant at one establishment
over a period of 90 days or less.
Employers
also have a statutory duty to notify the Department of Trade
and Industry if they propose to make 20 or more workers redundant
at one establishment over a period of 90 days or less.
If an employer fails to consult, a Tribunal has discretion
to make a protective award of up to 90 days pay.
It is good practice in all organisations however, regardless
of size and number of employees to be dismissed, for employers
to consult with employees or their elected representatives
at an early enough stage to allow discussion as to whether
the proposed redundancies are necessary at all. Then they
should ensure that individuals are made aware of the contents
of any agreed procedures and of the opportunities available
for consultation and for making representations. It must be
remembered that redundancy is a form of dismissal and therefore
all employers must follow a disciplinary and dismissal procedure
which satisfies the requirements of the Dispute Resolution
Regulations 2004, namely to include a letter setting out the
reasons for the potential redundancy, a meeting and an appeal
process.
Disclosure
of Information
Employers
have a statutory duty to disclose in writing to the appropriate
representatives the following information so they can
play a constructive part in the consultation process:
- the
reasons for the proposals
- the
number and descriptions of employees it is proposed
to dismiss as redundant
- the
total number of employees of any such description
employed at the office in question
- the
way in which employees will be selected for redundancy
- how
the dismissals will be carried out and over what timescale
- the
method of calculating the amount of redundancy payments
(other than statutory redundancy pay) to be made.
|
To
ensure that employees are not unfairly selected for redundancy,
the selection criteria should be objective, fair and consistent.
They should be agreed with employee representatives and an
appeals procedure should be established.
Examples of such criteria include last in first out (LIFO),
length of service, attendance record, experience and capability.
The chosen criteria should be measurable and consistently
applied. Non-compulsory selection criteria include voluntary
redundancy and early retirement, although it is sensible to
agree management’s right to decide whether or not such
an application is accepted or not.
Employers should also consider whether employees likely to
be affected by redundancy could be offered suitable alternative
work within the organisation or any associate company.
Employees who are under notice of redundancy and have been
continuously employed for more than two years, qualify for
a reasonable amount of paid time off to look for another job
or to arrange training.
Unfair
Selection for Redundancy
An
employee will be deemed to have been unfairly selected for
redundancy for the following reasons:
- participation
in trade union activities
- carrying
out duties as an employee representative for purposes of
consultation on redundancies
- taking
part in an election of an employee representative
- taking
action on health and safety grounds as a designated or recognised
health and safety representative
- asserting
a statutory employment right
- maternity-related
grounds.
The
Right to a Redundancy Payment
Employees
who have at least two years’ continuous service over
the age of 18 and under the age of 65 (unless the agreed normal
retiring age is less than 65) qualify for a redundancy payment.
For
each complete year of service (at the end of any notice
period), the entitlement is as follows:
• age 18 or over but under 22 – half a week’s
pay
• age 22 or over but under 41 – one week’s
pay
• age 41 or over but under 65 – one and a half
weeks’ pay. |
A
week's pay is that to which the employee is entitled
under his or her terms of contract as at the date the employer
gives minimum notice to the employee. The maximum statutory
limit for a week's pay is £270 (£280 with
effect from 1 February 2005). This figure is reviewed annually
and employers may, of course, pay in excess of the statutory
minimum.
The employee is also entitled to a period of notice or payment
in lieu of notice by statute and their contract of employment.
How
We Can Help
We
will be more than happy to provide you with assistance or
any additional information required.
Top
of page
For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
|
C o m p l e t
e 
Regulated
to carry on audit work for a range of investment business
activities by the Institute of Chartered Accountants in England
and Wales