Redundancy Advice for Employees and Employers

According to recent news reports, the downturn in the UK economy has meant that more and more employers are making staff redundant. We have set out below some useful redundancy advice for both employers and employees on this area of employment law. Please note that this is only intended to be a general guide to redundancy and is not intended to be a substitute for specific legal advice.

The Commons Questions:

What is redundancy?

Have I been fairly selected for redundancy?

Have my employers followed the correct procedure for making me redundant?

What payments should I expect to receive upon redundancy?

What is a Compromise Agreement?

What is redundancy?
The Employment Rights Act 1996 gives a definition of redundancy. This definition suggests that a redundancy situation would occur in three instances, namely, a cessation of the employer's business; a cessation or reduction in work at your place of work; and a reduction in the requirement for the employees to carry out work of a particular kind in the place that you are employed by your employer.

Do be aware that your contract of employment could contain a mobility clause requiring you to move to a different workplace if work ceases or diminishes at your usual place of work. If so, an employer could avoid a redundancy situation and avoid making any redundancy payments if they decide to invoke this clause.

Have I been fairly selected for redundancy?
Your employer should disclose the selection criteria that they used to select you for redundancy.

There are no hard and fast rules about how to select employees for redundancy, but it is important that any criteria is objective and are not discriminatory on the grounds of race, sex, disability, religion, sexual orientation or age. It is also automatically unfair to select an employee on the grounds of pregnancy or for a trade union reason. Your employer must apply the criteria fairly.

It is common for your employer to firstly select a pool of jobs for redundancy and then set a fair selection criteria to apply to these employees. Very often employers will look at attendance records, skills, disciplinary records, conduct, qualifications and standard of past performance to come to a decision.

Employers must also be careful to ensure that any of the criteria are not discriminatory. For example, if your selection for redundancy is based upon your attendance records and you were off work for a disability or pregnancy related reason then this could be discriminatory and/or an unfair dismissal.

Your employer should also consider whether there are any suitable alternative vacancies within their organisation before actually making you redundant. When making an employee redundant on maternity leave your employer must offer them a suitable alternative vacancy or else the dismissal will be automatically unfair.

It is possible that your contract of employment or staff handbook sets out the method that your employer will use when selecting jobs for redundancy.

Have my employers followed the correct procedure for making me redundant?
In most cases, your employer should follow the Statutory Dismissal and Disciplinary Procedure (DDP) when making you redundant. This means that they should do the following:

1. Set out in writing the grounds for the proposed redundancy and invite you to a meeting to discuss this;


2. At the meeting, you will be allowed to be accompanied by a colleague or trade union representative if you wish. Both sides should then discuss the proposed redundancy. After the meeting has taken place your employer must inform you of its decision and that you have the right of appeal;


3. If you decide to appeal you must inform your employer and a further meeting will take place. After the appeal meeting your employer will inform you of its final decision.

If your employers fail to complete this procedure your dismissal could be automatically unfair and the level of compensation you receive will be increased.

The DDP will not apply of your employer's business suddenly and unexpectedly ceases to function or if your employer is proposing to make more than twenty employees redundant within a ninety day period, for example. In the latter situation, your employer has a duty to consult with trade union representatives or elected employee representatives about the reasons for the redundancies, the methods of selection and whether there is a possibility of avoiding or reducing the number of redundancies.

What payments should I expect to receive upon redundancy?
If you have been employed for over two years with your employer you are entitled to a redundancy payment.

The minimum amount that you will receive is based upon a statutory formula that depends upon your age, gross weekly wage and length of service. Under this formula, the total number of years of employment that can be taken into account is capped at twenty and the gross weekly wage is currently subject to a maximum of £330*(figure changed yearly). For example, a 64 year old employee who has been continuously employed for twenty years and earns £330 (gross) per week would be entitled to receive £9,900.

Usually, the first £30,000 of any redundancy payment will not be subject to tax and national insurance, although you will usually have to give an indemnity to your employer.

However, it is worth checking whether your contract of employment provides for a more generous package on redundancy. Some employers may decide to pay you more than the minimum statutory redundancy by way of an ex-gratia payment as a reward for your past services.

Employers are required to provide a written statement to employees confirming how the sums have been calculated.

What is a Compromise Agreement?
A Compromise Agreement is a written, binding agreement between you and your employer on termination of your employment. Once agreed and signed it will have the effect of fully and finally settling any claims that may arise out of your employment. You will not be able to subsequently make a claim to an employment tribunal.

You must receive advice upon the agreement from a qualified Lawyer, Fellow of the Institute of Legal Executives or an Officer of a trade union or advice centre who has been certified in writing as competent to give you advice. The agreement should provide for payment of your legal fees to be paid by your employer.

If you are not happy with the terms of the agreement it may be possible to enter negotiations with your employer to change these. Ascot Lawyers can help you with these negotiations or carry then out on your behalf.

If you are being made redundant or are considering making staff redundant Ascot Lawyers can provide you with independent legal advice upon the term of your Compromise Agreement or draft a tailor made Compromise Agreement for you. Please contact the Employment Team on 01344 783 890 for more information.