How to avoid the legal pitfalls of redundancy

  27th November 2019       Private: Bond Williams
 Client, Employment

It is not just the troubled High Street where the threat of redundancy looms large: the technology revolution puts many jobs in many sectors at risk. According to analysts at Oxford Economics, robots could replace roles millions of roles in services, transport and construction by the year 2030. All these impending redundancies will have far-reaching consequences – and not just for the employees concerned.

Employers contemplating redundancies face a myriad of legal pitfalls. And the penalties for getting it wrong can be costly…

Giving notice of redundancy

As an employer you must give written notice to any employees you are planning to make redundant. Check each employee’s contract to ensure you are complying with any terms relating to notice of dismissal.

The minimum statutory notice periods are:

  • at least one week for those employed between one month and two years
  • one week for every year of service for those employed for two or more years (the maximum required notice period is 12 weeks).

Failure to provide sufficient notice can result in claims for the unpaid balance owed.

Employment contracts can contain a Payment In Lieu of Notice (PILON) clause – allowing the employer to pay notice rather than require the employee to work out their notice. The PILON should include an amount to compensate the employee for all contractual benefits that they would have received had the notice period been worked.

How to calculate statutory redundancy pay

Employees are entitled to statutory redundancy pay if they have been employed for two years or more. How much you must pay them will depend on their age and their years of service:

They should receive:

  • half a week’s pay for each full year they were employed aged up to and including 21 years
  • one week’s pay for each full year they were employed aged 22 to 40
  • 5 weeks’ pay for each full year they were employed aged 41 or older

There is a series of maximum limits which will cap the amount of redundancy pay they will receive:

  • maximum weekly pay – £525
  • maximum length of service – 20 years
  • maximum statutory redundancy pay – £15,750

Disgruntled employees selected for redundancy may try to claim more in compensation at an employment tribunal. They may allege unfair dismissal, saying that:

  • they were selected unfairly for redundancy
  • you used ‘redundancy’ as an excuse to dismiss them – when no real redundancy situation existed

If successful in these claims, the employees could be entitled to compensation beyond the redundancy payment you have offered them. Or you could be ordered to reinstate them.

How to carry out redundancies – Your 7-step checklist
  1. Warn employees likely to be affected. You must alert them that they face a potential redundancy situation. The warning should explain the nature of the redundancy (closing down of a place of work or ceasing or diminishing work undertaken by the employee) and the steps taken or being considered to avoid redundancy.
  2. Identify affected employees. If redundancies cannot be avoided then you need to consult with affected employees. Identify the pool of employees likely to be affected. (If there are 10 employees but only enough work for five then all 10 will be affected). You cannot select the employees to be made redundant out of the pool before consultation and selection. To do so would be unfair.
  3. Consult the affected employees on the reasons for redundancies, possible steps to avoid them, who is likely to be affected and the selection criteria. Give the employees an opportunity to suggest alternatives. Consultation may need to be both collective (trade unions or employee representatives) and individual. Depending on the number of affected employees, there may be statutory minimum periods of consultation with protective awards for failure to comply. You should respond to employees’ points raised during the consultation.
  4. Select the employees for possible redundancy based on fair and objective criteria (performance, skills, experience). Once the consultation period has ended, score the affected employees. Do not discriminate – ignore pregnancy or disability absence. Take care that selection based on experience does not discriminate against younger workers. You must show each employee their
  5. Meet – hold an individual meeting with each employee selected. Disclose their score to them and allow them to comment and make suggestions. Do not take a decision until after the employee has had the opportunity to comment.
  6. Decide – take the decision and notify each employee. Suggest alternative roles if they are available. If no alternatives are available then dismiss the employee in writing (with notice or PILON), setting out that they have been made redundant. Employees have a right of appeal.
  7. Rights To Time Off – employees on notice of redundancy have further rights including right to time off work to find another job or training.
Neil Andrews

Neil Andrews


Author: Neil Andrews, Partner, Coles Miller Solicitors LLP

Neil is a highly successful commercial litigator who deals with business disputes in the County Court, High Court and in employment tribunals and has been a Partner at Coles Miller Solicitors LLP since 1999. ¦

Private: Bond Williams


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