Redundancy: myths and useful facts for employers

A business objective to save money will not necessarily fall within the definition of a redundancy. Redundancy relates to circumstances where there is a business closure, closure of a particular place of work, or where work of a particular kind has ceased or diminished or is expected to.

As a cost saving measure, you can elect to make a payment in lieu of notice (where the employment contract provides for this) if payment of a bonus is due or else the employee is approaching their service anniversary.

The statutory rate for a week’s pay increases from £464 to £475 on the 6^th April 2015 for the purposes of calculating a statutory redundancy payment. A statutory redundancy payment is tax free.

If an employee refuses an offer of suitable alternative employment, they may forfeit their entitlement to a statutory redundancy payment.

A valid offer of suitable alternative employment must be made before the employee’s employment under the previous contract ends and meet certain conditions. However, the role can start up to 4 weeks after the previous employment ends and continuity of employment will be preserved.

Employees have 3 months within which to lodge an employment tribunal claim for unfair dismissal, but 6 months to lodge a claim for a statutory redundancy payment.

There is no set time limit that you have to wait before you can recruit someone else if business has picked up. However, you should be mindful that if you have made an employee redundant and then seek to recruit a replacement very soon afterwards, understandably this may give the employee cause for concern and if it is within 3 months of their dismissal, they will still be in time to pursue an unfair dismissal claim if they think their role was not genuinely redundant.

An employee on maternity leave is entitled to be offered a suitable alternative vacancy (where available) and has priority over other employees who are at risk of redundancy to that vacancy. This is a rare lawful example of positive discrimination.

Volunteers for redundancy are volunteering to be dismissed by reason of redundancy. They must still therefore be included in the head count for the purposes of establishing whether collective redundancy consultation applies (a proposal to dismiss as redundant 20 or more employees at a single establishment within 90 days).

Where a Company refuses to make a redundancy payment, only makes part payment or else is insolvent, an employee would need to make a claim to the Secretary of State for a redundancy payment out of the National Insurance Fund.

For advice or assistance on any employment law related matter, please contact Lianne Payne, Head of Employment at Askews Legal LLP.

Askews Legal LLP – Solicitors in Coventry.