HM Insights

Redundancy – what are an employer's responsibilities and an employee's rights?

Earlier this month Tesco announced plans to cut up to 4500 jobs from its Tesco Metro supermarkets, adding to the 9000 roles it had already warned were at risk earlier this year. The job losses are as a result of tough competition from other supermarkets and as part of a strategy to "simplify and reduce processes and administrative tasks."

Unfortunately, this is one of a number of recent announcements of large scale job losses in a variety of different sectors.

So, in such a redundancy exercise, what do employers and employees need to be aware of?

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Lessons for employers in redundancy exercises

Whilst redundancy is one of the five potentially fair reasons for dismissal, employers need to establish that the situation does fall within the definition of redundancy in the Employment Rights Act 1996. An employee is dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:

  • the employer ceasing or intending to cease carrying on the business for the purpose of which the employee was employed by him;
  • the employer ceasing or intending to cease carrying on that business in the place where the employee was so employed;
  • the requirements of the business for employees to carry out work of a particular kind, either generally or in the place where the employee was employed, ceasing or diminishing (or being expected to cease or diminish).

This is, though, only the start of an employer's responsibilities. It will also be expected to follow a fair redundancy procedure. The nature of the fair dismissal procedure will vary depending upon whether it is a collective or non-collective (sometimes known as individual, even though it often involves more than one person) redundancy situation.

Collective consultation rules apply when an employer is proposing to make 20 or more employees redundant from one establishment within a 90-day period, and imposes specific, and more onerous, obligations on an employer – with a hefty penalty of up to 90 days' pay per employee for failure to comply with these obligations.

What is the redundancy procedure?

A fair individual redundancy procedure usually comprises a number of stages, including:

  1. Warning and consultation – an employer should give as much warning as possible and then engage in genuine and meaningful consultation with employees;
  2. The fair basis for selection – this will involve identifying an appropriate pool of employees to be considered for selection and applying selection criteria to that pool (if required);
  3. Consideration of alternative employment – reasonable steps should be taken to find the affected employees alternative roles within the organisation and consult with them about it; and
  4. Opportunity to appeal – once a decision has been made to make an employee redundant, then a fair procedure would give them the right to appeal against that decision.

What are employees are entitled to in redundancy situations?

Any employee at risk of redundancy has certain rights through the consultation process and if eventually they are made redundant they have additional rights and entitlements, such as:

Redundancy pay

 Employees who have been working with their current employer for at least two years will usually be entitled to a statutory redundancy payment. The exact amount they are entitled to will depend on their age, length of service and weekly earnings.

A notice period

If made redundant, employees are entitled to receive their notice period. This could be either contractual or statutory notice depending on which is the longer of the two. If their employer doesn’t want them to work their notice period they can offer a payment in lieu of notice instead.

The option to move into a different job

An employer may offer another role within the organisation or an associated company. Employees can lose their right to statutory redundancy pay if they unreasonably refuse to accept a "suitable alternative role", but this is rare.

Time off to find a new job

If an employee has been continuously employed for two years, the employer should allow reasonable amount of time off to look for another job or to arrange training to help the employee find another job.

Unfair dismissal

If an employee feels that their dismissal is unfair due to, for example, there not being a genuine redundancy situation, or an improper selection process, then they have a right to take their employer to an employment tribunal.

Contact us

If you need advice in relation to redundancy, whether as an employee facing a redundancy situation or as an employer considering making redundancies, please get in touch with a member of our employment law team.

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