UpdateThe “R” Word (Redundancy)

July 6, 2020

Having to make redundancies can, understandably, be very daunting for employers.

The decision to make employees redundant will have an impact not only on your business but also on the lives (and livelihoods) of your employees. In fact, you could say that it is life changing.

In our experience, the businesses which not only survive but also thrive through difficult times are those which properly plan a redundancy programme and treat all employees with dignity and respect.

Employers need to ensure that they follow the correct procedures and apply them fairly. Employees have a number of rights in a redundancy situation and both parties need to understand what these are.

Employees who are made redundant may be entitled to a statutory redundancy payment if they have been employed for two years or more and, depending on the circumstances, they may be able to challenge the termination of their employment as an unfair dismissal.

Employers need to know:

1) What “redundancy” means.

2) When they must inform and consult collectively about redundancy.

3) How to deal fairly with individuals being considered for redundancy so as to minimise claims for unfair dismissal.

4) What the alternatives to redundancy are, including lay off and short-time working.

5) How to determine an employee’s entitlement to a statutory or contractual redundancy payment.

The statutory definition of “redundancy” encompasses three types of situations, business closure, workplace closure, and reduction of workforce.

The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” one of those situations.

Following the Global COVID-19 Pandemic, we expect that the most prevalent reason will be workforce reduction but it is also to be expected that there will be some business and workplace closures. If it is a reduction in workforce situation, businesses must take care who they select for redundancy, and ensure that they do not act in a discriminatory way.

If a business is making 20 or more redundancies, there are special rules about consulting with employees (or employee representatives). This is potentially an extremely costly mistake to make as an employment tribunal can award up to 90 days’ pay in respect of each employee where there has been a breach of this duty. The business can also be fined if it fails to notify the Secretary of State.

We will be publishing further information on redundancy over the coming weeks.

In the meantime, if you want to have a confidential discussion about this, please do not hesitate to contact our Head of Employment, Charlotte Turnbull at charlotte.turnbull@wlegal.co.uk or on 020 7220 9130.

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