Redundancy Process

Consultation

Employers who recognise independent trade unions have a statutory duty to consult them at the earliest opportunity once redundancies are proposed. This duty applies even when only one employee is to be made redundant, irrespective of whether or not they are members of the recognised trade union. Failure to consult could lead to a claim for compensation, known as a protective award. To avoid such a claim, employers should consult officials of those recognised trade unions affected by the redundancy programme.

Consultation should take place at the earliest opportunity.

Current legislation requires that consultation must be in any event begin:

• At least 30 days before the first dismissal takes effect if between 10 and 99 employees are to be made redundant at one establishment over a period of 30 days or less
• Where 20 or more redundancies are planned, the employer must notify the DTI on form HR1. Failure to comply may give rise to a fine of up to £5000

Disclosure of information

Employers have a statutory duty to disclose in writing to recognised trade unions the following information concerning proposals for redundancies so that they can play a constructive part in the consultation process.

• the reasons for the proposal
• the numbers and descriptions of employees it is proposed to dismiss as redundant
• the total number of employees of any such description employed at the establishment in question
• the way in which employees will be selected for redundancy and
• how the dismissals are to be carried out, taking account of any agreed procedure, including the period over which the dismissals are to take effect

Selection criteria

The dismissal of an employee selected for redundancy will be unfair if it is for one of the following reasons:

• the selection is in breach of a customary arrangement or agreed procedure unless there are special reasons to justify departure from it or
• the selection is for trade union reasons
• the selection is discriminatory on the grounds of race or sex

Voluntary redundancy

To agree to confine applications to selected categories. In practice, many agreements confirm management's right to decide whether a particular employee should be allowed to leave.

Early retirement

Can be an acceptable alternative to redundancy for employees and trade unions and thus have a less detrimental effect on workforce morale. It can also leave the company with better balanced age structure although employers could mean that there might be no natural retirement for some time. This could in turn lead to poor career prospects for those who remain if there is little future labour turnover.

Selection criteria

• skills or qualification - formal qualifications and advanced skills should be considered but not in isolation
• last in, first out - a decision must be made as to whether it will be operated company wide or on a departmental basis
• standard of work performance or aptitude for work
• attendance or disciplinary records -employers should look at the duration of the spells of sickness, whether the employee has had many frequent spells of sickness or long term sickness
• The approach adopted should be consistent and fair when looking at discipline, absence, timekeeping and holidays.

When agreeing selection criteria, the most important consideration for the future viability of the company is to maintain a balanced workforce after the redundancies have been carried.

Appeals

The establishment of a redundancy appeals procedure to deal with complaints from employees who feel that the selection criteria has been unfairly applied. Should consist of employee rep and senior management.

Suitable alternative work

Where alternative work exists, the employee should be given sufficient details to enable him or her to decide whether to accept or not. The search for alternative employment should extend, if possible throughout the organisation.

Suitable alternative work is dependent upon:

• Pay - wherever possible, earnings should be protected against a fall in the current rate of pay. Alternatively, there may be opportunities for employees to earn more
• Location - employer should consider the degree of disruption likely to be caused by a change of location and any additional expense incurred. Any increase in travelling time should be considered in relation to the age, health and domestic circumstances of the employee
• Hours of work - any change in an employee's hours of work, for example in shift patterns, may be considered unsuitable if it fails to take account of the individuals personal circumstances.

The offer

The offer should show how the new employment differs from the old and by law must be made before the employment under the previous contract ends. The offer must be for the new job to start either immediately after the end of the old job or after an interval of not more than four weeks.

Trial period

An employee who is under notice of redundancy has a statutory right to a trial period of four weeks in an alternative job where the provisions of the new contract differ from the original contract, the period to begin when the previous contract has ended.

The trial period is to give the employee the chance to decide whether the new job is suitable without necessarily losing the right to a redundancy payment. The four week trial period can be extended for retraining purposes by an agreement which is in writing, specifies the date on which the trial period ends and sets out the employee's terms and conditions after it ends. If the employee works beyond the end of the four week period or the jointly agreed extended period any redundancy entitlement will be lost because the employee will be deemed to have accepted the new employment.

Should the employer wish to end the new contract within the four weeks for a reason connected with the new job, the employee will preserve the right to a redundancy payment under the old contract. If the dismissal was due to a reason unconnected with redundancy, the employee may lose that entitlement.

Time off to look for new work, or for training

Employees who are under notice of redundancy and who qualify for a statutory redundancy payment also have a statutory entitlement to a reasonable amount of paid time off to look for another job or to arrange training.

The time off which is agreed must be allowed before the expiry of the period of notice.

STATUTORY REDUNDANCY NOTICE

Employees who are to be made redundant are entitled to a minimum period of notice which is dependent on their length of service. The entitlements are:

• employees who have served one month or less are not entitled to any notice
• employees who have served between one month and two years are entitled to one week's notice
• employees who have served more than two years but less than three are entitled to two weeks notice
• employees who have served more than three years but less than four are entitled to three weeks notice
• employees who have served more than four years but less than five are entitled to four weeks notice
• and so on to a maximum statutory requirement of 12 weeks

REDUNDANCY PAYMENT

The amount of payment an employee is entitled to receive depends on how long they have been in continuous service with an employer, how this length of service relates to their particular age band and how much they were paid. Employees are paid for each period in which they were in a particular age band and the payments for each of these periods should be calculated and then added together. The bands and respective entitlements are as follows:

• employees over 18 and up to 23 years old are entitled to half a week's pay for each complete year of employment
• employees over 22 and up to 42 years old are entitled to one week's pay for each complete year of employment
• employees over 41 but less than 65 years old are entitled to one and a half week's pay for each complete year of employment

A week's pay is currently a maximum of £260 and is reviewed each year.

Revised 6 March 2003