The last 6 months have been a scary time for millions of workers, not only in the UK but across the globe. Every country in the world has been affected, some worse than others (for instance, the US has apparently lost 39 million jobs – almost 25% of the workforce. The UK is seeing predictions of 6.5 million job losses by the end of the crisis.
Redundancy can be a frightening and daunting prospect for anyone, so this 2-part post will hopefully help you to make sense of it and decide what to do next. The first part gives you the information you need to ensure your rights are protected. In the second part, I’ve shared my personal experience of redundancy in the hope that it helps alleviate some of the worries you might have. Or at least help you rationalise the process and make the right choice for your future. I promise you it is worth the read.
What is Redundancy?
Redundancy is defined in the Employment Rights Act 1996 (specifically section 139(1)) as a situation where there is imminent or current:
- Closure of a business
- Closure of a workplace
- Reduction in the need for employees
The law gives you certain protections if you’re facing redundancy:
- The right to a fair process
- The right to a minimum notice period
- The right to consultation
- Certain time frames and types of consultation
- The right to time off to look for work
All of these are described in more detail later in the post. My advice is, if you haven’t already, join a trade union! Your trade union representatives can’t stop the employer from making you redundant in most cases, but they will make sure your rights are honoured. The TUC can help you find the right trade union for you here. Or find out who your local rep is and approach them.
Your rights and the employer’s obligations
The entire redundancy process and the rights you have can differ depending on how long you have been employed, your age, and how many redundancies the employer intends to make. The most important things you need to know are around the notice period the employer has to give, the amount of redundancy compensation you can expect, the consultation process, and how the employer selects you for redundancy
The amount of notice the employer has to give you depends on how long you have been employed by them, and can be broken down as:
- Between 1 month and 2 years – at least 1 week’s notice
- Between 2 years and 12 years – one week’s notice for each year of employment
- Over 12 years – 12 weeks’ notice. This is the legal maximum.
If the employer doesn’t want you to work your notice period, you are entitled to pay in lieu of notice (PILON). This takes as its basis the statutory minimums, but can also depend on what’s written into your contract. PILON is taxable, the same as any holiday pay or wages owing (see below).
Compensation (redundancy pay)
The amount the employer has to pay you in compensation also has some legal minimums set. To qualify for redundancy compensation, you have to have been employed for 2 years or more. If you have, you’ll get:
- half a week’s pay for each full year you were under 22
- one week’s pay for each full year you were 22 or older, but under 41
- one and half week’s pay for each full year you were 41 or older
The number of years is capped at 20 years, and weekly pay is capped at £538. So the maximum you can get by law is £16,140. If you are a member of a trade union, and you have a good rep, you might be able to negotiate a higher settlement. Any redundancy pay you get under £30,000 is not taxable. If you are owed any holiday pay, this will be added to the compensation but will be taxable (if you think about it, you are getting paid in lieu of something that forms part of your taxable employment).
If you’re furloughed, the amount of compensation is based on your normal pay, not the reduced rate of furlough pay (80% at the time of writing this, November 2020).
You can find a handy guide to the tax you have to pay on redundancy payments here, as well as some worked examples.
Unfortunately, if there are less than 20 redundancies in the offing, the employer doesn’t have to consult any trade unions or notify anyone except the employee. If there are 20 or more proposed redundancies, as soon as the employer thinks they might have to do so within the next 90 days, they have to notify both the recognised trade unions and the Secretary of State for Business, Energy & Industrial Strategy.
The trade unions are notified with a “Section 188 letter”, named after Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. In the letter, the employer has to give details of:
- the reasons for his proposals,
- the numbers and descriptions of employees whom it is proposed to dismiss as redundant,
- the total number of employees of any such description employed by the employer at the establishment in question,
- the proposed method of selecting the employees who may be dismissed,
- the proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect.
- the proposed method of calculating the amount of any redundancy payments to be made (otherwise than in compliance with an obligation imposed by or by virtue of any enactment) to employees who may be dismissed.
- the number of agency workers working temporarily for and under the supervision and direction of the employer,
- the parts of the employer’s undertaking in which those agency workers are working, and
- the type of work those agency workers are carrying out.
The employer also has to notify the Secretary of State via an HR1 form. This is then used to notify job brokering agencies and other government departments who may be able to help you with finding work (such as the Jobcentre).
As soon as these documents are issued, the clock starts ticking on a consultation period. Again, the length of the consultation period depends on the number of redundancies:
- between 20 to 99 redundancies, the minimum consultation period is 30 days before the first dismissal
- For 100 or more redundancies, the minimum period is 45 days before the first dismissal
As I said, for less than 20 redundancies this doesn’t apply. But, you are still entitled to a period of consultation, even if this is at the discretion of the employer. Your employer has a responsibility to explore alternatives to redundancy, tell you what’s going on, and do their best to reduce any hardship you might suffer. If they don’t, you can take them to an employment tribunal. Unfortunately, if you’ve waited until now to join a union, they might not represent you at a tribunal as they can be costly affairs and you are not guaranteed to win. Often a trade union will have rules that someone has to have been a member for a short period before they are able to offer legal assistance (usually at least a month).
If you fall into the latter category above, you are entitled to at least one individual consultation meeting with the employer to explain what is happening and why. Key things to remember:
- You can ask to be accompanied by a trade union or employee representative.
- You can raise objections and suggest alternatives to redundancy, for example, alternative work, short-time working, or lay-offs.
- Your employer considers your objections and, if they decide to go ahead with redundancy, they must confirm this to you in writing.
- Most employers will allow you the right to appeal if you’re unhappy with the decision, but if your employer does not offer an internal appeals procedure you can consider going to a tribunal.
- If your dismissal is, or seems, unfair and you’ve decided to sign a ‘compromise agreement’ (see below) you do this once the discussions with your employer are over.
If there are more than 20 redundancies, consultation must also be collective – that is, with your union rep or employee rep. If you don’t have a recognised union, you and your colleagues are entitled under Section 188(A) of the Trade Union and Labour Relations (Consolidation) Act 1992 to elect an employee rep.
Selection for redundancy
Whatever method your employer uses to select people for redundancy must be fair. Common methods include:
- last in, first out (employees with the shortest length of service are selected first)
- asking for volunteers (self-selection)
- disciplinary records
- staff appraisal markings, skills, qualifications and experience
Or a combination of any of the above. Sometimes these will be used in sequence, for example the employer might ask for volunteers first, then if they haven’t reached their target they will select based on one of the other criteria.
If your job no longer exists, your employer does not have to follow a selection process, for example if:
- your employer is closing down a whole operation in a company and making all the employees working in it redundant
- you’re the only employee in your part of the organisation
You might be asked to re-apply for your own job as a selection method. If you don’t, you have effectively volunteered for redundancy. This also applies if you are offered a job in another part of the organisation. This has to be sufficiently similar (“suitable alternative employment”) to your current job, but if you don’t accept the offer you have in effect made yourself redundant.
The employer must not discriminate against you in the selection process – if they do it would be classed as unfair dismissal and you can take them to an employment tribunal (with a maximum compensation of a year’s salary, plus any damages). The list of possible discriminations is here, but it’s worth remembering that you can’t be selected just for being a member of, or active in, a trade union. If your union decides to take industrial action to fight the redundancies, the employer can’t use that as an excuse to get rid of you either.
If your employer has not followed a fair procedure in selecting you for redundancy, they might sometimes ask you to sign an agreement stating that you’ll not go to an employment tribunal (often in return for an extra payment).
This is known as a ‘compromise agreement’.
Your employer must pay for you to receive independent legal advice so you fully understand the rights you’re giving up. Often you can leverage this to negotiate a better settlement. This is another way that a good union rep comes in handy!
You can also get advice from our friendly mentors at Future Shift – get in touch, we’re happy to help!