Redundancy is one of the potentially fair reasons to dismiss an employee. It has a strict legal meaning and only applies where an employer:
stops carrying on the business for which a particular employee was employed, either completely or in the place where the employee works
stops requiring employees or requires fewer employees to carry out work of a particular type, either at all or in the place where the employee works.
Making an employee redundant involves a number of steps which varies depending on the size of the business and the number of employees that are being made redundant.
Employees can be dismissed by reason of redundancy as long as the correct and fair procedure is followed and any remaining salary and untaken holiday is paid. Fair procedure generally includes:
warning all potentially affected staff of the risk of redundancy at an early stage in the process
formally consulting with each possibly affected staff member about their possible redundancy before the final decision
For more information, read Redundancy.
Where staff is being made redundant in a small or micro business (businesses between 1 and 50 employees with a turnover below £10 million) the following steps need to be taken:
staff selection - the redundant staff must be selected carefully and fairly
staff information - all potentially affected staff should be informed that they are at risk of redundancy
employee consultation - each employee who is at risk of redundancy need to be consulted with individually
redundancy notice - staff needs to be informed that they are being made redundant
For more information, read How to make someone redundant in a small business.
Where an employer is making 20 or more employees redundant in 90 days or less, this is known as ‘collective redundancy’. Special rules apply where a collective redundancy takes place, including:
notifying the Redundancy Payments Service before starting consultations
consulting with trade union representatives or elected employee representatives
Employees who are dismissed on grounds of redundancy after at least two years' service are entitled to a statutory redundancy payment according to their pay, age and length of service (capped at 20 years).
SRPs are calculated by multiplying a week's pay (capped at a statutory limit) as follows:
0.5 week's pay for each full year of service while they were under 22
1 week's pay for each full year of service while they were 22 or older, but under 41
1.5 week's pay for each full year of service while they are 41 or older.
Employers may offer enhanced redundancy payments. For more information, read Redundancy.
Rocket Lawyer has a panel of solicitors available to provide you with specific advice on your situation. Our solicitors can guide you through every step of the way to make sure redundancies are carried out in a legally compliant manner. Failure to comply with the redundancy procedure may result in a case being brought to an Employment Tribunal.
As part of this service, our lawyers will review your redundancy policies (if any) and schedule a 45 minute call with you to discuss how best to proceed.
If after the call you require assistance making employees redundant, your lawyer will be able to provide you with a quote for this additional assistance.