Redundancy in the UK: A Guide to Avoiding Unfair Selection
As you all know the Coronavirus Job Retention Scheme has now entered its final month and will draw to a close on the 30th of September 2021. With this scheme coming to an end companies are now unfortunately faced with the possibility of redundancies having to be considered. The number of redundancies in the UK has accelerated at the fastest pace since the financial crisis. According to ACAS, redundancy related calls to their helpline have increased by over 160% compared to 2019.
If redundancies must occur then we see the following steps should be adhered to:
Collective Consultation
If an employer is proposing to make 20 or more employees redundant at one establishment within 90 days, collective consultation will be required with trade union or employee representatives.
For employers who collective redundancy applies to and who wish to make redundant by the end of the furlough scheme, they would have needed to commence their collective redundancy consultation by the 31st of August 2021.
Non-Collective Redundancy
If collective redundancy does not apply and your redundancies are on an individual level this is non-collective redundancy which is less than 20. In this case;
- You should aim to avoid compulsory redundancies through: voluntary redundancies, agreed short-time working or other flexible staffing arrangements.
- You should also carry out a consultation with every employee individually. The consultation must be meaningful and your plans must not be finalised at this stage.
Next is selecting staff for redundancy. Employers should use fair and objective criteria. Ideally, all employees at risk of redundancy should be put in a selection pool and assessed upon criteria such as: Standard of work, experience / qualifications and disciplinary record. Selecting those who have been on furlough over other employees may not necessarily be fair – these employees may have been parents with childcare issues or individuals with disabilities, so there could be a risk of a direct or indirect discrimination claim.
Notice of Termination
Once you have selected staff for redundancy, you need to give employees notice of their redundancy. The statutory redundancy notice periods are:
- At least one week’s notice if employed between one month and 2 years
- One week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more.
It is always advisable to check your contracts of employment as the contractual notice agreed may differ to statutory notice. Where contractual notice is greater than statutory notice, contractual notice will apply. However, where the contractual notice is less than statutory notice, statutory notice will apply.
Statutory notice pay is protected. If the notice in the contract is the same or less than the applicable statutory notice, 100% of the employee’s normal pay should be paid during the notice period.
However, things are slightly different where contractual notice is greater than the statutory notice period. If contractual notice is greater, by at least 1 week, an employee should receive their normal full pay as long as they are working. If they are not working, they should receive what they would have normally been paid for that absence.
So, if you have an employee who is out of work due to furlough and being paid at 80%, and this employee’s contractual notice is greater than statutory notice, they may be paid at 80% for their notice period. For this reason, it is extremely important to always check the contract of employment.
Redundancy Payments
An individual is entitled to statutory redundancy pay if they are an employee and have been working for the employer for 2 years or more.
- One week’s pay for each full year they have worked when 22 or older, but under 41 years old.
- Half a week’s pay for each full year they have worked under 22 years old.
- One and half week’s pay for each full year they have worked when 41 years old or older.
Redundancy pay is capped with a length of service being 20 years. For employees made redundant on or after 6 April 2021, a weeks’ pay is capped at £544, so the maximum statutory redundancy they can receive being £16,320.
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