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The Employer’s Guide to Employee Redundancy in the UK

Key Takeaways

1. Redundancy in the UK is where an employee or employees are dismissed or told to leave a company because there is no longer a business need for them. This could be because the company is dissolving or because it is cutting down on staff whose roles are no longer required.

2. When an employer needs to make staff redundant, it is important that they follow the correct procedures that are set out by employment laws such as providing notice, paying UK redundancy pay, and following correct selection processes.

3. One of the key laws surrounding redundancy in the UK is that an employer who is making 20 or more redundancies within a period of 90 days or less, must notify Insolvency Service’s Redundancy Payments Service of any potential redundancies. Employers could face serious prosecution and fines for not adhering to this.

4. It is important that UK employers hiring UK staff comply with the laws on redundancy as not only can they be open to prosecution but employees can make claims for unfair dismissal and in some cases, discrimination.

5. Employees who have worked for a company for less than 2 years continuously have limited rights as they are often not entitled to statutory redundancy pay and only need to be given 1 weeks’ notice to be dismissed. 

A key benefit of doing business in the UK is the transparent laws and regulations in place with respect to employment relations. This applies equally when it comes to UK employee benefits and deductions (such as the UK Health and Social Care Levy), or to employee hiring and dismissal. 

One area that any employer in the UK needs to pay attention to is employee redundancy law which sets out rules for terminating employment when an employee’s position is no longer required.  

In a recent scandal, P&O Ferries there have been questions raised as to whether the correct procedure was followed when making large-sale redundancies. The UK business secretary observed that a failure to give employees adequate notice of redundancy can constitute a criminal offence, and can result in unlimited fines. It is said that around 800 staff on UK contracts were fired suddenly, some were told by video call and others were emailed or sent text messages. Apparently, the company had plans to replace redundant employees with cheaper staff.

In this article we take a deep dive into the rules that need to be followed in this type or case. 

What is the meaning of redundancy in UK labor law?

In UK labor law, “redundancy” is a form of dismissing or terminating someone’s employment due to an organizational need to reduce the workforce. The law on redundancy falls under the Employment Rights Act 1996 (the Act).

According to the Act (Section 139), an employee can be made redundant where the employer has ceased or intends to stop carrying out business either in the place in which the employee was employed or, for the purposes in which they were employed. For instance, this may occur where the business needs do not require that the employee carries out the work any longer.

However, it is not enough for an employer to simply justify making someone redundant on the grounds that the business does not require them anymore. There is a selection process that must be followed in order to adhere to employment laws in the UK, and an employer cannot make somebody redundant based on certain factors (which will be discussed later), otherwise, an employee may be able to make a claim for unfair dismissal.

Before making a person redundant, an employer must consider whether UK redundancy pay is applicable, how much notice they should give to the employee, whether they can move into a different position or be offered a different role, or, whether they are eligible for time off to find another job. All these factors are dependent on the individual employee and how long they have been working for the employer. This will be discussed further.

What steps do I need to take to when initiating employee redundancy in the UK?

1. Obligation to notify employee representatives and consult employees

In the UK, an employer must give an employee a certain amount of time to notify the employee of the redundancy, known as the notice period. This will usually be outlined in the contract of employment.

The statutory redundancy notice period for those employed between 1 month and 2 years is 1 week’s notice. For those employed between 2 and 12 years, the statutory notice period is 1 week for every year employed. Therefore, if a person is employed for 8 years for instance, they are required to have 8 weeks’ notice, and if they are employed for 12 years, they need to be given 12 weeks’ notice.

As an employer, it is important that you consult your employee before making them redundant. This will involve explaining why you are making them redundant and any potential alternative roles that can be offered to them within the company instead.

2. Redundancy process

Statutory redundancy laws in the UK require that employers undergo a fair selection process for dismissing people such as reviewing qualifications, skills, experience, or offering voluntary redundancy. You cannot make someone redundant on the basis of a “protected characteristic” such as their age, gender, religion, or disability, as this would be considered unfair and may lead to an unfair dismissal claim. The protected characteristics are set out in the Equality Act 2010.

For example, when considering redundancies and who you will need to make redundant, you cannot make an employee redundant because they are on maternity leave or because they are doing jury service at the time. Similarly, you cannot make an employee redundant based on the fact that they have a disability and the rest of your staff do not, as this could be classed as unfair dismissal.

3. Obligation to notify the Secretary of State for Business/Insolvency Service

Laws surrounding redundancy in the UK state that an employer must notify Insolvency Service’s Redundancy Payments Service of potential redundancies of 20 employees or more (within a period of 90 days or less) by completing a notification of redundancies form called an HR1 form. Not doing this can result in prosecution and a fine or a conviction. The information on redundancies around the UK is collected on behalf of the Secretary of State for business and is passed to the relevant government departments that use the information to help employees. 

In a recent case of R (on the application of Forsey & Palmer) v Northern Derbyshire Magistrates Court, it was found that directors of companies can be made personally liable for the non-compliance of their company in relation to not notifying the government that they will be making more than 20 employees redundant within 90 days.

Comply with the rules for redundancy in the UK

If you are looking to hire staff in the UK, and are not familiar with UK employment law or redundancy rules, it is a good idea to consult a Professional Employer Organization or Umbrella Company, who can give advice on the best options for compliance.

Horizons is able to hire UK staff on behalf of client companies, and where redundancy is required, can  ensure that all redundancy obligations are met. For further information please do not hesitate to contact us.

Frequently Asked Questions (FAQ)

When a person is made redundant in the UK, they may be entitled to redundancy pay if they have been working continuously for the employer for at least 2 years. The redundancy payment is based on factors such as the age of the person, their salary, and the number of years they have worked for the company. Therefore, there is no specific answer to this question as it depends on the individual. Usually, people who have worked for a UK employer for less than 2 years are not entitled to redundancy pay.

In the UK, redundancy pay is sometimes a statutory obligation for employees who are being dismissed after working for a company for 2 years or more (this is capped at 20 years). For instance, for those who are under the age of 22, half a week’s pay for each year will be payable by the employer. For those between the ages of 22-41, 1 week’s pay is due for every full year of service. For employees over the age of 41, 1 and a half weeks’ pay will be required for every full year of employment. The employee’s weekly pay is calculated based on the amount they have been paid over the last 12 week period prior to the redundancy notice.

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