Law guide: Employment

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Introduction

Introduction

Contents

The law on redundancy is complex and our guide is designed to provide information about the key provisions. If you are an employer considering undertaking or announcing any redundancy dismissals, we recommend that you obtain legal advice - check this website to see what might be available to you.

What constitutes redundancy?

Redundancy arises in three main situations:

1. Closure of the entire business

2. Closure of the employees' workplace

3. A diminishing need for employees to carry out work of a particular kind

In any of these circumstances, there are well-established obligations for employers and failure to meet them could result in a claim for unfair dismissal being made at an employment tribunal.

It is important to establish whether a dismissal falls within the legal definition of redundancy both to ensure that the dismissal is fair and to determine the entitlement to a redundancy payment.

If fewer employees are required to do a particular job, or the business (or part of it) is being closed down, that will normally constitute a redundancy. Depending on the circumstances, employees may be able to claim redundancy if they are asked to relocate to new premises or are laid off for more than a certain length of time. The sale of a business will not normally constitute a redundancy situation and would be governed by the Transfer of Undertakings Regulations 2006, better known as TUPE. For further reading material on TUPE, please see How is the employee affected?.

Redundancies may also result from a reorganisation of the business due to an economic, technical or organisational reason such as, for example, changes in working hours or technological changes.

Employees eligible for redundancy

A redundant employee will not be entitled to redundancy pay unless he or she has at least two years' service. There are several categories of employee who are excluded from the right to statutory redundancy pay, such as members of the armed forces or police services.

Redundancy pay

The amount of statutory redundancy pay due to an employee is related to age, length of service and weekly pay. Employers must provide the employee with a written statement of how the amount has been calculated.

If an employee is eligible for a redundancy payment and has been dismissed by reason of redundancy, they will be entitled, at a minimum, to a statutory redundancy payment from their employer. If there is a contract of employment, it may contain a provision for the employee to be paid more than the statutory minimum. This is known as an 'enhanced' redundancy payment.

A redundancy payment is intended to serve as compensation where an employee is dismissed through no fault of their own. Employees are entitled to receive the full redundancy payment upon being dismissed, even when they manage to find another job immediately. In most cases, the employer will make the redundancy payment without the need for any formal application to an employment tribunal. However, where there is a dispute over the right to receive payment or over the correct amount, an application may be made and the employment tribunal will determine these matters.