Working Out Redundancy Pay: Employers’ Guide

Redundancy pay is a statutory entitlement for eligible employees who are being made redundant by their employer. Redundancy pay is designed to alleviate the impact of job loss on the livelihoods and wellbeing of those affected, providing some financial breathing space to find new employment or transition to something new.

Given the importance of redundancy pay to employees, employers have to meet strict rules relating to entitlement and calculations. Failure to pay redundancy pay to anyone who is entitled or to pay the correct amount can result in costly tribunal claims.

In this guide for employers, we explain how to calculate redundancy pay, the rules on who is entitled and share best practices to minimise exposure to legal risk.

 

Section A: Fundamentals of Redundancy Pay

 

Whilst it’s lawful for an employer to bring an employee’s contract of employment to an end by reason of redundancy — provided there’s a genuine redundancy situation, for example, where there’s been a complete organisational restructure or a reduction in the requirement for work undertaken by the employee in question — you have to ensure you follow a fair and lawful redundancy procedure, or you risk unfair dismissal claims.

The employee will also have certain statutory rights when they’re made redundant. These rights include receiving any money owed to them, such as unpaid wages; any outstanding bonus, commission or expenses; any unused holiday pay; and a minimum paid notice period. In some cases, the employee may also be entitled to a redundancy payment.

 

1. What is Redundancy Pay?

 

Redundancy pay is a form of compensation provided to employees who are dismissed from their jobs due to redundancy.

Redundancy occurs when an employer needs to reduce their workforce because certain jobs are no longer required, often due to economic downturns, business restructuring, or technological changes.

 

2. When is Redundancy Pay Payable?

 

Provided the employee is eligible, redundancy pay is required in several specific situations, including:

 

a. Business Closure: If an employer decides to close the entire business, resulting in the termination of all employees, redundancy pay is mandatory.

 

b. Workplace Closure: When an employer closes a particular workplace (such as a branch or office), making employees at that location redundant.

 

c. Reduction in Workforce: If there is a need to reduce the number of employees due to decreased demand for products or services, technological advancements, or organisational restructuring, redundancy pay must be provided to those who lose their jobs.

 

d. Job Role No Longer Required: When specific job roles become obsolete or are no longer required, possibly due to automation or changes in business strategy, affected employees are entitled to redundancy pay.

 

e. Mergers and Acquisitions: During mergers or acquisitions, some roles may be duplicated or deemed unnecessary, leading to redundancies.

 

3. Legal Framework

 

The legal framework governing redundancy pay is designed to ensure fair treatment of employees if their roles are no longer required. A number of regulations make up the law in this area, including:

 

a. Employment Rights Act 1996: Sets out the basic rights of employees, including the right to statutory redundancy pay and the conditions under which it must be paid.

 

b. Collective Redundancies and Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE): Covering situations involving collective redundancies and business transfers, ensuring that employees’ rights are protected during significant organisational changes.

 

c. Employment Relations Act 1999: Includes provisions related to consultation requirements and the role of employee representatives during redundancies.

 

d. Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002: Ensuring fixed-term employees are not treated less favourably than permanent employees regarding redundancy rights.

 

4. Who Pays Redundancy Pay?

 

In the UK, the responsibility for paying statutory redundancy pay lies with the employer. When an employee is made redundant, it is the employer’s duty to ensure that the eligible employees receive their redundancy pay according to the statutory guidelines set out in the Employment Rights Act 1996.

Employers must calculate the redundancy pay based on the employee’s age, length of service, and weekly pay, up to a statutory cap. This payment is typically made as part of the final settlement when the employee leaves the company, and it should be provided promptly, either on or shortly after the employee’s last working day.

 

5. Redundancy Payments Service (RPS)

 

In situations where an employer is insolvent and unable to make redundancy payments, employees can apply to the Redundancy Payments Service (RPS), which is part of the UK government’s Insolvency Service.

The employer should contact the RPS in situations where they are facing insolvency and are unable to meet their redundancy payment obligations. This typically occurs when the company is entering administration, liquidation, or any other form of insolvency proceeding. Prompt communication with the RPS can facilitate a smoother process for both the employer and the affected employees.

The RPS will then pay the redundancy pay, and the employer will be required to repay the government.

 

Section B: Redundancy Pay Eligibility Criteria

 

Not all employees will be entitled to statutory redundancy pay. Employers must ensure that any individual in receipt of statutory redundancy qualifies under the requirements:

 

1. Minimum Continuous Employment

 

By law, an employee will be entitled to redundancy pay if, prior to the date on which their employment comes to an end, they’ve accrued two years’ continuous service with your organisation. This means they must have worked for the organisation for at least 24 months without significant breaks.

The period of continuous employment is determined by counting back from the last day of employment. The relevant date of termination, from which the length of service should be calculated, is the date on which any notice expires. If an employee is made redundant without the statutory minimum notice, for example, if they receive pay in lieu of notice, the relevant date is the date on which the statutory minimum notice would have expired had it been given.

Breaks in employment, such as for annual leave, sick leave, or maternity leave, do not disrupt continuous employment. Other breaks which do not count as interruptions to continuous service include temporary layoffs, authorised absences, or a change of employer due to business transfers under TUPE (Transfer of Undertakings Protection of Employment) regulations.

 

2. Classed as an Employee

 

Only those who are classed as employees are entitled to redundancy pay; workers and self-employed individuals do not qualify for statutory redundancy pay. This is because all employees are workers — they’re effectively a sub-category of worker — but an employee has additional employment rights that don’t apply to workers who are not employees, including the right to statutory redundancy pay.

In broad terms, an employee is someone who is required to work a minimum number of hours and be paid for that work under a contract of employment, whilst there’s no obligation for workers to either be offered or accept work. A worker provides services personally to an organisation, but typically under an arrangement that is looser than employment, with no guaranteed or regular hours.

It’s important, however, not to confuse workers with part-time employees, who are entitled to a statutory redundancy payment in the same way as full-time employees. It is unlawful for employers to treat part-time workers less favourably than comparable full-time workers, where a part-time employee should also benefit from any enhanced contractual redundancy payment, calculated in the same way as any payment made to a full-time employee.

 

3. Dismissal Due to Redundancy

 

Under the provisions of the Employment Rights Act 1996, the dismissal must be specifically due to redundancy, and statutory redundancy pay can only be provided in genuine redundancy situations, where an employee’s job is no longer required by the employer. The dismissal cannot be for other reasons, such as misconduct or poor performance.

Employees have the right to challenge a redundancy if they believe it is not genuine.

 

4. Exceptions

 

There are various exceptions to the general rule that an employee with two years of service will be entitled to statutory redundancy pay. For example, an employee could lose their entitlement to redundancy pay if they’re summarily dismissed for gross misconduct, or if they take early retirement or want to leave before their job is due to end because they’ve found other work.

The right to redundancy pay can also be lost when you offer an employee suitable alternative work, which they refuse without good reason. Whether a job is deemed ‘suitable’ will depend on things like how similar the work is to the employee’s current role and the terms of the position being offered, including the pay, benefits, hours, location and status. The employee’s skills, abilities and circumstances in relation to the role can also be taken into account.

For an offer of alternative employment to be valid, the following conditions must be met:

 

a. it should be an unconditional offer in writing

b. it must be made prior to the employee’s current contract coming to an end

c. it should illustrate how the new job differs from the old job

d. the job must be offered to the employee, where they shouldn’t have to apply

e. the new job must start within 4 weeks of the old job ending.

 

Employees who accept an offer of alternative work are entitled to a 4-week trial period. This period can be extended if the employee needs training, or if a longer period is deemed appropriate, although any extension must be agreed in writing before the trial period starts.

Once the trial period has started, the employee is then under an obligation to notify you if they decide the job isn’t suitable for them. If you both agree that it’s unsuitable, they can still claim statutory redundancy pay. Otherwise, provided their refusal is reasonable in all the circumstances, this won’t affect their right to a redundancy payment. If, however, you think that the job is suitable, but the employee refuses to take it, they might lose any entitlement.

The employee will also lose the right to redundancy pay if they fail to give you notice that they’re refusing the job offer within the 4-week trial period.

 

Section C: Calculating Redundancy Pay

 

The amount of redundancy pay an employee will be entitled to is determined by their gross weekly pay, age and length of service, and the relevant applicable statutory limits.

 

1. Legislative Formula for Redundancy Pay

 

The Employment Rights Act 1996 sets out how statutory redundancy payments should be calculated as follows:

 

a. 0.5 week’s pay for each year the employee was under the age of 22 in your employment

b. one week’s pay for each year they were aged between 22 and 40 in your employment

c. 1.5 week’s pay for each year they were aged 41 or more in your employment.

 

When working out how much statutory redundancy pay an employee is entitled to, their length of service will be capped at 20 years, with their weekly pay subject to a maximum of £700 from 6 April 2024.

Any years of service or earnings over these amounts aren’t included in the calculation. This means that the maximum statutory redundancy pay an employee can get is £21,000 from 6 April 2024.

If the employee’s contract of employment makes provision for a higher payment than the statutory level, this would need to be complied with. Importantly, any contractual redundancy pay cannot be less than the statutory minimum. Fundamentally, employers cannot contract out of an employee’s statutory employment rights.

An employee’s weekly pay is the average they’ve earned per week over the 12 weeks before being given notice. A week’s pay is calculated based on the employee’s normal working hours or average hours in a 12-week period if their hours vary. This figure should include any regular overtime, and bonuses or commission, if the contract makes provision for these.

You can also use the redundancy pay calculator on GOV.UK to check your figures.

You must notify the employee in writing how their redundancy pay has been worked out. You should also tell the employee when they’ll get their redundancy pay and how this will be paid, for example, in their monthly pay packet or a separate payment.

Any redundancy payment due should be made on or before the employee’s final pay date. If agreement is reached as to a different date, this should also be put in writing.

 

2. Using the Statutory Redundancy Pay Calculator

 

The UK government provides an online statutory redundancy pay calculator that employers can use to determine the exact amount of redundancy pay owed to an employee. Use this as follows:

 

Step 1: Access the Calculator

Go to the statutory redundancy pay calculator on the .gov website.

 

Step 2: Input Employee Details

Enter the employee’s date of birth to determine their age at the time of redundancy. Provide the start date and end date of the employee’s continuous employment to calculate the length of service.

 

Step 3: Enter Weekly Pay

Input the employee’s weekly pay amount. If the weekly pay exceeds the statutory cap, use the maximum capped amount.

 

Step 4: Calculation

Click the calculate button. The tool will automatically compute the total redundancy pay based on the provided details, including the appropriate weeks of pay for each year of service according to the age bands.

 

Step 5: Review and Record

Review the calculated amount to ensure it matches the expected redundancy pay. Record the calculation details for future reference and communication with the employee.

 

3. Incorrect Redundancy Pay Calculations

 

If you fail to make a statutory redundancy payment where an employee meets the qualifying conditions, or if there’s a dispute about the amount, an employee is entitled to refer the matter to an employment tribunal.

Equally, if you fail to pay any unpaid wages, holiday pay and pay in lieu of notice, they may be able to bring a tribunal claim. The employee may also have a claim for breach of contract, either before the tribunal or the civil courts.

When calculating any final pay, you’re entitled to deduct tax and National Insurance from any wages, holiday pay and pay in lieu of notice owed. To avoid any potential dispute, an employee’s final pay packet, including any redundancy payment, should always be carefully calculated.

Further, if you’re refusing to make a redundancy payment where an employee is potentially eligible, for example, because they’ve refused an offer of alternative employment, you should seek legal advice from an expert in employment law.

 

4. Is Redundancy Pay Subject to Tax?

 

Statutory redundancy pay up to £30,000 is tax-free and, as such, is not subject to either income tax or National Insurance deductions. Any redundancy pay above £30,000 is subject to income tax but not National Insurance.

Employers should ensure correct tax treatment of redundancy payments to comply with HMRC regulations.

Read our full overview of redundancy pay tax rules here.

 

Section D: Redundancy Notice and PILON

 

In addition to any entitlement to a redundancy payment, employees may also be entitled to a minimum period of paid notice when being made redundant.

In the absence of any enhanced contractual right to notice under the employee’s employment contract, as a statutory minimum, the employee will be entitled to:

 

a. at least one week’s notice if they’ve been employed by you between 1 month and two years.

b. one week’s notice for each year they’ve been employed by you between 2 and 12 years.

c. 12 weeks’ notice if they’ve been employed by you for 12 years or more.

 

These are the minimum periods required by law, where you cannot give an employee any less than this, even if the contract of employment makes provision for a shorter length of time.

However, as with redundancy pay, the contract can provide the employee with an enhanced right to a longer notice period. If this is the case, then the contractual right to notice must be honoured.

1. Payment in Lieu of Notice

 

If payment in lieu is provided for in the employee’s contract, their employment can be ended without notice, but you must pay them for this period instead.

Where an employee works their notice period, they will be entitled to payment of their wages as normal under the terms of their contract.

If the contract allows for payment in lieu to be made, or the employee agrees to this, this should still be based on the employee’s normal rate of pay, including any contractual entitlements, such as pension contributions or private health care insurance. The ‘pay in lieu’ calculation will be based on the minimum statutory notice periods of between 1 to 12 weeks unless the contract provides for longer.

Read our comprehensive guide to PILON here.

 

2. Time Off Work to Find a New Job

 

Prior to being made redundant, if an employee has been continuously employed for two years by the end of their proposed notice period, they will be entitled to a reasonable time off work to look for another job or even to arrange training to help them find alternative work.

The length of time an employee can take will depend on their circumstances, including how long their notice period is, whether you can run the business in their absence and how far they’ll need to travel to find work. However, unless the contract of employment provides differently, you’re only obliged to pay an employee 40% of one week’s pay — regardless of how much time they take off work. For example, if the employee works a 5-day week and they take 4 days off in total, you’ll only have to pay them for the first two days’ leave.

As with any other rights surrounding redundancy, the employee may have greater rights to paid time off under their employment contract — otherwise, the employee will be limited to the statutory minimum period of paid leave to look for another job.

 

Section E: Best Practices for Employers

 

Handling redundancies is a challenging process for employers that requires sensitivity, transparency, and fairness.

Our experts have shared the following best practices to help you approach the redundancy process with confidence and in compliance of the legal requirements.

 

1. Plan Thoroughly

Developing a clear and fair redundancy plan is essential to managing the process effectively. Begin by outlining the reasons for the redundancies, ensuring that they are based on genuine business needs such as economic downturns, restructuring, or technological changes. Clearly define the selection criteria to ensure they are objective and free from bias, focusing on the skills, experience, and business needs. A well-structured plan that includes a detailed timeline will help streamline the process and provide clarity for all involved.

 

2. Transparent Decision-Making

Transparency in the decision-making process is crucial to build trust and understanding among employees. Be open about the reasons behind the redundancies and the criteria used to select affected employees.

 

3. Provide Fair Notice

Providing affected employees with as much notice as possible allows them time to prepare and seek new employment. Adhere to the legal requirements for notice periods and consultation processes to ensure fairness and compliance with employment laws. Early notification demonstrates respect for the employees and helps them plan their next steps more effectively.

 

4. Offer Support

Providing comprehensive support can significantly ease the emotional and practical difficulties of redundancy.

Offer access to career advice and outplacement support to help them move on to new roles. Consider additional support such as financial planning advice or training opportunities to enhance their employability.

Recognise the emotional impact of redundancies and provide access to counselling or Employee Assistance Programmes (EAPs). Encourage managers to show empathy and offer a listening ear to affected employees. Emotional support is critical in helping employees cope with the stress and uncertainty of redundancy.

 

5. Early and Honest Communication

Communicate the potential for redundancies as early as possible, even if the details are not yet finalised. Early communication helps manage expectations and reduces uncertainty. By being upfront, you allow employees to begin preparing mentally and practically for the changes ahead.

 

6. Use Multiple Channels

Utilise various communication channels to ensure all employees receive the information. This can include face-to-face meetings, emails, and company intranets. Clear, consistent, and accessible communication is crucial, especially for remote or part-time employees, to ensure everyone is equally informed.

 

7. Personalise Communication

Conduct one-on-one meetings with affected employees to discuss their individual situations, answer questions, and provide support. Tailor your communication to address the specific needs and concerns of different employee groups. Personalised communication helps to mitigate anxiety and provides a platform for employees to voice their concerns.

 

8. Regular Updates

Keep employees informed throughout the redundancy process with regular updates on its status and any developments. Providing a timeline of key events and milestones helps employees understand what to expect and when. Regular updates maintain transparency and trust.

 

9. Listen and Respond

Create opportunities for employees to voice their concerns and ask questions. Listening to employees helps them feel valued and heard, which is crucial during times of uncertainty. Respond to questions and concerns promptly and honestly to maintain credibility and trust within the workforce.

 

Section F: Settlement Agreements as an Alternative to Redundancy

 

Employers in the UK have the option to use a settlement agreement as an alternative to statutory redundancy pay. A settlement agreement is a legally binding contract between the employer and the employee that outlines the terms of the employee’s departure, including any compensation provided. While this approach can offer several benefits and flexibility, it also requires careful consideration and legal guidance.

 

1. What is a Settlement Agreement?

 

A settlement agreement is a voluntary contract where the employee agrees to waive their rights to bring certain claims against the employer in exchange for a negotiated payment. This payment can include redundancy pay, additional compensation, and other benefits such as outplacement support or extended health insurance coverage.

 

2. Benefits of Using a Settlement Agreement

 

Settlement agreements offer a range of benefits that make them an attractive alternative to dismissal by redundancy. One of the primary advantages is flexibility. These agreements allow employers to tailor the compensation package to suit both parties’ needs, potentially offering more than the statutory redundancy pay. This can include additional financial compensation or non-monetary benefits that the employee values, such as extended health coverage or continued access to company resources.

Confidentiality is another significant benefit. Settlement agreements often include confidentiality clauses, which can help protect the company’s reputation and prevent details of the redundancy process from becoming public knowledge. This discretion is beneficial for maintaining a positive public image and avoiding unnecessary scrutiny.

Finality is also a crucial advantage. By signing a settlement agreement, the employee agrees not to pursue any further legal action related to their employment or redundancy. This provides certainty and reduces the risk of future disputes or claims, allowing both parties to move forward without lingering concerns.

 

3. Key Considerations

 

When using a settlement agreement, there are several important considerations to keep in mind. Legal advice is crucial for both the employer and the employee before signing a settlement agreement. Independent legal advice ensures that both parties fully understand the terms and implications of the agreement.

Critically, employees should not feel coerced or pressured into signing a settlement agreement. For the agreement to be legally binding, the agreement must be entered into voluntarily, and the employee’s consent must be genuine.

Adequate compensation must also be provided. While a settlement agreement would usually offer the employee more than statutory redundancy pay, it should still reflect the employee’s length of service, position, and contribution to the company.

Finally, the terms of the settlement agreement must be clear and unambiguous. All aspects of the compensation and any conditions attached to it should be detailed explicitly, including specifying the exact amount of payment, the timeline for payment, and any additional support or benefits provided.

Read our comprehensive guide to using settlement agreements instead of dismissal by redundancy.

 

Section G: Common Myths About Redundancy Pay

 

Many myths and misconceptions surround redundancy pay, which can lead to confusion and misunderstandings about the redundancy process.

Our experts have debunked these common myths to help employers understand their rights and obligations.

 

Myth 1: All Employees Are Entitled to Redundancy Pay

Not all employees are entitled to redundancy pay. To qualify for statutory redundancy pay in the UK, an employee must have at least two years of continuous service with the employer. Additionally, only employees (as opposed to workers, freelancers, or self-employed individuals) are eligible for redundancy pay.

 

Myth 2: Redundancy Pay Is Always Tax-Free

While statutory redundancy pay up to £30,000 is tax-free, any amount above this threshold is subject to income tax and National Insurance contributions. Employers should ensure they handle redundancy payments correctly to avoid tax issues for both the company and the employee.

 

Myth 3: Redundancy Pay Is the Same for Everyone

Redundancy pay varies based on several factors, including the employee’s age, length of service, and weekly pay. The statutory redundancy pay calculation takes these factors into account, meaning that different employees may receive different amounts even if they are made redundant at the same time.

 

Myth 4: Employees Can Be Made Redundant Without Notice

Employers are required to provide employees with a notice period before their employment ends due to redundancy. The length of the notice period depends on the employee’s length of service. Failing to provide proper notice is a breach of employment law and can lead to legal consequences for the employer.

 

Myth 5: Redundancy Means Immediate Job Loss

Redundancy is a process, not an immediate termination. Employees are entitled to a notice period and often continue working during this time. During the notice period, they may also be given time off to look for new employment or attend training sessions to improve their employability.

 

Myth 6: Employers Don’t Need to Consult Employees About Redundancies

Employers are legally obligated to consult with employees who are at risk of redundancy. This consultation process must be meaningful and conducted in good faith. For collective redundancies (20 or more employees), there are specific requirements for collective consultation with employee representatives or trade unions.

 

Myth 7: Redundancy Pay Includes Any Outstanding Wages and Holiday Pay

Redundancy pay is separate from other payments, such as outstanding wages, holiday pay, or any other owed payments. Employees should receive their statutory redundancy pay in addition to any other payments they are entitled to upon termination of employment.

 

Myth 8: Redundancy Pay Is Only for Long-Serving Employees

While employees need at least two years of continuous service to qualify for statutory redundancy pay, there is no requirement for extremely long service. Employees with two years or more are entitled to redundancy pay, and the amount increases with the length of service.

 

Myth 9: Redundancy Decisions Are Based Solely on Performance

Redundancy decisions should be based on objective criteria related to the needs of the business, such as the necessity of certain roles, not solely on individual performance. Using performance as the sole criterion can lead to claims of unfair dismissal and discrimination.

 

Myth 10: Redundancy Is a Way to Get Rid of Unwanted Employees
Redundancy is a legitimate business process to reduce the workforce when certain roles are no longer needed due to business changes. Using redundancy as a pretext to dismiss unwanted employees for reasons unrelated to redundancy can result in claims of unfair dismissal.

 

Section H: Summary

 

Employers are under strict legal obligations throughout the redundancy process, including handling redundancy pay. Calculations must be correct, and payments must be made on time, or the employee may have grounds to bring a claim.

 

Section I: Need Assistance?

 

When dealing with workforce issues, it is important to consider the full legal risks and rights of your workers. Our employment lawyers are on hand to help you assess the circumstances and understand the options that are in your best interests, not least to avoid unwanted tribunal claims and damage to reputation.

Our employment law specialists can assist if you have any queries relating to redundancy pay, changing contract terms and working arrangements or settlement agreements, particularly in complex situations. Speak to our experts today for advice.

 

Section J: FAQs

 

What is redundancy pay?
Redundancy pay is financial compensation provided to employees who lose their jobs because their roles are no longer needed by the employer. It supports employees financially during their transition to new employment.

 

Who is eligible for redundancy pay?
Employees must have at least two years of continuous service with their employer to qualify for statutory redundancy pay. Only employees (not workers, freelancers, or self-employed individuals) are eligible.

 

How much is redundancy pay in the UK?
UK redundancy pay will depend on how much an employee gets paid, how old they are and the number of years in the job. For example, a 35-year-old employee with five years of service will get five weeks pay.

 

How is redundancy calculated in the UK?
Unless the contract provides otherwise, redundancy pay is calculated using a statutory formula based on an employee’s age, their gross weekly pay (capped at £700 from 6 April 2024) and length of service (up to a maximum of 20 years).

 

How is a redundancy calculated?
The way in which redundancy pay is calculated will depend on whether the employee is entitled to the statutory minimum, for which a set formula must be applied, or whether they have enhanced redundancy rights under their contract of employment.

 

How is redundancy pay calculated?
Redundancy pay is calculated based on the employee’s age, length of service, and weekly pay, with a statutory cap on weekly earnings. The calculation considers half a week’s pay for each full year under age 22, one week’s pay for each full year between ages 22 and 40, and one and a half week’s pay for each full year over age 41.

 

Is redundancy pay tax-free?
Statutory redundancy pay up to £30,000 is tax-free in the UK. Any amount above this threshold is subject to income tax and National Insurance contributions.

 

How much notice should an employer give for redundancy?
The notice period depends on the length of service: at least one week for less than two years, one week for each year of service up to 12 weeks for two to 12 years of service, and 12 weeks for 12 years or more.

 

Can an employee refuse redundancy?
Employees can refuse redundancy if they believe the process was unfair or if suitable alternative employment within the company is available. However, refusing redundancy without a valid reason might affect their eligibility for redundancy pay.

 

What is a consultation process in redundancy?
Consultation is the process of discussing potential redundancies with employees or their representatives before making final decisions. It involves sharing information, considering alternatives, and allowing employees to express their views.

 

Are there any additional payments besides redundancy pay?
Yes, employees may be entitled to other payments such as outstanding wages, holiday pay, and any other contractual entitlements. These are separate from statutory redundancy pay.

 

Can redundancy be used to dismiss underperforming employees?
Redundancy should not be used as a pretext for dismissing underperforming employees. The process should be based on objective business needs and fair selection criteria to avoid claims of unfair dismissal.

 

What support should employers provide to redundant employees?
Employers should offer support such as outplacement services, career counselling, resume writing workshops, and emotional support through Employee Assistance Programmes (EAPs) to help redundant employees transition to new employment.

 

Section K: Glossary

 

Redundancy Pay: Financial compensation provided to employees who are dismissed due to their job role no longer being required by the employer. It supports employees financially during their transition to new employment.

Continuous Service: The period of unbroken employment with the same employer, considered when calculating redundancy pay. Employees must have at least two years of continuous service to be eligible for statutory redundancy pay.

Statutory Redundancy Pay: The minimum amount of redundancy pay that employers are legally required to provide to eligible employees. It is calculated based on age, length of service, and weekly pay, up to a statutory cap.

Consultation: The process of discussing potential redundancies with employees or their representatives before final decisions are made. This includes both individual and collective consultations, depending on the number of employees affected.

Collective Redundancy: A situation where an employer proposes to make 20 or more employees redundant within a 90-day period. This requires consultation with employee representatives or trade unions.

Notice Period: The time period between informing an employee of their redundancy and their last working day. The duration varies based on length of service, ranging from one week to 12 weeks.

Employee Assistance Programme (EAP): A support service offered by employers to help employees with personal or work-related problems that might affect their performance, health, or well-being. Services may include counselling, financial advice, and career coaching.

Outplacement Services: Support services provided to redundant employees to assist them in finding new employment. These services may include career counselling, resume writing, and interview preparation.

Redeployment: The process of transferring employees at risk of redundancy to other suitable roles within the organisation, with the goal of retaining valuable talent and reducing the number of redundancies.

Selection Criteria: The set of standards used to determine which employees will be made redundant. Examples include performance, skills, length of service, and business needs.

Enhanced Redundancy Pay: Redundancy pay that exceeds the statutory minimum, often provided as part of a company’s policy or employment contract to offer additional financial support to redundant employees.

Employment Rights Act 1996: The primary piece of legislation governing employment rights in the UK, including redundancy pay. It sets out the legal framework for redundancy procedures and employee entitlements.

TUPE (Transfer of Undertakings Protection of Employment) Regulations 2006: Regulations that protect employees’ rights when a business is transferred to a new owner, ensuring that employees are not dismissed unfairly as a result of business transfers.

Financial Planning Advice: Guidance provided to employees to help them manage their finances during the redundancy transition, helping them plan for financial stability while seeking new employment.

Grievance Procedures: Formal processes for employees to raise complaints or disputes regarding their redundancy, ensuring fair and transparent handling of any issues related to the redundancy process.

 

Section L: Additional Resources

 

GOV.UK Redundancy Overview
https://www.gov.uk/redundant-your-rights
Provides a comprehensive overview of redundancy procedures, employee rights, and employer responsibilities.

 

Statutory Redundancy Pay Calculator
https://www.gov.uk/calculate-your-redundancy-pay
An online tool to calculate statutory redundancy pay based on age, length of service, and weekly pay.

 

ACAS (Advisory, Conciliation and Arbitration Service)
https://www.acas.org.uk/redundancy
Offers guidance on handling redundancies, including consultations and fair selection processes.

 

ACAS Helpline
Phone: 0300 123 1100
https://www.acas.org.uk/contact
Provides free, confidential advice on employment rights, including redundancy.

 

Employment Tribunal Guidance
https://www.gov.uk/employment-tribunals
Information on how to handle disputes and claims related to redundancy.

 

Chartered Institute of Personnel and Development (CIPD)
https://www.cipd.co.uk/knowledge/fundamentals/emp-law/redundancy
Offers resources and professional advice on HR practices, including redundancy management.