Redundancy

Section 139 of the UK’s Employment Rights Act 1996 defines redundancy as the dismissal of an employee from employment wholly or mainly due to:

• his employer ceasing or intending to cease carrying on business for the purposes for which the employee was employed, either completely or in the place that the employee was employed (known as the place of work redundancy); or
• the requirements of the employer’s business to carry out work of a particular kind having ceased or diminished or are expected to cease or diminish, whether that is across the business or where the employee is employed (known as type of work redundancy).

To be eligible for a statutory redundancy payment in the UK an employee must have at least two years’ continuous service. The lower and upper age limits (18 and 65) on the right to claim redundancy payments no longer apply, as a result of age discrimination legislation that came into force on 1 October 2006.

Statutory redundancy payments are calculated in accordance with the employee’s age, length of service and the rate of the employee’s weekly pay. The employee’s weekly pay is multiplied by their complete years’ service and age multiples as follows:

• By 1.5 for every year in which the employee was 41 years old or older;
• By one for every year in which the employee was aged between 22 and 40; and
• By 0.5 for every year in which the employee was between 18 and 21.

The most important issues to be considered in a redundancy process are:

• Step one – Planning – document the reason for redundancies.
• Step two – communicate your redundancy policy to employees.
• Step three – Collective or individual consultation.
• Step four – Confirm the options in writing.