Personal Law

What is redundancy?

Estimated read time: 4 mins

Carrie Tennick, April 06, 2020

There is often a great deal of uncertainty around our professional lives, with jobs for life unfortunately a thing of the past. And at the moment, this has never been more true.

More and more organisations are looking at restructuring to save costs, which could lead to more people facing redundancy.

What is redundancy?

Redundancy is when your employment ends because your employer needs to reduce their workforce.

There are many reasons why you might be made redundant. It could be down to hostile market conditions, meaning the company just isn’t making the same money it previously did. It could also be down to technology being able to do your job.

The job you were hired to do may no longer exist or the business you were employed by may be closing down, changing what it does or relocating. Your employer may also have been bought by another company, which could already have people in place to do your job.

Redundancy is not when your employment is terminated and someone replaces you in the role. You can only be made redundant when your employer can show that your job no longer exists or it has had to reduce its workforce.

Your rights around redundancy

You’ll have to be selected for redundancy in a fair way. This means your employer can’t select you for employment based on any personal characteristic. According to Citizens Advice, it is discrimination if you are selected for redundancy based on any of the following traits:

  • pregnancy or on maternity leave
  • race, ethnicity or nationality
  • marriage or a civil partnership status
  • sex
  • disability
  • sexual orientation or gender identity
  • religion or set of beliefs
  • age

If your employment is ended because of any of these characteristics, you could have a claim for unfair dismissal.

Your employer is also not allowed to make you redundant because of a number of so-called ‘automatically unfair reasons’. These include being on jury service, belong to a trade union, work part-time or are on a fixed-term contract, took action about health and safety concerns, became a whistleblower or requested your rights – including being paid minimum wage or being allowed holidays or maternity leave.

Although you can be made redundant in these situations, it is illegal for them to be the reason for redundancy. You can show that your employer has disregarded the law and made you redundant for an automatically unfair reason if most others in similar situations have been made redundant or others with similar jobs not in your situation are not made redundant.

If your employer is making 20 or more people redundant, they’ll need to carry out a group consultation. Trade union representatives or employee representatives should be part of the consultation. It has to happen at least 30 days before anyone’s employment is ended. But if 100 people or more are being made redundant, consultations need to happen at least 45 days before that.

Your employer will have to provide written details on who is being made redundant, why redundancies are happening, who is being chosen and why, redundancy payments and expected timelines and processes.

When being made redundant, you are allowed a notice period based on the amount of time you have worked for your employer. This is one week’s notice if you’ve been employed between one month and two years, one week’s notice for every year worked between two and 12, and 12 weeks’ notice for more than 12 years service.

How much redundancy pay should I receive?

Depending on your situation, you may be entitled to redundancy pay. This could be statutory redundancy pay – which is what the law states you’re entitled to – or contractual redundancy pay – which is any extra money on top of a statutory payment that your employment contract sets out.

You are only entitled to statutory redundancy pay if you have been employed continuously for two years, you lost your job because of a genuine need to make redundancies, and you are an ‘employee’ with an employment contract – whether you are full-time or part-time.

Fixed-term contract workers are entitled to statutory redundancy if they had a contract for two years or more or shorter contracts following on from one another and added up to two years or more.

Redundancy pay is based on pre-tax earnings, as well as your age. Citizens Advice explains that for each full year you've worked for your employer, you’ll receive:

  • age 18 to 22 – half a week's pay
  • age 22 to 40 – one full week's pay
  • age 41 and older – 1.5 weeks' pay

But you can only get a maximum weekly amount of £525, even if you earn more per week. You can also only get redundancy pay for a maximum of 20 years’ work. You won’t have to pay tax on a statutory redundancy payment.

Any contractual redundancy pay will depend on your employment contract. It is not legally allowed to be less than the statutory amount. If you receive more than £30,000 as a redundancy payment, you’ll have to pay tax on it.

If you think you were made redundant unfairly or your employer did not act legally, you may be able to take action against them. Just get in touch and our employment law solicitors will help you work out your options.

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