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Making a Redundancy Fair in Law

Redundancies occur when a business is downsizing or looking to streamline its workforce. They can also occur when the business is not getting as much work as it used to or if the business is on the verge of closing down.

Legal Definition

The law defines redundancy as a situation or circumstance in which an employee is dismissed due to the closure of the business, the closure of the workplace where the employee was employed or reduced requirements of the business for employees to do work of a particular kind. There are five major areas to consider when making a redundancy fair in law and these are included below.

Fair Process for Legal Redundancy

1. Establish A Fair Reason In Law, A Fair Process

The reason for the dismissal must be congruent with one of the legally fair reasons, which are outlined above. Following the establishment of fair reason in law, the employer must follow a fair process.

2. Meaningful Consultation

Meaningful consultation is the first step of the process. The employer must consult with the employee(s) concerned before a decision is reached. Consultations must be both one on one and collective in the case of a large group facing redundancy. For example, if 20 or more employees are to be dismissed as redundant by an organization within a 90 day period, then collective consultations become mandatory.

3. Fair Selection

After a period of fair consultation, the next step is to establish fair selection criteria and a fair selection process. This step may not be required if the individual(s) involved performs a unique role within the organization. However, if employees that face redundancy are performing the same or similar roles, then this step is a requirement of fair process.

4. Consideration for Suitable Alternative Employment

As part of a fair process the employer must make every reasonable effort to search for suitable alternative roles for the employee(s) facing redundancy either within same entity or even other organizations.

5. Redundancy Must Be Determined As The Last Reasonable Resort

The employer should be able to demonstrate that they have taken every reasonable step to provide an alternative role or to in some other way accommodate the person(s) facing redundancy. It must be clear that redundancy is the last reasonable resort in the given circumstances.

Statutory Redundancy Payments

Both employees and employers must be aware that when employees having served for at least 2 years in the organization are made legally redundant they are entitled to a statutory redundancy payment, which is calculated with reference to length of service, age and earnings (A maximum of GBP 489 per week and an overall cap of GBP 14,670 at the time of this writing). If, in the event of a redundancy, an employee unreasonably refuses an offer of suitable employment with the employer or an associated employer, that employee will then lose their right to statutory redundancy payments.

Unfair Dismissal

Employees having served for at least 2 years with the same organization have the right to not be unfairly dismissed. Redundancy is a fair reason for dismissal only if all of the criteria outlined above have been fulfilled and in the event of a dispute, the courts have ruled that the dismissal was fair. However, in the event of unfair dismissal, eligible employees are entitled to up to 52 weeks of pay.

Redundancies can be difficult for both employers and employees and it’s important that both parties are aware of the law so that they can protect their own interests.