Redundancy when your employer is not insolvent

RPS Assist and this site is mainly about what to do when you are made redundant by an insolvent employer.

If you have been made redundant by an employer who can pay you your redundancy entitlement and is continuing in business, we set out some basic information here and some helpful links.

These include what to expect when you are made redundant, and details about your rights as an employee.

 

What to Expect

 

When You Are Made Redundant

Redundancy is a form of dismissal that usually happens when employers have to reduce the number of employees in their business. This can happen due to loss of business or income, or insolvency.

If your role in your employer’s business is terminated, there are lots of things to consider. On this page we will walk you through how businesses select which roles to make redundant, the possibility that you will be asked to reapply for your current job, and the basis on which your selection for redundancy may be unfair.

Redundancy Selection

If your job no longer exists due for example to financial problems in the business, your employer can make you redundant. This could be because the business is closing down, making all employees redundant, or because you are an employee in a department or part of the business they are closing.

If your employer is scaling back and removing only some job positions, they may ask for volunteers for redundancy first. This is known as self-selection. Other methods that business use to select employees for redundancy are:

  1. last in, first out (employees with the shortest length of service are selected first)
  2. asking for volunteers (self-selection)
  3. disciplinary records
  4. staff appraisal markings, skills, qualifications and experience

Reapplying for your job

In some cases, you may be asked to reapply for your own job. This allows an employer to make a decision about who to select for a job.

If this happens and you do not reapply, or if your application is unsuccessful, you will still have your job until your employer makes you redundant.

Read our information about your rights on the What Are My Rights? Page [link to What Are My Rights? Page].

Planning for Redundancy

As well as managing your finances, it is important to prepare the other aspects of your life for redundancy.

This can include ensuring your rights are met by your employer, making a plan for finding new work, and dealing with any other problems that might arise in relation to your work life.

If you feel overwhelmed, disappointed, or any other negative feelings about your redundancy, you are not alone. If you need more information on coping with redundancy, read our pages about Impact on Relationships and Mental Health Support.

You may also want to look at other avenues for redundancy. Depending on your circumstances, these may include working reduced hours as an alternative to redundancy, or considering early retirement instead of redundancy.

 

What Are My Rights

 

If you are made redundant through fair process, you may be eligible for some rights. These include consultation with your employer, a notice period, and redundancy pay. You may also be given the option to move into a different job in the business, or time off to find a new job.

Consultation With Your Employer

If you are being made redundant, you are entitled to a consultation with your employer.

At your consultation you can ask questions about why you are being made redundant. You can also discuss any alternatives to redundancy that your business can offer you. If your employer does not consult with you properly, or at all, you can make a claim to an employment tribunal.

The only exception is during collective redundancy. If your employer is making 20 or more employees redundant at the same time, you will have a representative who will consult with your employer on your behalf. If you are represented by a trade union, the trade union rep will be your representative. If not, or if your employer doesn’t recognise your trade union, you can stand for election as an employee representative, or vote for someone else to be your employee rep.

Collective consultations have more topics to cover. They must cover the reasons for redundancies, ways to avoid redundancies, and how to keep the number of dismissals as low as possible. It will also cover how to limit the effects for employees involved, for example offering opportunities like retraining.

The minimum time period of a consultation is at least 30 days before any dismissals take effect, when there are 20 to 99 redundancies. For 100 or more redundancies, the consultation must start at least 45 days before any dismissals take effect. There is no time limit for how long the consultation period should be.

Notice Period

Your employer must give you a notice period before your employment ends, in the same way that you would be required to give notice if you were leaving your post as an employee. If your employer gives you notice as part of redundancy, it should be in writing and it should specify the date on which your contract will end.

Notice periods vary depending on your type of contract. However normal notice applies when employment is ending due to redundancy. Usually you should be paid your normal pay during the notice period.

The standard redundancy notice periods are:

  • If you’ve been employed between 1 month and 2 years: at least 1 week
  • If you’ve been employed at the business for between 2 and 12 years: 1 week
  • If you’ve been employed at the business for between 12 years or more: 12 weeks

In addition to statutory redundancy pay, your employer should either pay you through your notice period, or pay you in lieu of notice (if this is written into your employment contract). Payment in lieu of notice means that you will be paid your basic salary for the duration of the notice period.

If your contract does not mention payment in lieu of notice, your employer may still offer this to you. If you accept, you should receive full pay and any extras that are in your contract for the duration of the notice period.

Redundancy Pay

If you are employee and you’ve been working for your current employer for 2 years or longer, you should be entitled to statutory redundancy pay.

Statutory redundancy pay is:

  • For each full year you were under 22: 0.5 week’s pay
  • For each full year you were 22 or older, but under 41: 1 week’s pay
  • For each full year you were 41 or older: 1.5 week’s pay

The length of service is capped at 20 years and weekly pay is capped at £479. The maximum amount of statutory redundancy pay is £14,370. Redundancy pay (including any severance pay) under £30,000 will not be taxed.

However, there are exceptions. You are not entitled to statutory redundancy pay if your employer offers to keep you on, or if your employer offers you a suitable alternative job which you refuse without good reason.

You may also fall into a category that is not entitled to redundancy pay. These include merchant seamen, share fishermen and former registered dock workers, crown servants like members of the armed forces or police, apprentices who are not employees when their training ends, or domestic servants who are members of the employer’s immediate family.

Taking a different job

If your position is becoming redundant, your employer might offer you “suitable alternative employment”. This can be within the business you currently work in, or in an associated business.

You may lose your right to statutory redundancy pay if you turn down suitable alternative employment without giving a good reason. However, if you think a job you have been offered isn’t suitable, you can make a claim to an employment tribunal.

A suitable job will usually be similar work to your current job, and have similar terms. Consider whether it suits skills, abilities and circumstances. Suitable alternative employment should also have comparable pay, benefits, status, hours, and location to the job you are leaving.

If your employer has suitable alternative employment but does not offer it to you, your redundancy may be an unfair dismissal.

If you are offered suitable alternative employment, you have the right to a 4 week trial period. This can be extended if you need training. An extension must be agreed in writing before the initial trial period begins.

If you feel the new job isn’t suitable, you must tell your employer during the trial period. If you do not give notice within the 4 week period, you will lose your right to claim statutory redundancy pay. However, if you give notice, this will not affect your employment rights or your right to statutory redundancy pay.

Finding a New Job

If you have been employed by your current employer for 2 years by the end of your notice period, you are allowed a reasonable amount of time off to look for another job, or to arrange training which may help you find another job.

The amount of time you can take off will vary depending on your circumstances, but the maximum amount is 40% of one week’s pay. This is the equivalent of 2 days out of a 5 day notice period.

Unfair Selection

You have the right to be selected for redundancy in a fair way. Your employer cannot select you for unfair reasons, for example because of your age, gender, sexual orientation or race.

The following reasons for dismissal would be classed as unfair:

  • gender
  • marital status
  • sexual orientation
  • race
  • disability
  • religion or belief
  • age
  • your membership or non-membership of a trade union
  • health and safety activities
  • working pattern, eg part-time or fixed-term employees
  • maternity leave, birth or pregnancy
  • paternity leave, parental or dependants leave
  • you’re exercising your statutory rights
  • whistleblowing, eg making disclosures about your employer’s wrongdoing
  • taking part in lawful industrial action lasting 12 weeks or less
  • taking action on health and safety grounds
  • doing jury service
  • you’re the trustee of a business pension scheme

If you believe that you have been unfairly selected for one of these reasons, this can be classed as unfair dismissal. You can appeal by writing to your employer explaining the reasons, and make a claim to an employment tribunal for unfair dismissal.

Click here for more resources about your redundancy rights.