Redundancy is one of the fair grounds for dismissal set out in the Employment Rights Act 1996. However, it is important to ensure in the context of a dismissal that there is a genuine redundancy situation and that the employer has acted fairly and reasonably in making employees redundant.

A redundancy arises where the job that the employee was employed to do ceases or diminishes in a place that the employee was employed to do the work. It is not always easy to discern if a redundancy situation arises because they often arise out of re-structuring and re-organisations.

Acting fairly and reasonably in a redundancy process means following a proper procedure which accords with the ACAS guidelines as a minimum and in doing so, exploring all options before reaching a final decision of dismissal on grounds of redundancy.

The main areas for consideration by the employer are:-

Warning and consultation

If the number of employees at risk of redundancy is 20 or more then statutory conditions will apply to the redundancy process. In any other situation, the employer is obliged to fully warn and consult directly with the employee in accordance with the common law. As part of this exercise, employers should give the employee the opportunity to give their views on the proposed redundancy and come up with ideas which the employer may not have considered and which if adopted would result in the employee not being made redundant.

Selection Pools and Criteria

Where the employer is reducing headcount to, for example, cut costs or because of a diminishment in the work, then the pool of employees from which the redundancy will be made needs to be indentified. It is important that the pool is appropriate. Fair Criteria then needs to be devised which should contain some objective criteria and the employees in the pool marked fairly against it. From this exercise, those employees at risk of redundancy will be identified. For further information on selection pools please click here.

Suitable alternative employment

Having identified those employees at risk of redundancy, the employer must through the consultation process consider whether there is suitable alternative employment within the business. If there is and the employee turns it down then he or she will be treated as having resigned and will not be entitled to a redundancy payment. There can often be disagreement between the parties over whether the job offered is suitable alternative employment. If there is no suitable alternative employment, then the employee’s employment is terminated by reason of redundancy and may be entitled to redundancy pay. To qualify for a statutory redundancy payment the employee must have 2 years continuous service.

Many claims brought in Employment Tribunals are for unfair dismissal arising out of a dismissal by reason of redundancy. It is therefore important to get it right both procedurally and substantively. If you are considering making redundancies or are in the process of doing so and need specialist employment advice, please Contact Us for an initial consultation.