In response to current market challenges, employers are being forced to make difficult workforce decisions, with unprecedented numbers of redundancies affecting large parts of the UK economy.
But as organisations adapt to the new normal, and after the initial focus on survival and the need to cut costs, many businesses may now be looking to rebuild their workforce. This may include hiring for roles that had only recently been made redundant.
In this situation, employers have a number of options.
This article will examine the key considerations for employers looking to hire for a previously redundant role, including if and how you can re-employ a redundant employee or hire someone new.
Can you recruit after making a position redundant?
The simple answer is yes, you can recruit after making a position redundant. Once employment has been terminated by reason of redundancy, employers are not subject to any legally-imposed time period before which they can hire again for the redundant role.
However, to avoid the risk of an unfair dismissal claim made against you by the redundant employee, you would need to be able to show:
- the original redundancy was genuine and not simply an exercise in ‘getting rid’ of people;
- the redundancy was unavoidable at the time; and
- the financial prospects of the business have changed to such an extent that you now need to recruit new workers.
By law, for a redundancy to be deemed ‘genuine’, it must be on the grounds of either business closure or relocation, or so as to lower costs.
In the current, rapidly changing economic environment, it may be possible for an employer to enter into and complete a redundancy process in good faith, only to find a short time later that its financial position has improved and they need to re-hire.
It is important to be able to show that the reason you wish to recruit is a change in your organisation’s financial affairs, otherwise your case for making the employees redundancy in the first place may be undermined.
Can you re-employ a redundant employee?
You are under no obligation to offer your former employees their old jobs back. It is your choice.
If your organisation was forced to make employees redundant who possessed skills and experience that were valuable to the organisation, it may be an attractive option to approach those former employees to see if they wish to return to their old jobs.
Employers may consider advertising new vacancies to the redundant employees, and potentially consider repayment of any enhanced redundancy packages if the employee is re-employed within a specified time period.
Some employees may, however, feel reluctant towards a return to the organisation, such as where the circumstances and handling of the initial dismissal were not wholly positive or the employee has ‘moved on’.
Employing someone new for a previously redundant role
Employers are not obliged by law to re-hire a redundant employee if their previous role becomes genuinely ‘available’ after a change in business circumstances.
If you wish to employ new staff you should still be aware that former employees may see your advertisements inviting applications for the new roles. This may lead the former employees to question the genuineness of their redundancy.
When considering the fairness of a redundancy dismissal, the tribunal would look at the timeframe from the start of redundancy consultation until the date of termination by redundancy. Hiring someone new for a redundant role soon after termination may create doubt as to the genuineness of the redundancy.
How long do you have to wait before replacing a redundant position?
Technically, there is no set period of time that you have to wait before hiring for a redundancy position.
However, as discussed above, timing should be a consideration to mitigate the risk of allegations of non-genuine redundancy and potential claims for unfair dismissal by redundant employees.
The deadline for an employee to make a claim in the Employment Tribunal is three months after the date of termination of their employment contract. Therefore, you may be cautious about hiring during this three month period.
Remember that employers must be able to show that the redundancy situation was genuine and subsisting at the time of termination, and that the financial circumstances of the business had changed following the termination.
Can you re-employ a redundant employee?
Yes, you can re-employ a redundant employee. However, there are a number of factors to consider.
Suitable alternative employment
Employers have a duty to continue to consider if there are suitable alternative positions available within their organisations right up until the employee’s last day of employment. In other words, it is possible for an employer who has completed the redundancy consultation process and given notice to its employee to offer an alternative role to that employee during their notice period. If this happens, section 138 of the Employment Rights Act 1996 states that as long as the renewal or re-engagement under a new contract of employment takes effect within four weeks of the expiry of the old contract, then the employee will not be regarded as having been dismissed (made redundant).
Continuity of employment
If your organisation only discovers that it needs to re-hire after the redundancies of its employees have taken effect, then you will be in the position of having to reach out to your former employees to see if they will come back.
In this situation, continuity of employment is an important factor to consider. Continuity of employment refers to how long an employee has worked for their employer without a break in their employment contract. A break is one week, from Sunday to Sunday. Working out an employee’s continuity of service matters because employees are entitled to certain benefits once they have worked for you for a certain amount of time. For example, once an employee has worked for you for 26 weeks they can request flexible working.
If you contact an employee who used to work for you, and you do this within a week of the termination of their old contract and they agree to come back, their continuity of employment will not be broken. In practice, there would have to be quite exceptional circumstances in order for your organisation to change its mind within seven days.
If you would prefer the returning employee to start afresh with a new employment contract then, to be on the safe side, you should wait at least two weeks before re-hiring them. This would ensure that their continuity of employment is broken. They would have to start again from ‘Day 1’ in order to qualify for any of the employment rights based on service (including maternity and redundancy pay). It is advisable to inform your employee that they are starting on a fresh employment contract and will not carry over their previous service. You should also inform them that this will affect their employment rights (as outlined above) and could also impact on their entitlement to any contractual rights based on service, for example, health insurance or additional annual leave. This approach ensures that there are no misunderstandings further on in the employment relationship.
Statutory redundancy pay
You should also be aware of the interaction between continuity of employment and the payment of statutory redundancy pay. As a reminder, you must make a statutory redundancy payment to any employee who you make redundant with over two years of service. The maximum they can receive under the statutory scheme is £16,140, but many organisations choose to offer an enhanced redundancy payment on top of the statutory amount. It is important to remember that if you choose to re-hire the employee then they do not need to re-pay their redundancy payment.
However, section 214 of the Employment Rights Act 1996 states that the continuity of employment of an employee is broken for the purposes of the statutory redundancy pay scheme only, where they have been paid a redundancy payment and the contract of employment is then renewed or the employee is re-engaged. Therefore, where your employee receives a redundancy payment and is then re-employed by you, you will have to tell them that even though their continuity of employment is preserved in every other respect, they will need to work for another two years before they are entitled to a further statutory redundancy payment.
If there is a short amount of time between you making someone redundant and re-hiring them, you should be aware that HMRC may decide to investigate your organisation. HMRC suspects that in cases like these the redundancies are a sham and only carried out in order to save tax. Currently redundancy pay (including severance pay) under £30,000 is not taxable. You will need to be prepared to answer questions on this if HMRC contacts you.
Employers are currently facing workforce challenges demanding creative and legally-compliant solutions. If, following a redundancy exercise, your organisation is (or will be) in a position to hire and fill a redundant role, speak to our experts today for advice that considers both the legal and HR aspects.
Replacing a redundant role FAQs
How long before you can recruit after redundancy?
There is no set period after a redundancy process that you must wait before you can recruit new employees. However, you should be mindful when advertising for new staff that former employees whom you made redundant may see these and use them to challenge whether the redundancy was genuine. The deadline for making a claim in the Employment Tribunal is three months from the date of the end of the employment contract, so if you are advertising within that time you must be sure that you have evidence to show that the redundancy was genuine from a business perspective and that the circumstances of the organisation have changed quite significantly since then.
Can you replace a redundant position?
Yes, you can replace a redundant position. However, right up until the redundant employee’s last day of employment you should be considering whether there is suitable alternative employment that you could offer them within your organisation. If, following the redundancy, you find that you need to replace that person, you must be able to show that there has been a change in the circumstances of the organisation such that a new employee is now needed, whereas the role was genuinely not required before.
Can you re-employ someone made redundant?
Yes, you can re-employ someone who has been made redundant. If you do this within a week of the termination of their old contract, then they will not lose their ‘continuity of employment’ with you. If you would rather the employee returned to your employment under fresh terms and conditions on a new contract of employment, then you should wait at least two weeks to ensure that they have a clear break between contracts of employment and do not preserve any continuity of employment. It is not necessary for the employee to repay their redundancy payment.
Last updated: 6 August 2020