Being made redundant can be a hugely stressful process. By understanding your employment rights in the context of a redundancy situation, this can help to ease some of your practical and financial concerns, from how much notice you should get and what you should be paid, to whether or not you’re being treated fairly by your employer in being selected for redundancy.
The following guide for employees on redundancy rights, set outs how the procedure for making you redundant should unfold, and what you can do if your employer gets this wrong.
When can you be made redundant?
It’s lawful for an employer to bring your employment to an end by reason of redundancy, but only if there’s a genuine redundancy situation. This will arise where there’s a reduction or cessation in the requirement for work that you undertake. This might be because the business you’re working for is doing things in a different way or changing what it does, for example, through the introduction of new machinery or some form of restructure.
In some cases, your employer may be forced to make significant financial cuts due to a downturn in business, where sadly redundancies are unavoidable so as to save the company from insolvency. The business could also be changing location or closing down. Still, even in a genuine redundancy situation, your employer must follow a fair and lawful procedure.
You will also have certain statutory rights when you’re made redundant. These include receiving any money your employer owes you, such as unpaid wages or outstanding holiday pay, plus a paid notice period and, in some cases, redundancy pay. Your contract of employment may provide you with enhanced redundancy rights to notice and pay.
What is the redundancy process?
Your employer is not allowed to handpick those staff they would like to let go, or to select for redundancy on a wholly random basis. They must also consult with you over how their selection will be made and why. As such, when being made redundant, your employer must:
- Follow a fair consultation process
- Fairly identify a pool for selection
- Adopt a fair and objective redundancy selection criteria.
The consultation process
If your employer is making 19 redundancies or fewer, there are no set rules on how they should carry out a redundancy consultation, although they are still required to discuss with you the reason(s) why you’re being made redundant and to explore the possibility of viable alternatives, including the offer of any suitable alternative work.
If your employer is making 20+ redundancies within any 90-day period at a single establishment, the collective redundancy rules will apply. This means that the consultation should take place between your employer and any trade union or elected employee representative(s), or with staff directly if there are none. The consultation is to provide detailed information to representatives or staff about the planned redundancies, from the numbers and categories of employees involved to how the redundancies will be carried out, and for the employer to respond to any requests for further information.
There is no maximum time limit for carrying out a collective consultation, although there must be a statutory minimum period before any dismissals take effect. This must be at least 30 days for between 20 to 99 redundancies, or at least 45 days for 100 or more. Collective consultation does not have to end in agreement, but it must be carried out by your employer with a view to reaching it, including ways of avoiding or reducing the redundancies.
The selection pool
The redundancy selection process is essentially twofold: the employer must first identify a pool for selection and then decide on the redundancy selection criteria. The selection pool is the group or categories of employees at risk of redundancy and against whom your employer will apply their criteria.
Where your employer is being forced to cut back on payroll liabilities, this can affect all areas of the business. If, in contrast, the business has undergone a complete restructure, specific job roles may automatically have become obsolete. However, even where specific jobs may be lost, the selection pool should not be confined to those currently filling those roles, but should include all employees capable of doing the work in question. This can include those carrying out the same or similar roles in other parts of the business or on other sites.
If the business you work for is being shut down and, as such, the entire workforce is being made redundant, with no other sites to take into consideration, there will be no need for your employer to follow any selection process. Equally, if the redundant post is unique, it may be entirely reasonable for your employer to focus on you, as a single employee, without creating any selection pool. Otherwise, your employer must adopt a fair and objective way in which to decide who to make redundant.
The selection criteria
Having identified the pool of employees at risk of redundancy, your employer must follow a fair procedure when deciding which individuals to select from that pool. Common methods of selection include:
- Self-selection: inviting employees to volunteer for redundancy
- Performance data: assessing the employee’s standard of work or performance
- Capability data: examining the employee’s skills, qualifications or experience
- Disciplinary or attendance data: reviewing the employee’s conduct and absences
- Last in, first out: where employees with the shortest length of service are selected first.
Essentially, when selecting employees for redundancy, your employer should adopt objective criteria, rather than based solely on opinion. They will not be restricted to using a single set of criteria, but can apply a combination of factors, typically with the aim of retaining those staff with the necessary capabilities to meet the future needs of the business.
Your employer should be entirely transparent about the criteria being used, a matter which ought to be raised with you during the consultation process. They should also provide you with a written explanation of how any redundancy decision has been reached.
How much redundancy notice should you get?
If you’ve been selected for redundancy, your employer must give you notice and agree a leaving date once they’ve finished the redundancy consultation(s). You’ll be entitled to a minimum statutory notice period if you’ve worked for your employer for at least one month. By law, your employer must provide you with a minimum of:
- 1 week’s notice if you’ve been employed between a month and 2 years
- 1 week’s notice for each year if you’ve been employed between 2 to 12 years
- 12 weeks’ notice if you’ve been employed for 12 years or more.
Your employer cannot give you less than the statutory minimum, although your employment contract may provide for longer. Your employment can be ended without notice if ‘payment in lieu’ is provided for in your contract, but your employer must pay you for this period instead.
How much is redundancy pay?
If you’re made redundant, you will be entitled to your final wages on termination of your employment. This could include pay for any unused holidays, plus any outstanding bonus, commission or expenses. If you’re not working your full notice period, you may also receive pay in lieu, together with any redundancy pay that you’re entitled to.
To qualify for statutory redundancy pay, you must have accrued a 2 year service period prior to the date on which your employment comes to an end. Provided you satisfy the continuous service requirement, you’ll be entitled to a minimum amount based on your weekly pay, age and length of service. This will be calculated as:
- 0.5 week’s pay for each year you were under the age of 22
- 1 week’s pay for each year you were aged between 22 to 40
- 1.5 week’s pay for each year you were aged 41 or more.
The overall length of service is subject to a maximum of 20 years, with the weekly pay capped at £544 (from 6 April 2021). This means the maximum statutory redundancy pay you can get is £16,320. Your contract of employment may make provision for a much higher payment although, by law, your contractual redundancy pay cannot be less than the statutory amount.
Can you take time off work to look for a new job?
Prior to being made redundant, if you’ve been continuously employed for 2 years by the end of your planned notice period, you’ll be entitled to a reasonable time off work to look for another job or to arrange training to help you find alternative employment. The length of time you can take will depend on your circumstances, including how long your notice period is, whether your employer can run the business without you and how far you have to travel to find work.
You may be entitled to additional paid time off under your contract of employment. However, unless your contract provides otherwise, regardless of how much time you take off work, your employer only has to pay you 40% of one week’s pay. For example, if you work 5 days a week and you take 4 days off in total, your employer only has to pay you for the first 2 days.
What can you do if your employer gets it wrong?
Redundancy is a potentially fair reason for dismissal, provided there’s a genuine redundancy situation and the selection process is fair. If, however, your employer unfairly selects you for redundancy this could form the basis of a tribunal claim for unfair dismissal. You can also make a claim if your employer fails to consult properly, for example, they start late or don’t consult at all, or they have suitable alternative employment which they fail to offer you.
You would normally need to have 2 years’ continuous service with your employer to lodge an unfair dismissal claim. In some cases, however, a dismissal can be classed as automatically unfair for which no qualifying period of service is required. This could be, for example, where the redundancy criteria applied by an employer discriminates against a certain group of employees because of their age, gender or other protected characteristic.
Claims for automatic unfair dismissal can often arise in the context of indirect discrimination, where the employer has applied a selection criteria that inadvertently discriminates against a particular group of employees. For instance, the ‘last in, first out’ method has been largely discredited as a sole means of redundancy selection because of its potential to discriminate against younger people or women who tend to have shorter periods of employment. Even using an employee’s attendance record as a basis upon which to select for redundancy could discriminate against those who have had time off work relating to pregnancy and maternity, or even a disability, unless those absences have been wholly discounted.
Claims for unfair or automatically unfair dismissal can be complex, so expert legal advice from an employment law specialist should always be sought. You should also seek advice if you think you’ve not been correctly paid, either by way of your final pay packet, or notice or redundancy pay, or if your employer has become insolvent. There are various practical and legal steps that can be taken — either through negotiation, mediation or litigation (or through the Insolvency Service) — to recoup the money you’re owed when made redundant.
What is being made redundant?
Being made redundant is a form of lawful dismissal, provided there’s a genuine redundancy situation and the employer follows a fair consultation and selection procedure. This could be where jobs roles have become obsolete following an organisational restructure.
Is it bad to be made redundant?
Being made redundant does not reflect badly on affected employees, but typically arises as a result of the employer being forced to make financial cutbacks. It is not the employee who is redundant, but rather their job role.
Can you claim benefits if you are made redundant?
If you’ve been made redundant, there are 3 main types of financial support that could be available to you whilst you’re looking for a new job: Jobseeker's Allowance, Employment and Support Allowance, and Universal Credit.
What should I do if I am made redundant?
If you’re made redundant you can contact Jobcentre Plus Rapid Response Service for help in finding employment and advice about claiming benefits. You should also seek legal advice to check you’ve received all the money you’re entitled to.
Last updated: 12 April 2021