As a consequence of the social distancing and lockdown rules relating to COVID-19 imposed by the UK government, many companies and organisations will no longer be able to operate or provide their staff with any work to do.
This may mean, as with many other employers, that you are considering redundancy as a potential option in response to this crisis, although you may not know how much redundancy notice you are required to give to your employees.
The following guide provides an overview of the rules relating to redundancy notice periods, in the context of the redundancy process as a whole. We also explore other potential options that may help you to avoid making your staff redundant altogether during this difficult period.
UK redundancy notice period rules
If you are making an employee redundant, they may be eligible to various different things in addition to a redundancy payment. This includes a minimum set notice period before their contract of employment is brought to an end.
The statutory redundancy notice periods are as follows:
- At least 1 week’s notice if employed between a month and 2 years
- 1 week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
These are the minimum periods required by law. You cannot give an employee less than this, where the same notice will apply, regardless of whether a redundancy is voluntary or compulsory. In some cases, the employment contract may provide the employee with a longer redundancy notice period.
How does the redundancy notice period affect redundancy pay?
The employee will be entitled to be paid throughout their redundancy notice period, or to receive payment in lieu of notice where permitted by their contract of employment. Where your business has been forced to close due to the coronavirus crisis, pay in lieu may be the only viable option.
If an employee works their notice, they will be entitled to the payment of their wages as normal, in accordance with their contract of employment. If you make a payment in lieu instead, this should still be based on the employee’s normal rate of pay, including any contractual entitlements, such as pension contributions.
What are the other elements of a lawful redundancy process?
Given the financial impact of someone being made redundant in the current economic climate, where there will be a shortage of alternative employment for those who lose their jobs, any employment tribunal is likely to carefully scrutinise the fairness of both your underlying reasons and your processes in the context of any claim for unfair dismissal.
It is crucial that you follow a fair procedure when making redundancies. In addition to providing employees with the statutory minimum redundancy notice period, you must ensure that you follow the correct consultation rules and adopt a fair and objective selection procedure, where applicable.
The consultation process
If you are making up to 19 redundancies, there are no hard and fast rules about how you should carry out a consultation, although you are still required to discuss with an employee why they are being made redundant and any alternatives to this, such as unpaid leave or taking any paid holiday entitlement.
If you are making 20 or more redundancies at the same time, the collective redundancy rules will apply. The required length of a collective consultation will significantly extend the period in which you can reach a conclusion to the whole process, where the statutory minimum is as follows:
- For 20 to 99 redundancies, the consultation must start at least 30 days before any dismissals take effect
- For 100 or more redundancies, the consultation must start at least 45 days before any dismissals take effect
Redundancy selection process
As for deciding which employees to make redundant, you do not need to follow a selection process if an employee’s job no longer exists, for example, where your business is being shut down and the entire workforce is being made redundant.
Otherwise, you must adopt a fair way in which to decide whom to let go. Common methods of redundancy selection include the following:
- Inviting employees to volunteer for redundancy, ie; self-selection
- Last in, first out, ie; where employees with the shortest length of service are selected first
- Based on experience or capability to do the job
- Based on disciplinary records
You must not discriminate against any individual, or groups of individuals, when selecting for redundancy, for example, because of someone’s age, gender, sexual orientation, disability, pregnancy, or race and religion. It would also be unfair, for example, to dismiss an employee for asserting their statutory rights.
How is redundancy pay calculated?
If an employee has worked for you continuously for at least 2 years they will be entitled to a redundancy payment. Subject to satisfying this continuous service requirement, and assuming there is no suitable alternative employment available to them, the pay-out will be calculated as follows:
- 0.5 week’s pay for each full year the employee was under 22
- 1 week’s pay for each full year they were 22 or older, but under 41
- 1.5 week’s pay for each full year they were 41 or older
The overall length of service is capped at 20 years, with the weekly pay capped at £538 (as of 6 April 2020). This means that the maximum statutory redundancy pay an employee can get is £16,140. An employee’s contract of employment may make provisions for higher payments.
What alternatives are available to redundancy?
With the current uncertainty as to how long the coronavirus crisis is likely to last, you may be looking for alternative options to avoid making redundancies in haste. There is also a real reputational risk here. Fortunately, there are various other options that you may want to consider first.
By law, employers should not force employees to take unpaid leave, save except where this is expressly permitted within their contract of employment. However, given the risk of redundancy, you may be able to negotiate an agreement with your staff to temporarily take unpaid leave in the short-term.
In the absence of any prior contractual arrangement or subsequent agreement to vary the terms of an employee’s contract, by forcing someone to take a leave of absence without pay would amount to a breach of contract.
Strictly speaking, it would be open to you to dismiss an employee for any refusal to co-operate, although this would potentially expose you to an unfair dismissal claim for any employee with more than 2 years’ continuous service. You would also be liable for any pay in lieu of notice.
By law, employers can lay off employees if:
- This is permitted in the employee’s employment contract
- There is a national agreement for the industry
- There is an agreement between your workplace and a trade union
- There is custom and practice in your workplace, with clear evidence
- An agreement is reached with any affected employee to vary the terms in their employment contract to include layoffs or short time working
If you are looking to temporarily suspend a worker’s employment, unless there is prior agreement within the contract of employment or otherwise, or will again need the agreement of your staff to vary their contractual terms to include a temporary suspension from work without pay.
That said, even though there is no upper limit on how long a layoff can last, an employee can resign and apply for redundancy pay if the layoff lasts for
- 4 or more consecutive weeks in a row, or
- 6 or more weeks in a 13-week period, where no more than 3 are in a row
They will also be entitled to a minimum guarantee pay, although this is capped at a maximum of £30 per day for 5 days in any 3-month period, equating to a total of £150 (as from April 2020). You may also find that any employee, whose express agreement you need to enable you to lay them off, will be looking for a much higher rate than the statutory minimum.
Job Retention Scheme
Given the enormity of the current COVID-19 crisis, the Government has offered unprecedented support to enable employers to keep their staff on the payroll without forcing them to take redundancy, unpaid leave or layoffs. This includes the Coronavirus Job Retention Scheme (CJRS).
Under the CJRS you can access significant government financial support for furloughed workers. A person is furloughed if they are still employed by you but temporarily suspended on unpaid leave.
The scheme allows employers who furlough workers during the COVID-19 pandemic to apply to the government to subsidise up to 80% of employment costs, capped at £2,500 per month. This will be administered by HMRC through an online portal being built for this purpose.
The scheme is open to any employer in the country – small or large, charitable or non-profit – and to all workers, including agency workers and those on flexible, variable hours or zero hour contracts. To be eligible, the employer must have been operating a PAYE payroll scheme on or before 28 February 2020. For the prospective furloughed worker, they must have been on that payroll by this date.
Agreement must be reached between you and any given worker to furlough them during this crisis. Employees will also be precluded from undertaking any work for you, remotely or otherwise, during the furlough period.
Under the scheme you will not be responsible for paying the balance of a worker’s wages, although contractually, unless any alternative agreement can be reached, you may still need to make up any shortfall.
As part of the wider package of government support for UK businesses and employees, the Coronavirus Business Interruption Loan Scheme (CBILS) is offering loans of up to £5 million for small and medium sized businesses (SMEs) across the UK through the British Business Bank.
The CBILS is aimed at SMEs that are losing revenue and seeing their cash flow disrupted as a result of the COVID-19 outbreak to access much needed funding to help sustain their businesses and pay their employees. This could help you meet the balance of any unpaid wages for furloughed workers. It could also enable you to pay your staff without further delay.
The British Business Bank is operating CBILS via its accredited lenders, where there are over 40 of these lenders currently working to provide finance, from high-street banks to smaller specialist local lenders.
If you are an SME with an annual turnover of up to £45m, a lender can provide you with up to £5 million in the form of term loans, overdrafts, and invoice or asset finance, available on repayment terms of up to 6 years.
CBILS gives the lender a government-backed partial guarantee for the loan repayments to encourage more lending, even though you, as the borrower, will remain 100% liable for the debt. The government will also make a payment to cover the first 12 months of interest payments and any lender-levied charges.
When dealing with workforce issues, it is important to consider the full legal risks and rights of your workers. DavidsonMorris’ employment lawyers are on hand to help you assess the circumstances and understand the options that are in your best interests, not least to avoid unwanted tribunal claims and damage to reputation.
As employment law specialists, we can assist if you have any queries relating to redundancy, layoffs, furloughing under the JRS or settlement agreements, particularly large or complex situations. Speak to our experts today for advice.
Redundancy notice period FAQs
Do you get paid notice period when made redundant?
When made redundant an employee is still entitled to their notice period or to pay in lieu of notice (PILON). The PILON calculation will be based on the minimum statutory redundancy notice periods of between 1 to 12 weeks.
Do employees have to work their redundancy notice period?
An employee may not be required to work their notice period if their contract of employment allows their employer to provide pay in lieu of notice. Where a business is forced to close, or shuts down unexpectedly, an employee will be entitled to what they would’ve been paid if they had been able to work.
What is the statutory notice period?
The minimum statutory redundancy notice periods are 1 week’s notice if employed between a month and 2 years, 1 week’s notice for each year if employed between 2 and 12 years, and 12 weeks’ notice if employed for 12 years or more. The contract of employment may provide for longer periods.
Last updated: 10 April 2020