When an employee is made redundant they may be eligible for a redundancy payment, in order for an employee to be eligible for a redundancy payment they would need to have two years’ continuous service.
There are various reasons why an employee would be made redundant, they can most easily be summed up as:
- Closure of the entire business
- Closure of a site location of the business
- The type of work that the employee was required to do has diminished or is expected to diminish.
The minimum you would expect an employee to receive in a redundancy situation is their statutory redundancy payment. Statutory redundancy payments are calculated on; the employees’ age, length of service and pay. In reality a redundant employee would receive much more than the statutory redundancy payment such as payment in lieu of notice, payment for loss of office, payment for untaken holiday and ex-gratia payments. Contracts can also provide for more generous terms.
Redundancy payments of up to £30,000.00 have long been held to be tax free however there are certain payments which are not tax free such as payment in lieu of notice and holiday pay. It is important to get this right as the employee will want to know how much they will have “in their pocket” after tax. If the redundancy payment amount is in dispute then that is a claim that could be pursued in the employment tribunal.
It is important to note that redundancy is a form of dismissal and so if a proper process isn’t followed the redundant employee could bring a wrongful dismissal and/or unfair dismissal claim.
Some important points an employer should look out for in a redundancy situation are:-
- How the redundant employee is chosen
- What information about the redundancy is given to the employee
- Whether there should be a consultation period with the affected employees
- The time frame of the consultation period
- How much information should be given to the employees during the consultation period
- Whether there are any alternatives to redundancy
- Whether the redundant employee could do another job within the business
- Whether you should offer the redundant employee a trial period in another job within the business
If a redundant employee chooses to stay and do another job within the business then there is no redundancy and no redundancy payment is due.
If using a settlement agreement, an employee who chooses to accept redundancy is required to obtain independent legal advice as to the terms of the agreement. Such agreements are the best way to finalise a redundancy package and it is important that these are drafted professionally as an ambiguous and poorly drafted settlement agreement could legal to a separate legal claim.
The settlement agreement should cover:-
- Termination date
- Pension and benefits
- The amount of redundancy payment
- When payment is due including in one go or payment by instalments
- Warranties such as in the event of a challenge That the employee is liable for an tax (if it is due)
- Return of company property
- An agreed Reference
- That any potential claims the employee may have are being waived
- That the employee has taken independent legal advice
- Restrictive covenants preventing the Employee from taking trade secrets or clients or setting up in competition
Redundancy is a complicated area of employment law and legal advice should be obtained from the outset. The Linder Myers employment team has considerable experience in advising on redundancy. To ensure that the redundancy process is implemented properly, please do not hesitate to contact a member of the employment team on 0161 837 6844 and we’d be happy to help you.
Ask the Expert
Employment Law Specialist at Linder Myers Solicitors advises:-
“We have a fixed term contract which is currently being performed by an employee, there is a need for the fixed term contract to run again but the employee who is currently in the role is due to go on maternity leave two months into the fixed term contract, are we obliged to consider her as a candidate?”
Once the employee is pregnant and she informs you that she is pregnant she will be covered under the Equality Act (EQA) 2010. Pregnant job applicants are specifically included under section 18 (6) (b) EQA 2010. In deciding whether a female employee is discriminated against under section 18 of the EQA 2010 the test is whether the employee has been treated unfavourably. The importance of this is that the pregnant employee does not even need to name a male comparator to show a difference in treatment. A specific example of unfavourable treatment in the “Equality and Human Rights commission: statutory code of practice” is deciding not to award a job to an employee either permanently or on a fixed term contract because of their pregnancy.
Under section 18 of the EQA 2010 the pregnancy does not have to the only reason for the treatment. So even if you say that the refusal to offer the job is not based on pregnancy then she will still be protected. There are also further regulations to consider specifically the Maternity and Parental Leave etc Regulations 1999 which cover pregnant employees.
It is safe to say that it would be considered discriminatory to not consider the pregnant candidate solely on the basis that she is pregnant and as a result of that pregnancy she wouldn’t be able to do the job. This may seem difficult for employers to reconcile with however it should be noted that monetary awards in employment discrimination cases are uncapped and therefore particular care should be taken by employers when considering pregnant job applicants.
Should you require any further information, please do not hesitate to contact us on 0161 837 6844 or via email [email protected]