Redundancy

Dismissal by reason of redundancy is defined in the Employment Rights Act 1996 as being where the dismissal is attributable wholly or mainly to:

  • The fact that the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee was so employed; or
  • The fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where the employee was so employed, have ceased or diminished or are expected to cease or diminish.

It is an exhaustive definition and covers three basic situations:

  • Where the employer ceases to carry on business (other than involving a transfer of an undertaking) on a permanent or temporary basis;
  • Where the employer ceases business in the place where the employee is employed5; and
  • Where the employer’s business no longer requires any employees or as many employees to do a particular kind of work (whether generally or in the place where the employee was employed)

What is the method of selecting employees for redundancy?

The employer must act fairly at all times and, in particular, there should be a fair method of selecting employees to be made redundant.

Any employees who may be affected by the proposals should be consulted. Although breach of any customary or agreed selection procedures does not make the dismissal automatically unfair, failure to comply with any of the above procedures may result in the unfair dismissal of an employee.

As well as following a fair procedure for selection for redundancy, Under the Trade Union and Labour Relations (Consolidation) Act 1992 s 188(1) an employer who is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, is obliged by statute to inform and begin consultations with appropriate representatives of any of the employees who may be affected by the dismissals or by any measures taken in connection with those dismissals. Consultation must be commenced in good time and, in any event, within the time limits set out in the Trade Union and Labour Relations (Consolidation) Act 1992. Where the employer is proposing to dismiss as redundant 100 or more employees at one establishment within a period of 90 days or less, the consultation must begin at least 45 days before the first dismissal takes effect, and where there are 20 or more proposed redundancies, the consultation must begin at least 30 days before the first dismissal takes effect.

In all cases, consultation must be about ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissals, and must be undertaken with a view to reaching agreement with the appropriate representatives. In order to comply, therefore, the employer must begin consultations before giving individuals notice of dismissal.

To ensure that redundancy dismissals are fair, employers should follow a transparent procedure that is reasonable in all the circumstances.

What is a fair redundancy procedure?

A fair redundancy procedure involves giving as much warning as possible to the employees involved. The employer should also consider the possibility of voluntary redundancies, early retirement, and redeployment within the company or transfers to other establishments within the undertaking rather than redundancy.

The employer should write to all employees who are at risk of redundancy and invite them to a consultation meeting. If compulsory redundancies are necessary, the employer must have objective criteria that are precisely defined and capable of being applied in an independent way to determine which employees will be made redundant, and the order of discharge.

The employer must comply with the duty to consult trade unions and employee representatives (not only of the employees affected by the proposed dismissals, but also of any employees affected by the measures taken in connection with those dismissals). In addition, the employer should ensure that individuals who are likely to be made redundant are adequately consulted. Dismissals have been found unfair if the appropriate representatives have been consulted, but the individuals concerned have not. The employer should also consider putting in place policies that offer to help employees find other work and allow them reasonable time off for this purpose. Proper consideration should be given to timing the announcements about the redundancies and notifying employees of their redundancy payments.

Does Acas Code apply to redundancy dismissals?

The Acas Code does not apply to redundancy dismissals therefore there is no strict requirement to allow employees dismissed by reason of redundancy to appeal against the decision to dismiss. However, depending on the circumstances surrounding the redundancy, it may be appropriate to notify the employees that they can appeal against the decision. If they decide to do so, the employer should hold an appeal meeting and inform the employees of the outcome in writing.

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