Redundancy covers the situation where an employee is dismissed because they are no longer needed by their employer. This is usually due to either the complete cessation of the employer’s business or the closing of the employer’s place of work or most commonly, due to the reduction in the number of workers required to do a particular job.
During the redundancy process, the employer must consult with the employees affected, identify the correct pool for selection, apply objective criteria to select the employees for redundancy such as length of service, skill set, qualifications and disciplinaries and offer suitable alternative employment where appropriate. If the employer does not select the employees for redundancy fairly, then the employees concerned may have a claim for unfair dismissal if they have at least one year's continuous employment (2 years for employees starting new jobs after 6 April 2012). Redundancy is a potentially fair reason for dismissal. The employee(s) affected may also have a claim against their employer for discrimination.
Employees with at least 2 years' continuous employment at the relevant date are entitled to a statutory redundancy payment if they are dismissed by reason of redundancy. The statutory redundancy pay is calculated according to a formula based on age, length of service and pay. It is essentially the same amount as a basic award in an unfair dismissal or a constructive dismissal claim e.g. £430 per week for each completed year (½ a week’s pay for employees aged 21 and under and 1½ weeks’ pay for employees aged 41 and over) up to a maximum of 20 years which amounts to £12,900.