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An Introduction to Redundancy

Dealing with redundancy can be a complicated and daunting experience for both employers and employees, with this area of employment law being spread over several areas of UK and EU legislation.

What is redundancy?

The statutory definition of redundancy covers three types of situation:

  1. The business stops or intends to stop carrying on the business for which the employee was employed by it;
  2. There is a reduced need for employees to carry out a particular kind of work; and
  3. The business stops or intends to stop carrying out their trade in a place where the employee was employed.

The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” the employer. This means that the reason for dismissing the employee is due to business needs and is not based on performance or any other factors alone.

Alternatives to redundancy

Throughout a redundancy procedure, an employer should always consider whether it is possible to reduce the number of compulsory redundancies, where possible. An employer should consider:

  • Not renewing the contracts of external contractors and agency workers;
  • Reducing or removing overtime opportunities; and
  • Suspending or limiting its recruitment.

Should these considerations not be enough, then the employer should consider:

  • Inviting employees to volunteer for redundancy or early retirement under the pension scheme;
  • Temporarily laying off employees or reducing their hours; and
  • Inviting potentially redundant employees to apply for suitable alternative vacancies.

Redundancy and the prospect of unfair dismissal

An employee who has worked for the employer for a minimum of two years (qualifying service) is entitled not to be unfairly dismissed. Therefore, when applying the redundancy process, the employer must ensure that the process is fair. If a claim is issued for unfair dismissal, the courts will apply a general test for fairness. This is regardless of whether the dismissal is genuinely on grounds for redundancy.

When applying the general test of fairness, the court will consider:

  • Whether the employer has identified and applied an appropriate and objective method of selecting employees for potential redundancy;
  • Whether the employer had consulted with those employees; and
  • Whether the employer has offered suitable alternative employment or any other alternatives as to making that employee redundant, as appropriate.

At Foskett Marr Gadsby & Head LLP, we have the expertise and the experience to guide you through the redundancy process. Should you wish to speak further about this with someone, then please contact our either Robin Cearns or Richard Gordon on 020 8502 3991.