Redundancy – everything you need to know

‘Redundancy’ is a scary word for any worker, no matter their job role or how senior of a position they have at their workplace.

Being made redundant can turn your life upside down and throw a spanner into your financial security, having a huge knock-on effect on your personal life. Redundancy is a stressful time, and easy to let yourself get bogged down in the minute details, wondering if you could’ve done something better. It isn’t pleasant to be let go from a job you’ve worked hard to get under any circumstances, but quite often, with redundancy, there’s nothing you can do or could have done to avoid it.

This guide aims to walk you through what redundancy is, what your rights are, and what your next steps should be after being made redundant.

In t his guide, we’ll cover the following topics:

• What is redundancy?
• When does redundancy happen?
• Redundancy process
• Redundancy pay entitlement
• Redundancy after furlough
• Will I lose my redundancy if I get a new job?
• What should I do after redundancy?

What is redundancy?

Redundancy happens when a business needs to lessen its workforce. When this decision has is made, jobs are closed, and the people who did those jobs are made ‘redundant.[i]

Although the phrase ‘being made redundant’ is common, it is important to remember that when someone is made redundant, it is the job role that is being made redundant and not the person. Redundancy is never (or should never be) personal, and the terms of redundancy should be outlined in your employment contract.

When does redundancy happen?

There are many reasons redundancy could become necessary, and it is something employers will try their best to avoid. Common reasons for redundancy are:

• The business is closing
• Sections of the business are closing
• Financial difficulties
• The job role itself isn’t needed anymore due to technological advances or changes to processes within the business
• Location change[ii]

Dismissal for reasons such as poor performance or misconduct won’t count as redundancy and follow a different set of processes.

Redundancy process

As mentioned, employers will do everything they can to avoid making people redundant. They might ask employees if they want to switch to a different job role or reduce their working hours. If redundancy is the only option, employers may ask staff if they want to volunteer for redundancy before deciding.

In any case, if redundancy must happen, employers will follow a set process. This might vary slightly from company to company, but these are the typical steps that will be taken[iii]:

Step 1 – Preparation – Employers will decide how many job roles are to be made redundant. If more than 20 people are being made redundant, this is known as a ‘collective redundancy’ which will involve further legal requirements.

Step 2 – Employee Consultation – Employers will talk to employees who will be affected, usually in a group setting. This will give them a chance to ask questions.

In the case of a ‘collective redundancy’, employers may speak to a representative of their workers instead of each person individually. This needs to happen before any firm decisions on who is being made redundant are made and should include everyone at risk of redundancy.

Step 3 – Selection – During this stage, the employer will set out criteria for who will be made redundant. This is where they will narrow down the pool of ‘at risk’ employees to a final list.

Factors that employers might review are general performance, attendance, skillset and experience. By law, employers cannot choose staff for redundancy based on protected characteristics such as sex, race, age, disability and/or religion[iv].

Step 4 – Announcement – After the selection process has taken place, the employer must tell all staff about proposed redundancies and make sure they know that final decisions will not be made without consulting the affected employees.

Step 5 – Individual Meetings & Alternatives – As a continuation of the employee consultation, the employer will organise a series of individual meetings with at-risk staff. During these meetings, employers will give their employees the redundancy process’s full details, why they might be chosen, and the timeframe of the process. If there is any alternative employment available, the employee must be offered the position and have a statutory right to a four week trial period. If there are no alternatives available, this should be explained to the employee at this stage.

Step 6 – Confirmation – If the redundancies go ahead, employees selected for redundancy must be informed in a meeting and then receive a confirmation in writing.

Full notice or payment in lieu of notice should be given. Employers might help their employees to seek further employment and allow their employees time off to attend interviews.

Redundancy pay entitlement

When you’re made redundant, you’ll generally be entitled to some form of lump-sum payment.

Statutory redundancy pay

If you have worked for an employer for two years or more, you’ll usually be entitled to statutory redundancy pay. Statutory redundancy pay varies from person to person and is worked out based on the following[v]:

• 1 and ½ week’s pay for each full year you’ve worked thereafter the age of 41
• 1 weeks pay for each full year you worked there from the ages of 22 to 41
• ½ a weeks pay for each full year working there under the age of 22

The maximum weekly pay caps at £538, and the maximum statutory redundancy pay is £16,140.

Enhanced redundancy pay

Employers can choose to pay employees more than the statutory amount of redundancy pay. This is often done as a gesture of goodwill, or to make sure the member of staff leaves ‘quietly’.

Employees can receive up to £30,000 of redundancy pay without paying tax on it, but there is no real legal limit to how much they can be paid.

Reasons for not receiving statutory redundancy pay

There are very few instances where you may not be entitled to redundancy pay, but it can happen. You won’t be entitled to it if: 

• You are an apprentice who isn’t employed after your training
• You are a domestic servant and immediately related to the employer’s family
• You are offered alternative work and refuse it without a reason
• The employer offers to keep you on at the business

Your final paycheck

When you receive your final wage, you should check you have received the following[vi]:

• Correct redundancy pay
• Your final wage
• Payment for untaken holidays
• Outstanding bonuses or commission
• Any ‘pay in lieu’ if you aren’t working your full notice period

Redundancy after furlough

‘Furlough’ is a term that wasn’t a part of most people’s vocabularies until the COVID-19 pandemic hit. Many employers were forced to put their employees on furlough due to their businesses having to close temporarily or less work being available as a knock-on effect of lockdown restrictions.

You can be made redundant whilst on furlough, but you will have the same rights as you would do during ‘normal times.’

Whilst furloughed, you should receive 80% of your usual wage (this may change – make sure you check up to date guidance). If you are made redundant whilst furloughed, your redundancy payment should be based on your usual rate of pay[vii].

Will I lose my redundancy if I get a new job?

When you are made redundant, you may start the job search immediately. There is nothing wrong with seeking out a new job during your notice period, but you need to be very careful to make sure you don’t breach the terms of your redundancy.

Your new job might want you to start sooner than the end date of your notice period. In this case, you should ask your current employer if they can move your end date forwards. If they do not agree to this, you need to ask your new job if they can delay your start date. Leaving your current job earlier than your official finish date could count as a resignation, and you won’t receive your redundancy payment.

What should I do after redundancy?

When you’ve been made redundant, you may struggle to find a job or want a short break before you get back to work. Whether you want to fit in some new experiences or fill in a gap in your CV, there is a lot you can do to keep yourself occupied.

• Education – if you want to take this opportunity to change your career, you could look into revisiting your education to learn new skills. You could consider online a levels or interest courses to fill your time and make your CV stand out.
• Travel – it’s often hard to get time off work to travel, so whilst you’re out of a job you could spend some time visiting the places you’ve always wanted to.
• Seek advice – if you feel like you’ve no direction or you are struggling to find a new job, there are plenty of places you can seek advice from such as ACAS and Citizens Advice.

*Please note: the information in this article has been taken from the third-party sources cited below. This article has been produced for interest purposes only and is not legal advice*

References

ACAS, n.d. Your rights during redundancy. [Online] Available at: https://www.acas.org.uk/your-rights-during-redundancy
[Accessed March 2021].

Citizens Advice, n.d. Preparing for after redundancy. [Online] Available at: https://www.citizensadvice.org.uk/work/leaving-a-job/redundancy/preparing-for-after-redundancy/
[Accessed March 2021].

gov.uk, 2021. Furlough and redundancy. [Online] Available at: https://www.gov.uk/government/publications/furlough-and-redundancy/furlough-and-redundancy
[Accessed March 2021].

gov.uk, n.d. Redundancy: your rights. [Online] Available at: https://www.gov.uk/redundancy-your-rights/redundancy-pay
[Accessed March 2021].

Legislation.gov.uk, 2010. Equality Act 2010. [Online] Available at: https://www.legislation.gov.uk/ukpga/2010/15/contents
[Accessed March 2021].

Net Lawman, 2020. Redundancy procedure. [Online] Available at: https://www.netlawman.co.uk/ia/redundancy-procedure
[Accessed March 2021].

Peachey, K., 2020. What is redundancy and what are my rights?. [Online] Available at: https://www.bbc.co.uk/news/business-53501506
[Accessed March 2021].

Sources

[i] https://www.bbc.co.uk/news/business-53501506

[ii] https://www.acas.org.uk/your-rights-during-redundancy

[iii] https://www.netlawman.co.uk/ia/redundancy-procedure

[iv] https://www.legislation.gov.uk/ukpga/2010/15/contents

[v] https://www.gov.uk/redundancy-your-rights/redundancy-pay

[vi] https://www.citizensadvice.org.uk/work/leaving-a-job/redundancy/preparing-for-after-redundancy/

[vii] https://www.gov.uk/government/publications/furlough-and-redundancy/furlough-and-redundancy