Over the past year, the pandemic has cast black cloud of redundancy over many people’s working lives. many people; in fact, as reported by the Office for National Statistics (ONS), redundancies increased by 370,000 between August and October in 2020 due to the severe crash in the UK’s economy. In one of his public statements, Chancellor Rishi Sunak had to admit that he cannot save every job as businesses are forced to close or downsize and redundancy is becoming the only option left for many workers.
Section 139 of the Employment Rights Act 1996 states that, in compliance with the legislation under review, it identifies two types of dismissal: (i) the first, where the employer has ceased or intends to cease their entire business activity or the part of it where the dismissed employee was employed; (ii) the second, where the pre-existing conditions for continuing a certain type of business activity have ceased to exist and, therefore, the need for workforce has decreased or is expected to decrease.
There is no doubt about the interpretation of the Regulation in regards to first case just mentioned, whereas, in the second case, it has been necessary the involvement of the Employment Appeal Tribunal (E.A.T).
The issue revolves around the question: what is meant by “reduction or termination of a particular type of employment?”.
In “Safeway Stores Plc v Burrell [1997] IRLR 200”, the E.A.T made it clear that, in order to ascertain whether or not the regulation applies: “it is necessary to look at the overall need for employees to do work of a particular kind; not at the amount of work to be done”.
In a similar case (Alyward v Glamorgan Holiday Home Ltd t/a Glamorgan Holiday Hotel E.A.T/167/02), the E.A.T, sharing Safeway’s ruling, added that a reduction in the number of employees doing the specific work (i.e. the number of people) is a necessary requirement in order to meet the statutory definition of redundancy.
However, in another decision, the E.A.T overturned the guidance. In fact, in “Packman t/a Packman Lucas Associates v Fauchon UKEAT/0017/12”, contrary to the ruling in Alyward, the E.A.T says that a reduction in headcount is not needed in order to meet the statutory definition of redundancy, stating instead that the focus must be on the employer’s need for employees in general to do work of a particular type, and not focused on whether the number of hours worked has been reduced. This has probably been and will remain an isolated case.
When an employee has been notified that his/her role is at risk of redundancy meaning his/her name is on the redundancy list, a period of consultation will begin and this gives the employee certain rights, including a minimum notice period the possibility of consultation with his/her employer in order to find an alternative solution to the dismissal (such as offering an alternative role available within the company , or even a reduction in working hours with a consequent salary reduction) and, finally, if no other options are left available, the right to obtain statutory redundancy payment, which varies based on age of the worker and years of services within the company, as will be explained in depth hereafter.
Apart from the case where the employer decides to liquidate or winding up the entire company and/or in the circumstance where there is only one employee within the company, the employer must meet certain requirements in order to select which worker let go. First of all, this decision cannot be made on discriminatory grounds, such as gender, disability, religion, age, state of health, pregnancy, etc., otherwise that would be considered an unfair dismissal, which can be appealed by workers through the E.A.T.
Among the common reasons for redundancy, the employer might decide to dismiss the newest employee, as this is likely the cheaper option, “last one in, first one out” is a common phrase heard around redundancies, or the employee who has received a high number of disciplinary warnings, or it could be that the worker decides to volunteer for redundancy because of the new contract conditions offered during the consultation period with the employer. In addition, the employer could carry out a qualitative assessment of his/her team and cherry pick based on the skills, qualifications or experience of the staff members at risk of redundancy,
A valid alternative could be that the employer offers a different role in the team, if it is available. In that case, if the employee does not accept, the dismissal is considered to be above board. As far as voluntary redundancy is concerned, it often happens that it is dictated by the strategic need to change the structure within the company. It is important that this option is given on the whole team, and not only to some employees (i.e. only those with more tenure – which could be seen as discrimination), in order to avoid unfair dismissal.
Before proceeding with dismissal, the employer is obliged to give appropriate notice to the employee, or faces paying compensation to the employees. The employee loses the right to compensation if he/she:
- the reason for dismissal is a case of gross misconduct of the employee;
- He/she has refused to continue his/her employment and the employer has offered him a suitable alternative role.
But this is not always the case. In fact, if the worker does not want to accept the alternative role offered because of lower pay, or the tasks involved in the new role are irrelevant to his/her expertise, or because of excessive transport costs, or health problems, etc., the worker must inform the employer of these reasons in writing during the consultation period.
At this point, if the employer does not consider the reasons given by the employee to be valid, he/she may refuse to pay the redundancy payment. The employee can still lodge a complaint with the relevant authorities against the employer. The legal period of notice prior to dismissal for redundancy is: at least one week’s notice if the employee is employed for a minimum of one month and a maximum of two years; one week’s notice for each year of service if the employee is employed for a minimum of two years and a maximum of twelve years; and at least twelve weeks’ notice if the employee is employed for a period of twelve years or more. For this reason, the minimum notice period required for a dismissal due to redundancy, can be longer than the statutory notice period and it would prevail on the latter. Moreover, if the employer does not respect the notice period, he will be obliged to pay compensation to the employee.
Along with the notice period, it needs to be considered also the statutory redundancy payment, which was introduced by the Redundancy Payments Acts 1967–2014 and which establishes a minimum entitlement to a redundancy payment – known as “lump sum” – for employees who have accomplished a continuous employment (with the same employer).
The Regulation entitles the employee to statutory redundancy pay if an employee worked for the same employer for 2 years or more. The amount of the lump sum that should be paid will be based on the age, the tenure of the employee and on the weekly pay. Based on the age requirement, the employee is entitled to receive:
- 0.5 week’s pay for each full year of service if the employee is below the age of 22;
- one week’s pay for each full year of service if the employee is aged between 22 and 41, and
- 1.5 week’s pay for each full year of service if the employee is older than 41.
If an employer has been forced to lay off some of their team due to the Covid-19 pandemic, they can turn to the authorities for financial support.
In order to support the UK economy, the Government issued the Coronavirus Job Retention Scheme (CJRS), first introduced in March 2020 by Rishi Sunak, the Chancellor of the Exchequer and still in force nowadays, since it had been further extended in November 2020 and is valid until the 30th April 2021.
The Scheme entitles the employees (including the workers involved in the redundancy process) to receive payment from the Government equating to 80% of their current salary – capped at £2,500 per month, or £576.92 a week – whereas the employers are responsible for paying NI and pension contributions.