Unfortunately, redundancy happens very often and businesses reluctantly have to let staff go, perhaps due to a loss in business or new technology being introduced.
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An eligible employee, dismissed by reason of redundancy, is entitled, at a minimum, to a statutory redundancy payment from his employer. Employees’ must have two years continuous service before they are eligible to commence a redundancy claim. There must also be a dismissal.
Good communications and consultation between management and employees can assist a business to get through the redundancy process. An employee has the right not to be unfairly selected for redundancy.
This is where there is closure of the employers business. This can be permanently or temporary.
This is where the place where the employee is employed is being relocated. It is sometimes hard to determine where an employees’ place of work is; it is either where the employee is required to work according to the contract or where the employee actually works.
This is when the requirement for employees to do work of a particular kind has ceased. This covers things such as surplus employees or if new machinery replaces employees.
A redundancy payment is intended to compensate the employee for the loss of his job. Therefore if an employee is re-employed or by an associated company, he does not qualify for a redundancy payment. The employee will also lose his entitlement to a redundancy payment if he unreasonably refuses an offer of suitable alternative employment.
A formula is applied based on age factor, length of service and a ‘weeks’ pay. The employee is entitled to:
– One and a half weeks’ gross pay for each complete year over 41
– One weeks’ gross pay for each earlier year in which employee was 22 or over
– Half a weeks’ gross pay for each previous year.
The total number of years’ service is capped at 20 and a ‘weeks’ pay is calculated under statute. There is a statutory maximum of £400.00.
It is easier to explain with an example. If I had been employed for 5 years 11 months, 45 years of age and my net week pay was £350 I would get the following:
1 ½ x 4 x £350 (over 41) plus 1 x 1 x £350 (41 and under).
The age is split into two sections and the full length of years’ service is only 5. Calculating redundancy payments can be complicated, and here at Seatons we can offer you a breakdown of what you should receive.
An employer usually has to consult those affected by the redundancy. The exact consultation requirements depend on how many people were being made redundant.
If an employer does not correctly consult with employees, then they may be given a ‘protective award’ if they go to tribunal. Furthermore, failure to consult with individual employees can render dismissals to be unfair.