Being made redundant is often extremely stressful. People worry about paying their bills and how long it will take to find a new role. If your company tells you they’re making your role redundant, they must follow a specific process. You must understand all the rules and your rights to protect yourself throughout the process. Here’s what you need to know.
Redundancies occur when a company is making changes and decides your role is no longer required. Often, they happen as part of a wider restructure if a company is not as financially successful as it needs to be. It’s a form of dismissal from your job, meaning you’ll need to leave your role and seek employment elsewhere.
A business might decide to make redundancies:
To cut costs
When closing down
When moving premises
When changing operations or altering structures.
Regardless of why you’re being made redundant, you may have rights to:
A notice period
A redundancy payout
Time off to find a new job
An alternative job within the business.
Of course, every situation is different, but it’s worth knowing exactly what you’re entitled to.
By law, a business has to be fair when deciding who will be made redundant.
For you to be made redundant, your job must cease to exist. You can’t just be replaced by someone else. But the employer can continue making appointments for other roles in the business.
There may be a selection process during which employees are chosen for redundancy. This could be based on a range of criteria which covers:
Capability to fulfil the role
Disciplinary and attendance record
The nature of the work to be completed by the remaining staff
Length of service (last in, first out).
Some companies even ask employees to reapply for their own job roles as part of the selection process to help them decide who will be made redundant.
Firms can ask for volunteers for self-selection redundancy. If you were already thinking of leaving anyway, voluntary redundancy could be a good option. This is especially true if your company offers a more generous package to employees who choose to go.
In some cases, you could be made redundant with no selection process. For example, if a whole business area is closing down, all the employees in that section could lose their jobs.
Similarly, if you’re the only employee in a specific business function, there wouldn’t need to be a selection process.
If you’re told you’re being made redundant, your employer must explain why and how you were chosen. It must comply with the reasons above.
There’s a long list of reasons why a company cannot select you for redundancy. For example, The company cannot choose you because of your age, gender, race, religion, disability or pregnancy. A redundancy for any of these reasons – among others – is likely to be considered unfair dismissal. If you believe you’re a victim of unfair discrimination, you have the right to appeal and then take the matter to an employment tribunal.
Your employer should attempt to offer suitable alternative employment within the company if it’s available. If you’re offered an alternative role, you have a right to a four-week trial period to see if it works for you. This doesn’t affect your statutory redundancy pay – you’d still be entitled to it.
The amount of redundancy pay you get depends on factors including:
Your length of service
Your weekly wage
Whether the business is offering over and above the statutory redundancy pay package
If the business has employed you for two years or more, you’ll have a right to statutory redundancy pay as a minimum. But you won’t be offered statutory redundancy pay if your employer offers you suitable alternative work.
Statutory redundancy pay is:
Half a week’s income for each full year you were under 22
One week’s pay for each full year you were 22 or older but under 41
One and half week’s income for each full year you were 41 or older
Any payments are capped at 20 years of service.
A week’s pay is set at your average weekly earnings 12 weeks before your company served your redundancy notice.
The weekly pay is capped at £538 per week if you were made redundant after 6 April 2020, or lower if you were made redundant before that. Therefore, the maximum statutory redundancy pay you can get is £16,140.
The good thing about redundancy payouts less than £30,000 is that they aren’t taxable.
Some companies offer more attractive payouts. Check your contract thoroughly to see what it says about redundancy and whether you could be entitled to more.
During the coronavirus pandemic, you still have the same redundancy rights. This includes the right to statutory redundancy pay if you qualify.
If the business is going through insolvency and can’t pay, you may still have rights. You can apply to the government for partial payment of your statutory redundancy pay.
First, you’d need to write to your employer formally requesting the outstanding payment within six months. If they still didn’t pay, you’d need to download a Redundancy Claims form from The Insolvency Office. You can send it to the Redundancy Payments Office or to the insolvency practitioner handling your former employer's case.
Alternatively, you can complete this form on the GOV.UK website to claim any money owed to you if your employer has already been made insolvent.
If you’re being made redundant, it won’t take place with immediate effect – you’ll get a notice period.
The minimum statutory notice periods are as follows:
At least one week’s notice if the business has employed you for between a month and two years
One week’s notice for each year if you’ve been employed between two and 12 years
12 weeks’ notice if you’ve been employed for 12 years or more.
Some employers offer longer redundancy notice periods, but they cannot offer less. Your contract will explain whether your employer offers a longer period. You’ll be paid during your notice period.
Check your contract as some businesses offer ‘payment in lieu of notice’ which is when they pay you but don’t expect you to work your notice. If that’s the case, your company could end your employment without notice.
If you’re being made redundant, you have a right to consultation with your employer. You’ll be able to talk about why you’re being made redundant and what alternatives there might be.
If 20 or more redundancies are being made, there are rules and legal requirements for handling the consultation. If there are 19 or fewer redundancies, there are no rules about how the consultation is done.
The minimum length of the consultation is 30 days for 20-99 redundancies or 45 days for 100+ redundancies.
If the idea of redundancy is playing on your mind, there are several you could do to prepare yourself.
For example, you could:
Sort your finances. Start saving. Create a budget. And see if you can get mortgage and income protection insurance – although this might be harder to get at the moment due to the pandemic
Start your job search. Keep your eyes peeled and see what’s out there. Get your CV ready now in case you need to leap into action
Make yourself indispensable. The more valuable you are to the business, the less likely you are to be selected for redundancy
Train. Now might be a good time to do some extra training or gain some additional qualifications, especially if you fancy a career change
Here are more tips on how to be prepared for redundancy
If you find a new job elsewhere before the end of your notice period, you could talk to your employer. They might be willing to release you without docking your redundancy pay. But if you leave your job without your employer’s permission, they’re entitled to reduce the amount of redundancy pay owed to you.
There are a few agencies you could speak to if you need more information about redundancy or unfair dismissal. These include: