Many companies have recently had to embark on redundancy programmes and we have been asked a number of questions on the more intricate issues. Redundancy is a difficult time for both employer and employee, and getting the details right can certainly help smooth over what can be a bumpy road. The following Q &A looks at the main areas of concern.
Is an employee who is 65 entitled to a redundancy payment?
On 1 October 2006 new age regulations came into force and the government ordered a review of the statutory redundancy scheme. At this time several age based factors in the statutory redundancy scheme were repealed:
- The upper (65) and lower (18) limits on the right to claim redundancy payments. Employees aged 65 and over are therefore entitled to redundancy payments.
- The 'taper' provision, by which any employee over the age of 64 had their redundancy payment reduced by 1/12 for every extra month of service.
I have offered an employee an alternative job. Do they have to take it? What happens if they don't like it or turn it down?
If an employee is being made redundant, you should try to offer them 'suitable alternative employment' within the organisation or an associated company. In deciding whether an alternative job is 'suitable' for an employee several factors are taken into account:
- How similar the new job is to their current job.
- Their skills, abilities and circumstances in relation to the job.
- The pay (including benefits), status, hours and location of the job.
The employee has a right to a four week trial period. If they have not given notice by the end of the trial period their right to redundancy pay ends and they will continue as an employee in the new role. If they decide the new job isn't suitable, they should inform you during the trial period. If they wrongly claim the job isn't suitable and they unreasonably refuse it, they lose their right to redundancy pay.
Disputes about whether employment is suitable and whether a refusal is unreasonable are decided by an employment tribunal taking into account the factors set out above.
The office is closing down in August but we have asked several employees to stay on until October 2010 in return for which we have offered them an enhanced redundancy payment – is there any difficulty with us doing this?
There is no difficulty with doing this and it is quite a common
occurrence. If you are carrying out a redundancy exercise because you are closing down an office or are winding down entirely, it is likely that you will want to carry out a phased redundancy exercise, enabling you to stagger the termination dates of your staff to suit the gradual process of bringing the business to a halt. Usually, a skeleton staff is kept on for a few extra weeks after their colleagues have been made redundant.
Enhanced redundancy pay is not generally taxable, although a loyalty or retention bonus is likely to be taxable. The treatment of arrangements of this kind depends on the circumstances and it is sensible to take advice.
Can I re-hire a redundant worker? Do they keep their redundancy pay?
If you renew an employee's contract of employment within four weeks of their dismissal, the dismissal is deemed never to have happened and they are not entitled to redundancy pay. If you re-hire an employee in a new job within four weeks of the dismissal, then again there is no dismissal and so no right to redundancy pay. The re-hired employee is entitled to a 4 week trial period during which time they may decide to quit the job and take the redundancy payment. If the employee is re-hired in the same or a different role more than four weeks after their dismissal, they can keep their redundancy payment.
The company has warned the workforce that there may be redundancies. One employee has found another job on the basis of this news. Are they entitled to redundancy pay?
If the employee intends to leave their job before they have officially been given notice of their termination then they are not entitled to redundancy pay.
Does an employee get redundancy pay if they serve the company with a counter notice?
If an employee wishes to leave before their redundancy notice expires, they can provide you with 'a written counter notice' stating when they would like to finish. You should respond confirming whether or not you will allow them to leave early. Often, the arrangement works well for all concerned because the employer achieves a saving in notice pay.
If an employee leaves early without your permission, they lose their right to redundancy pay.
How do I decide which employees should be in a pool for selection? What can I take into account when making this decision?
A selection pool is only required where some jobs will be retained. Being included in a pool puts employees at risk of redundancy but also offers them an opportunity of continuing in employment. This means that the decision is an important one which is susceptible to challenge and you should consult with employees about your proposals during the consultation phase and seek to reach agreement.
The starting point is to look at the "new" jobs which will be available after the redundancy exercise is complete, bearing in mind that they may have more elements than the "old" jobs people are doing now. Alternatively, if the redundancy is a straightforward headcount reduction, the "new" jobs will simply be the "old" jobs. Amongst the groups of employees in jobs which will no longer be required or will be required in smaller numbers, you should consider identifying a pool of those whose old jobs have common element with the new jobs, rather than limiting the pool to those whose old jobs most closely resemble the new jobs.
Within the pool, the safest way of selecting (and most effective from a business point of view) is to assess as objectively as possible people's ability to carry out the elements of the new job.
What effect does voluntary redundancy, as opposed to compulsory redundancy, have on:
- Mortgage/Credit Card/Loan Protection
Payment is usually excluded if an employee takes voluntary redundancy. You should advise affected employees to check the terms of their insurance.
- Claiming unemployment benefits
Redundancy and other payments can affect when an ex-employee starts receiving Job Seeker's Allowance and how much they get. You should advise affected employees to contact their local Jobcentre Plus.
Is "dismissal" the correct terminology if someone is being made redundant?
"Dismissal by reason of redundancy" is the correct term when you make an employee redundant.
Does an employee have to participate in all consultation whether collectively or individually?
It is possible for employees to notify you that they no longer wish to participate in consultation meetings. If this happens, you can exclude the employee from the consultation process but it will be sensible to confirm in writing that you are doing so at their request. They will be entitled to re-engage in the consultation process at any time if they change their mind. Their statutory rights, including the right of appeal, are not affected.
What is the procedure regarding pregnant employees when considering redundancies?
It is advisable to try to include them in the consultation process, to correspond with them and invite them to meetings like anyone else (apart from during the two week compulsory maternity leave period). If, at the time of the consultation, there is a suitable alternative role the employee on maternity leave has a priority right to be offered that role and will then be treated as being on maternity leave from that role. If there is no suitable alternative you should offer to review the position at the point at which the employee exercises their right to return.