uarantee paymentRedundancy, lay-offs and short time
Definition of Redundancy
Redundancy is when an employer has a reduced requirement for employees of a particular kind at a particular place of work.
An employer does not have to show that there is a decrease in work or even a need to save money; redundancy is often the result of reduced work, but can also be a result of reorganisation, outsourcing work, or closure of a site.
What makes redundancy unique among the potentially fair reasons for dismissal is that it is the “job” that is being dispensed with, rather than the employee personally.
Employers may decide not to make redundancies where there is a reduction in work which they anticipate is only temporary and they don’t want to lose their employees. They may then lay off employees or put them on short time.
Definition of a Lay Off
A lay off is where an employer does not provide the employee with work, but does not terminate their employment.
Definition of Short Time
An employer may temporarily cut the employee’s hours, maintaining the same rate of pay per hour, but reducing the employee’s pay because of a reduction in hours.
Payments to employees who are made redundant
Employees who are made redundant are entitled to notice (or pay in lieu of notice) and a redundancy payment calculated according to their gross weekly pay, age and length of service. See calculator or ready reckoner.
An employee must have been employed for 2 years to qualify for a redundancy payment, although they are still entitled to claim unfair dismissal after 1 year, so even though an employee who is made redundant may not qualify for a redundancy payment, if the process followed is unfair they can still make a claim of unfair dismissal to an Employment Tribunal.
The notice period of needs to be included when calculating the qualifying period.
Rights of an employee in relation to lay offs and short time
The Right to lay off
An employer does not always have the right to make lay offs or put employees on short time. This can only be done if either:-
1. The Employment contract allows for this (or does not guarantee a set number of hours work)
2. Lay offs and short time are accepted as “custom and practice.”
3. The employer makes and agreement with the employees (employees may agree to this or even suggest it as a way of avoiding redundancies)
If an employer lays off employees or puts them on short time without the right to do so the employees can claim full pay for each day of the lay off as “unlawful deductions from wages.” An employee might also be able to resign and claim “constructive unfair dismissal.”
Guarantee Payment and Job Seekers Allowance
During the first 5 days of lay off the employee is entitled to a “Guarantee payment.” This is £25.00 per day.
More detail about rights to a guarantee payment.
If the employee is still off work after 5 days lay off they can claim Job Seekers Allowance from Job Centre Plus, without having to resign.
Procedures for lay offs
Where an employer chooses to lay off some employees there is no particular requirement to consult or use any fair selection process, although an employee who is unfairly singled out for a lay off or short time may be able to resign and claim unfair constructive dismissal.
Claiming Redundancy
An employee who is on short time or laid off can also claim redundancy in certain circumstances. They must first have been laid off or on short time for either 4 continuous weeks or 6 weeks in any 13 week period. They must then write to the employer claiming a redundancy payment, and after giving the employer an opportunity to respond, may then in some circumstances be able to resign on notice and claim a redundancy payment. The procedures and timing have to be strictly observed so this should only be done after taking advice or checking the requirements carefully. Further details.
What needs to be done to make a redundancy fair?
In all redundancies a fair process means there must be a consultation period before a final decision is taken. An employee is entitled to notice from when the final decision is taken. The amount of notice an employee is entitled to is either what is written in their contract or one week for every year of their employment (up to 12 weeks), whichever is the longer.
The following steps must be followed by an employer to make a redundancy dismissal fair:-
1. Considering pool for selection
2. Warning
3. Consultation
4. Fair selection process
5. Offering vacancies
6. Appeal
1. Pool for Selection
An employer must first of all decide on a “pool” for selection. This means selecting a group of employees with reference to their jobs out of which the redundancies are to be made. There is no right or wrong answer to how wide the pool should be drawn as long as determining who should be included in the pool is by reference to the job or place of work, not the individual characteristics of the employees.
If there is a unique role that is being made redundant it would be valid to have a pool of one.
2. Warning
An employer has a duty to warn all employees who are likely to be affected as soon as a decision is made to propose redundancies. This unusually marks the beginning of the “consultation period.”
If an employer proposes to make 20 or more employees redundant from one site either at the same time or over a 3 month period, special consultation procedures are required.
3. Consultation
The consultation period is a period of time during which all employees affected are entitled to have an input into the employer’s proposals. The employer is required to provide sufficient information for the consultation to be meaningful and consider any suggestions made by the employees.
The subject matter of the consultation can include:-
(a) Ways of avoiding compulsory redundancies
(b) The employer’s proposed method and process of selection
(c) Alternative employment/process for filling existing vacancies
Consultation is more than providing information, but does not necessarily amount to “negotiation” in the sense that the final decision following consultation is down to the employer so long as the employer has considered suggestions made by the employees and has reasons for the final decisions.
There is no set minimum time for the consultation period (30 days or 45 days only applies where there are 20 or more redundancies). However it would be difficult for an employer to justify a consultation period of much less than a week, especially if a selection exercise is to be undertaken.
4. Selection process
If the number of redundancies to be made is smaller than the number of employees in the pool for selection, a fair method of selection must be used.
A fair method of selection is one which is objective. An employer who simply chooses the employees to be kept on subjective grounds acts unfairly. The criteria used may be very simple (e.g. “last in first out”), or can involve a number of criteria and a scoring system. If a scoring system is used, the use of some categories which involve a degree of subjective assessment, may be valid as long as when looked as a whole the process is objective. In determining whether a process has been fair, a Tribunal must consider both the categories used and the process by which employees are assessed to see whether it is a genuinely objective way of selecting employees or whether it is just a cloak to mask the employer’s subjective selection.
Whether the criteria are all objective or partly subjective, the process of assessment must be objective and employees must therefore be given the opportunity to comment on their assessment before a final decision is made. This means they must be able to know how they scored in each category of the assessment. An employee is entitled to see their own assessment but not those of other employees.
5. Vacancies
An employer must offer redundant employees any suitable vacancies. There is a statutory 4 week trail period available so if there is doubt about an employee’s suitability for the job or if the employee doubts the suitability of the job for them, the employee can try the job as long as within 4 weeks a decision is made either by employer or employee that it is not suitable.
Although the employer has an active duty to notify potentially redundant employees of suitable vacancies, in some circumstances, particularly with large organisations or large scale redundancies, it is fair to provide employees with a list of vacancies and invite them to apply for them.
Where there are more potentially redundant employees than there are vacancies, the employer must use a fair process in selecting the employees who are to be offered the vacant positions. The same criteria apply as for redundancy selection. Reorganisations in which “everyone has to apply for their jobs” is effectively the same as a redundancy selection procedure with a wide pool for selection.
There is nothing wrong with incorporating an interview as part of the selection process as long as the process as a whole is objective. If employers attempt to use it as a “back door” method of choosing subjectively the individuals they wish to retain, redundant employees may be able to claim they were unfairly dismissed.
If employees are faced with redundancies, then any vacancies any of them are interested in must be “ringfenced” so that candidates who are not facing loss of their employment and outside candidates cannot be offered the vacancy unless no redundant employees wish to apply for the vacancy or no redundant employee is suitable to fill the vacancy.
6. Appeal
Finally, the employer should allow an employee selected for redundancy the right to appeal against the decision to dismiss them from redundancy. The appeal should be carried out by someone who has not been involved in the process up to that point as is sufficiently senior to overrule the original decision.
Reorganisation
Sometimes an organisation will restructure and a complete role or roles will become redundant. Before making any employees redundant, the employer will devise a system to select for the vacancies in the new organisational structure. If there are as many new roles as old roles then there may not need to be any redundancies. However, in most cases there are fewer new roles and/or some or all of the new roles are on less favourable terms and conditions.
In many cases employers will select for the new roles through tests and/or interviews. Roles in the new organisational structure should be ring fenced so that only those faced with possible redundancy can apply unless there are roles which no one is qualified to do, or there are not enough people to fill the new roles.
However, an employer does not have to be as objective when selecting for the roles in the new structure as they would have to be when selecting for redundancy. For that reason, selection through interview alone might be held to be fair. A degree of fairness is required, however and it would be open to a Tribunal to hold that a redundancy was unfair if the method of selection for the new roles were found to be too subjective. If an employee successfully alleges that the new roles weren’t “new” at all but that they were being “interviewed for their own job” then a Tribunal would expect selection for the new roles to be as objective as selection for redundancy.
Determining if a redundancy is also an unfair dismissal
An employer who fails significantly to follow these established guidelines could face a claim for unfair dismissal.
Failure to follow all these points does not automatically render a dismissal for redundancy unfair, it all depends on the seriousness of the employer’s shortcomings and the size and administrative resources of the employer.
It is not a defence to a claim for unfair dismissal for redundancy to say that following all the procedures would have made no difference. However, if this is the conclusion of an employment Tribunal it will limit the award of compensation to the difference between what the employee would have received if the employer had acted fairly and what the employee in fact received, which in some cases could be very modest, or even zero.
Failure to pay a Redundancy Payment or Notice
If an employer fails to pay a redundancy payment or fails to either give the required notice of termination of employer or pay the employee in lieu of notice, the employee can bring a claim to an Employment Tribunal.
A failure to pay notice pay amounts to a breach of contract and unlawful deduction from wages. Claims for unpaid notice can either bebrought in an employment Tribunal or in the County Court. the time limit for claiming in the Employment Tribunal is 3 months. In the County Court it is 6 years.
An employee can claim a redundancy payment from an employer by starting a claim in the Employment Tribunal. The time limit for claiming a redundancy payment is 6 months. this cannot be claimed in the County Court.
The Government insolvency service will pay a redundancy payment if the empoyer becomes insolvent (and sometimes even if the employer is not insolvent if the employer is unable to pay).
Payments are also available for up to 8 weeks pay (subject to a maximum weekly amount) for unpaid wages, unpaid notice pay or unpaid holiday pay if the employer becomes insolvent.
Before bringing a claim to an Employment Tribunal an employee must have a certificate form ACAS confirming that conciliation has been attempted.
In some circumstances the time for bringing a claim can be extended as long as the employee has registered for pre claim conciliation with ACAS, using the mandatory ACAS Conciliation procedure within the time limits (6 months or 3 months depending on the type of claim) from the date of dismissal, but there are still strict time limits for the employee to submit the case to the Employment Tribunal once that period of conciliation has come to an end.
Any claim to an employment Tribunal must include certification from ACAS that conciliation has been attempted and must be accompanied by the Employment Tribunal fee or a valid and fully evidenced application for a fee remission. If any of these is missing, or if the application form has not been correctly completed or if documents of information is missing, the application will not be accepted and it will be returned to the employee.
A claim to the County Court does not require the employee to use ACAS conciliation. there is still a fee, but the Court fee may be lower than the Employment Tribunal fee.
Links
Government guidance on redundancy
ACAS guidelines and publications on redundancy are available.
ACAS guidelines on lay offs and short time are available.
Disclaimer
Please note that the information on this page is intended to be a guideline and is therefore a summary of the law only and not a complete guide. Before taking any action based on this information you are strongly advised to take legal advice. Whilst every effort has been made to ensure that the information contained on this page is up to date and accurate, no guarantee can be given to this effect.