Redundancy - the law

Basic legal rules

A redundancy situation exists where an employer closes or intends to close the workplace or reduce the number of employees doing a particular kind of work. In particular, the employer must:

• adopt redundancy selection criteria which are not discriminatory;

• allow employees selected for redundancy time off to look for other work, provided they have at least two years’ service;

• give redundancy pay to all employees with at least two years’ service calculated using a statutory formula linked to age and length of service. A week’s gross pay is subject to a statutory maximum cap which is reviewed annually (£464 from 6 April 2014); and

• offer any suitable available vacancies.

If at least 20 redundancies are proposed, the employer must notify the Department for Business, Innovation and Skills. It must also consult employee reps with a view to reducing the number of redundancies. There are detailed rules which must be followed. If an employer fails to consult, a union can apply for a protective award.

Key developments

• The expiry of a fixed-term contract only triggers the right to a redundancy payment if the non-renewal is due to a reduction in the employer’s need for employees. Where a contract was not renewed because the original post-holder returned from secondment there was no right to a redundancy payment (case 7).