Where an employer can show that there is a reduced requirement for a role, it can potentially terminate the employment lawfully. In order to do so, the employer must demonstrate that there is a genuine redundancy situation and complete a consultation process with any and all affected employees.

Joseph Lappin and Charlie Thompson, partners in our Employment law team, outline the basics of and provide tips for employees facing redundancy.

What are my rights as an employee at risk of redundancy?

Employees’ rights come from two sources – contract and statute.

In the event that your employment is terminated, you are entitled to notice pay under your employment contract. Your contract and related policies may also entitle you to pro-rata commission and bonus on termination.

If you have deferred remuneration or equity, the underlying contractual documentation (such as the plan rules and award letters) may set out your entitlements on termination. In some cases, an employer might have a contractual redundancy policy which sets formal requirements in terms of procedure and enhanced payments to redundant employees.

Under statute, employees with at least two years’ continuous service are entitled to a statutory redundancy payment, which is calculated based on the employee’s age, length of service and weekly pay.

Employees with two years’ continuous service also have protection from unfair dismissal. This means that in order to dismiss you fairly for redundancy, your employer must establish that there is a reduced requirement for your role, and follow a fair selection and consultation process before dismissing.

Employees have other statutory employment rights, such as protection for whistleblowers and protection against discrimination. In some cases, an employee’s selection for redundancy may breach one of these rights.

Employers also must meet certain formal requirements when dismissing more than 20 employees at a single establishment for redundancy within a 90 day period. Failure to do can make the employer liable to pay up to 90 days’ salary to each affected employee.

Settlement offers

Employers will often make a settlement offer to employees before, during or after a formal redundancy consultation. The typical premise of such an offer is to “buy out” the employee’s potential claims in a settlement agreement, often through the promise of an enhanced payment above the statutory and contractual minimum. Employers may also seek to impose further obligations on employees, such as in relation to confidentiality.

What should I do next?

If you are at risk of redundancy, it is vital to understand your legal and commercial position, as this will help determine your strategy – in particular whether to contest the redundancy and/or how best to negotiate a settlement offer.  If you would like legal advice regarding redundancy, contact our employment team.

How has the pandemic and recent economic turmoil affected redundancies?

There was a record number of redundancies in 2020, peaking in November when there were approximately 402,000 according to Statista. Numbers then fell dramatically as the economy emerged from Covid-19 lockdowns, and in August 2021 they were at their lowest level in seven years. Many companies severely affected by the pandemic had already made staff redundant, and so there was little need or appetite to go further.

The end of the furlough scheme in September 2021 saw a slight rise in redundancies, but not nearly as dramatic an increase as the initial 2020 boom. Numbers of redundancies have begun to creep up again after May 2022 as a result of growing political and economic instability both domestic and international.

Media coverage

Twitter’s decision to make more than half of the company’s workforce redundant with immediate effect prompted legal claims in the UK and US. We have previously gone into more detail about the Twitter situation.

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