Redundancy in the Construction Industry: Advice from Employment Lawyers

Reasons for redundancy in construction

Not every dismissal in the construction sector due to restructuring the business is a redundancy. Redundancy has a statutory definition, namely it is a form of dismissal which happens when an employer either: (i) has ceased or intends to cease the business or (ii) there is a requirement to reduce the size of the workforce in a particular location or workplace.
It is worth noting that redundancy cannot be used as a ‘cover’ for situations such as employees’ misconduct or poor performance. To be certain, before proceeding to the redundancy process, legal advice should be sought to clarify that a particular situation amounts to a genuine redundancy.
The redundancy should be the last resort step. All reasonable steps should be taken to avoid redundancies such as freezing recruitment, furlough, a proposal for a lower pay to the employees.

How construction companies should handle the redundancy process

Redundancy statutes and case law are complex, and it requires proper and fair handling by the employer. Any failure to follow the correct procedure or to give the employees the necessary entitlements will render the dismissal unfair.

The main stages that an employer must follow to ensure a fair redundancy for its employees are :(i) conducting a fair selection; (ii) consulting with the employees; (iii) considering alternative employment options.

The employer must first choose a group from which employees will be selected for redundancy (the selection pool). The employer must identify the selection pool on a fair basis, ensuring that they do not discriminate against certain individuals or groups of individuals on grounds of age, sex, race, religion, or belief. If an employer fails to make a fair selection, the dismissal would be legally unfair. Therefore, it is recommended to use objective criteria in selecting employees for potential redundancies such as: (i) employees’ skills, qualifications, and aptitude; (ii) employees’ performance; (iii) employees’ disciplinary and attendance records.

The employer’s duty to consult the employees at risk of redundancy and also undertaking this step in a fair and meaningful way applies to employees in the construction sector as well. The employer gives a reasonable warning about the potential redundancy and the employee is allowed to respond and to make objections to the redundancy proposal. There is no minimum timescale for less than 20 employees; the employee is entitled to be accompanied by a trade union representative or a colleague. For employers with more than 20 employees subjected to redundancy within a 90-day period, there is an obligation for the employer to carry out collective consultation. This entails providing a list of statutory information to the trade union or employees’ representatives and to conduct collective consultations alongside consultation with every employee individually. The timeline for collective consultation is stipulated in the statute, namely must begin 30 days before the first dismissal taking effect for a maximum of 99 employees or 45 days for more than 100 employees.

If alternative employment can be identified within the organisation, the employer must offer this to the employees affected before the expiry of the employment contract. The employee is entitled to accept the role or to be rejected in which case they might lose their entitlement to redundancy pay.

Redundancy pay and other employees’ entitlements

Provided that the employee subjected to redundancy has more than two years in service, they are entitled to statutory redundancy pay. It is calculated based on a formula involving a week’s pay (capped at £538) and the employee’s length of service and their age bracket. There is a maximum statutory pay of £16,140. The employer is under an obligation to calculate the employee’s redundancy pay and provide them with a written statement setting out the amount they are entitled to.

The employee made redundant in the construction sector has also a right to a minimum statutory paid period of notice. The length of the statutory notice period depends on the employees’ length of service. An employer may require the employees made redundant not to work the notice period if their contract of employment provides pay in lieu of notice (PILON). Failure to give employees the correct notice, or PILON may result in the employee seeking compensation for wrongful dismissal.

Employees with a length of service of two years or more are also entitled to a reasonable amount of time off for either looking for another job or subsequent training.

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Employees working in the construction sector have certain statutory rights when they are made redundant. When in doubt, legal advice should be sought from a solicitor in the event of redundancy.
If you are having queries or need assistance on how the redundancy process in the UK works, or you need legal advice with the negotiation of the terms of the settlement agreement, please contact our team of employment specialists today. Ring 0330 221 0684 or contact our legal team online.