Redundancy: What Will it Affect?

As of 25th August 2020, there have been 186,456 redundancies across the UK this year, according to statistics published by the Guardian. With the furlough scheme ending in October, it is easy to predict that this number will only continue to rise over the upcoming months. Anyone that is being made redundant will be impacted in several ways – but what will it affect? And how?

The Redundancy Process

The redundancy process or redundancy procedure will be different from company to company as there is no uniform or standard way to conduct it. It should be tailored depending on the company’s size, structure and needs. For example, a redundancy process for a small company making one redundancy in only one department will be extremely different from a large company that is making a whole department redundant. Your staff/employee handbook may contain specific details of your company’s redundancy process.
You should be entitled to a consultation period in any fair redundancy process. The requirements of the consultation period vary depending on the amount of redundancies being made, but at the very least you should have an opportunity to discuss the impending redundancy situation with your employer. You can explore the possibility of avoiding redundancies and discuss alternative roles within the company.
The employer should also use a fair selection criteria to select individuals for redundancy. Again, this will vary depending on the company, but employers often use a selection matrix to score employees against one another, with the low-scoring employees being made redundant.

A Guide to Redundancy Pay

There are three main payments usually involved in a redundancy situation:
Redundancy pay – statutory redundancy pay is calculated based on your age, length of service and salary. You may also be entitled to contractual redundancy pay dependent on your contract.
Notice pay – you may need to work your notice period prior to termination, or you can receive payment in lieu of notice if this is agreed with your employer or a contractual provision.
Accrued and untaken holidays – you will be entitled to receive a payment for any accrued and untaken holidays up until your termination date. Your employer may ask you to take these holidays before your termination date, and they can do so, provided you receive the prescribed notice.
Usually these payments are made in line with usual payroll following your termination date.

Redundancy before two years of employment

If there has been an unfair redundancy, you will not be able to bring a claim for unfair dismissal if you have not been employed for two years as the law currently stands. This means that employers often bypass the consultation process if you have been employed for less than two years, because you would have no standing to bring a claim for unfair dismissal. If you have less than two years’ service, you would also not be entitled to any statutory redundancy payment.
However, this does not necessarily mean that you have no legal recourse if you have been unfairly dismissed. If you have been discriminated against, you can still bring legal action against your employer under provisions in the Equality Act 2010. You can also bring a tribunal claim where you have been dismissed unfairly in limited circumstances, for example following a protected disclosure (whistleblowing). You may also be entitled to a protective award if you have not been consulted and there are at least 20 redundancies.

Redundancy on a zero hour contract

The importance of two years continuous service is again seen here. You require a minimum two years in employment to be entitled to statutory redundancy pay if you are on a zero hour contract. Statutory redundancy pay will be calculated on the number of hours you worked within a specific period.

Redundancy with immediate effect

Employers rarely make redundancies with immediate effect due to the requirement to consult with employees. Redundancies with immediate effect is more common where the company is in financial trouble, or alternatively where you have been employed for less than two years.
If you have been made redundant with immediate effect, you will still be entitled to notice pay. Your notice period will be determined via statute dependent on your length of service at the company, or your notice period will be specified in your contract of employment. Your contract may also state that you can be paid in lieu of notice. This is where you receive the money as a lump sum without needing to work your notice period. Any payment of notice will be subject to tax in the same way your usual salary is.
You will also be entitled to any accrued and untaken holidays. This will be calculated up to your termination date and will again be subject to tax.

Redundancy near retirement age

If you have been made redundant near retirement age, you may be considering early retirement. This will be a decision for you to make based on the type of pension(s), your pension(s) forecast, your overall financial situation and your own aspirations – the same way some people choose to retire early, others choose to work past the standard retirement age.
Early retirement is not a decision that should be made lightly, and it is something you may even wish to discuss with a financial adviser. Your employer may be able to assist you in making this decision by providing you with information that you require.
One thing to consider from the employment law perspective and the redundancy perspective is, if you opt for early retirement, you will not be entitled to a statutory redundancy payment. This could mean that you are missing out on a pay-out of a few thousand pounds. In the scheme of things, it may be a small loss for a greater reward, but you will not know unless you review the impact of early retirement on your unique individual circumstances.

Will redundancy affect my pension?

Again, the type of pension scheme will be a factor. If you are part of a defined benefit pension scheme and you are made redundant, you will stop paying into the scheme until you find another job, retire, or convert the pension contributions into your personal pension.
If you are part of a defined contribution pension scheme and you are made redundant, you can either transfer it to another similar scheme or leave the money to grow. You can enquire with a financial adviser for guidance on this point and your options regarding your pension.

Will redundancy affect my benefits and tax credits?

If you are unemployed, you may be able to claim benefits. One benefit you may be entitled to claim is new-style Jobseeker’s Allowance (JSA) if you have enough National Insurance contributions. Follow the link for more information and the qualifying conditions.
You may also be able to claim benefits for support with housing or childcare. It is worth noting that if you are receiving multiple benefits or tax credits, they may reduce one another.

Conclusion

If you are involved in a redundancy situation, is important that you are aware of your rights and the payments you are entitled to. At Kalra Legal Group we have great experience with redundancy scenarios, and we have great success in negotiating exit packages for employees that are being made redundant.
If you require any assistance or advice please contact our team of redundancy lawyers on 0330 221 0684 or by e-mailing [email protected].