REDUNDANCY PAYMENTS

Employment Rights Act 1996

The termination of employment by way of redundancy is potentially a fair dismissal however whether or not an employee has been unfairly dismissed will be dependant on the facts of each case. The Employment Rights Act 1996 requires the Employment Tribunal to consider whether or not the employer acted reasonably and fairly in dismissing the employee taking into account the size and administrative resources of the employers business.

Qualifying criteria

To qualify for a redundancy payment an employee must satisfy the following criteria :-

• the claimant must be an employee and cannot claim if self employed
• the employee must have been employed continuously for at least two years

Payment calculation

Employers must provide a written statement showing detailed calculations and any dispute can be referred to an Employment Tribunal within 6 months. The amount of the redundancy payment depends on the age of the applicant and the length of service however there is a cap on these payments. Compensation payments are calculated as follows :-

• one and a half week's pay for each year that the employee was over 41
• one week's pay for each year that the employee was over 22, but under 41
• half a week's pay for each year that the employee was over 18, but under 22
• the maximum number of years which may be counted is 20

NB: There is a cap in the definition of a week’s pay currently this is £310 per week

Unfair dismissal?

For the employee to qualify for payment the employment must have terminated either because the business closes, or because there is a reduced need for workers of that employee's particular skills. There are occasions where the redundancy is a sham, usually because it’s cheaper for an employer to pay for redundancy rather than for an unfair dismissal claim or where the selection of those employees whose employment was terminated was unfair or unreasonable. In either case an application can be made to the Employment Tribunal for unfair dismissal where compensation awarded may be substantially higher than the statutory payments outlined above.

Fair dismissal?

In deciding whether or not an employer has acted fairly an Employment Tribunal must consider the following :-

• whether the employee or any applicable Trade Union has been given reasonable and adequate notice
• whether fair selection criteria have been applied
• whether adequate consideration has been given to the employees personal work record.
• whether the employer has given adequate consideration to alternative employment that may be available within the organisation

Suitable Alternative Employment

If an employee is offered suitable alternative employment within the organisation and refuses the alternative job then no claim can be made by the employee however an employee can refuse the alternative job if the refusal is reasonable after taking into account his personal circumstances and needs. If the employee decides to take an alternative job that is offered within the same organisation then the law allows a trial period of 4 weeks in the new job for assessment and the subsequent right to re-instate his previous claim if the new job is unsuitable.