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Redundancy and Restructure

The word ‘redundant’ is often used to describe any dismissal which does not arise from misconduct. However in law, redundancy has a specific meaning, and a dismissal will be on the grounds of redundancy if one of the following applies:

• The business employing the employee has ceased or intends to cease trading.
• The place of business where the employee was employed has ceased or intends to cease trading.
• The requirements of a business for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish.

When an employer intends to re-organise its business, and possibly make redundancies, it should consult with all employees who may be affected, and depending on the numbers involved there could be a statutory collective consultation procedure which must be followed. Regardless of numbers involved, when a dismissal is likely to take place, employers must follow minimum best practice and ensure the principles laid down in the ACAS guide to handling redundancies are adhered to.

Not only must the employer have genuine reasons to make a redundancy, it must also ensure that both the procedure it follows and the selection processes used are fair and reasonable. If the employer fails in any of these aspects employees may have a claim for unfair dismissal.

In order to be eligible for a redundancy payment, employees must have at least two years’ continuous employment.

In addition to statutory redundancy pay, employers must also give employees the appropriate amount of notice as prescribed under their contract of employment, or by statute.

If your business is thinking of restructuring, or is thinking of making redundancies, Warners can guide you through the process to ensure it goes as smoothly as possible. We can provide you with a detailed overview of the redundancy process, tailored to your business, and give you checklists to ensure you know what to do at each stage of the procedure. We can also assist with drafting letters which need to be sent at each stage of the process, thereby ensuring compliance with the legal requirements throughout the process.

If you are paying an ‘ex-gratia’ amount to employees we would generally advise you to require the employee to sign a ‘compromise agreement’, and again we can draft these for you.

If you need any assistance in this area please contact one of our specialist employment lawyers as early as possible to ensure your business does not fall foul of the wealth of employment legislation in existence.