The sad reality of redundancy

May 15, 2009 8:39 am Published by

Sadly, most of us know someone affected by redundancy at the moment.  ‘Redundancy’ can be a dreaded word, to employers as well as their employees.  It is sometimes inevitable due to a downturn in business or a cash flow problem there is no money to keep people paid.  Subject to the right procedures being followed, with fair consultation and consideration of any suitable alternative work to be offered, dismissal for redundancy is often lawful and little can be done about it.

What is redundancy?

This is when the need for work of a particular kind has stopped or reduced, usually because the work level had gone down or the business doesn’t want to pay so many workers to do it.  It is often a legally fair reason for dismissal, provided it is genuine and the right procedures are followed.

What procedures are required?

The employer has to make sure there is a genuine redundancy situation.  Then he has to fairly select which employee may be asked to leave, based on good business reasons like relevant skills, experience, standard of work, attitude, absence and any disciplinary record.  LIFO (“last in, first out”) is usually just a tiebreaker, though if someone is fairly new they have fewer rights so may be picked to go.  The selection criteria are applied to all employees doing the same or similar jobs.  Employees put at risk of redundancy are invited to a meeting for them to comment on anything, including the redundancy situation, the selection criteria and how they are applied, and any suitable alterative work for which they wish to be considered.  They have the right to bring along a colleague or TU rep.  The crucial thing is that this consultation should be carried out before final decisions are made, though of course this is easier known than proved!

Should other work within the business be offered instead?

Yes, there must always be consideration given to whether there is suitable alterative work available within the business.  ‘Suitable’ means that the employee is suitable and that the employee thinks it reasonably suitable for them.  This can include transfer to the job of another person, who may then be redundant themselves: called ‘bumping.’

So just how much is redundancy pay?

Not the golden sum that employees often think it will be and that can be a cruel disappointment.  If there is no higher amount given by the contract of employment or under an agreement with the employer, then only the statutory redundancy is payable.  An employee of less than two years service gets nothing.
In summary, redundancy pay is usually one week of pay (capped at  £330 per week, soon to rise to £350) for each complete year worked (capped at 20 years).  The multiplier is .5 for each year under age 22, and 1.5 weeks for every year over age 41.  For example if a 40 year old has worked for an employer for 10 years and earns 30k, they get statutory redundancy of £3,300.  If a 60 year old works for 5 years and earns 16k, they get £2,308.  The maximum possible is under £10,000, needing at least 20 years service by someone 61 years plus.  A useful calculator of redundancy pay is at Employment matters/ Redundancy/ The Redundancy ready reckoner is on the right.  Other payments will usually be only paid notice or pay in lieu of notice and for accrued holiday.
Anyone involved in redundancy may well wish to take advice to ensure that all requirements are met and dues paid. It can be well worth an hour of a lawyer’s time to answer queries and make sure that all is legally in order.   Then, cruel as it seems, it is probably on to searching for the next job, hopefully before the redundancy money has run out!
Frances Barker is employment partner at Blocks Employment Service.

Contact her at Blocks Solicitors on tel. 01473 343905 or

The above is general information only and individual advice should be taken.

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This post was written by Frances