Following the high-profile collapse of Toys R Us, along with New Look store closures and the end of Maplin, plus ladies’ fashionwear retailer Select filing for a company voluntary agreement, thousands of people are currently facing redundancy – but do you know your redundancy rights?
Karen Barker, head of employment law and HR at a Cheshire law firm has shared with us the basic legal rights we should all be aware of.
1. Am I entitled to redundancy pay?
If you have been employed for two years or more then you are entitled to statutory redundancy pay.
The amount of pay you are entitled to depends on your age, length of service and weekly earnings.
If you are under 22 you’ll receive half a week’s pay for every year you have worked there, if you are 41 and under you would receive one week’s pay and over 41 you would be given one and half weeks’ pay for every year of service. Your length of service will be capped at 20 years.
A week’s pay is gross but capped at £489 per week, so if you earn more than this it will cap at £489.
It is always worth double checking whether you are contractually entitled to anything above statutory redundancy pay.
2. What if my employer declares bankruptcy?
Employees are entitled to redundancy pay, however in some severe cases when a company collapses they won’t have the ability to pay you.
If your employer is a company then it will become insolvent, which means it cannot pay its debts.
If your employer is an individual, insolvency will be called bankruptcy, and the individual isn’t able to pay you.
In cases of insolvency and bankruptcy you will be advised to open a claim with the company or individual’s insolvency practitioner.
It may be that you then have to make a claim for redundancy pay, unpaid wages and holiday pay to The Insolvency Service, which is a government body.
If the business is sold to someone else your employment may be protected under what is known as ‘TUPE’ [Transfer of Undertakings (Protection of Employment) Regulations 2006] meaning your employment should transfer across to the new employer.
3. When can redundancy be unfair dismissal?
If you have over two years’ service and feel your redundancy was unfair, you can challenge this for free in an Employment Tribunal by making an unfair dismissal claim. For those with less than two years’ service your rights are much more restricted.
A tribunal will look at a number of factors when considering whether a redundancy dismissal was unfair including the employer’s rationale for making redundancies and the pool of people placed a risk.
Also, whether any process of selection was fair and whether there was adequate consultation with employees throughout the whole process.
Employers should also consider suitable alternatives to redundancy. Employers should only make redundancies as a last option.
4. What’s a redundancy consultation period?
The consultation period is a chance to ask your employer why you’re being made redundant and to discuss any alternatives to redundancy, such as relocation or change in job role.
When more than 20 people are being made redundant it’s referred to as a collective redundancy and a collective consultation takes place.
It must cover ways to avoid redundancies, explain the reasons for potential redundancies, how dismissals are being kept to a minimum and how to limit the effects on the employees involved.
The consultation should also include a representative, whether it’s a trade union representative or an elected employee.
This period is a chance for your employer to demonstrate the steps they have taken to try and avoid making redundancies and it’s your chance to get answers to your questions.
A consultation period must start at least 30 days before the dismissals take effect and at least 45 days prior to the dismissal date if 100 or more redundancies are happening.
Severe penalties can be imposed on employers who fall foul of collective consultation obligations.
5. What if I’m offered an alternative to avoid redundancy but I don’t want to take it?
In any redundancy process, an employer should identify any suitable alternative employment options. This can include finding you an alternative job role or offering you work at a new location.
If it’s a small change in location or job role, and an employee refuses, then the employee can be seen as being unreasonable which can become an issue. Deciding if someone is being unreasonable is subjective but takes into things like your personal circumstances.
If an employee unreasonably refuses to accept an offer of suitable employment as an alternative to redundancy that employee would forfeit their right to a redundancy payment. They will instead be seen to have been dismissed due to redundancy.
Employers must ensure that offers of alternative employment are given careful consideration in their drafting and whether the terms are negotiable or subject to change.
Employees must also review how reasonable any offer is, and where it is considered to be unsuitable, they should provide the employer with well thought out, justifiable reasons for refusal.