Unfair Redundancy – Sham Redundancy

If an employee is dismissed by reason of redundancy, he/she is entitled to a statutory redundancy payment from his/her employer. If this is not paid, the employee can claim a statutory redundancy payment from an Employment Tribunal. If the employer has a contractual enhanced redundancy scheme, the employee is entitled to those enhanced terms inclusive of his/her statutory entitlements.

The redundancy process must be carried out in a fair manner. If the redundancy procedure is not carried out in a fair manner, with adequate consultation, then the employee can bring a claim for unfair dismissal and/or wrongful dismissal (if a contractual redundancy policy exists which has been breached).

To claim a statutory redundancy payment, the employee must have two years’ continuous service and show that he/she has been dismissed in order to claim. However, if the selection process was unfair or unreasonable, the employee only needs to have one year’s continuous employment to bring a claim of unfair dismissal.

The employee must present the claim for a statutory redundancy payment within six months from the last working date. If the employee is claiming unfair dismissal as well, this must be presented within three, not six, months.

(a) Consultation

The employer must consult with employees about the proposed redundancies as soon as possible.

All representations by employees should be considered by the employer.

The employer must decide on the number of redundancies as soon as possible. If 20 or more redundancies are to be made at one establishment within a 90 day period or less, the employer must consult with a trade union (or, if the employer prefers, elected employee representatives) at least 30 days before the dismissals take place. If 100 or more redundancies are proposed within a 90-day period, then the consultation must begin at least 90 days before the dismissals take place. Failure to comply with these requirements will allow each affected employee to bring a Tribunal claim for up to 13 weeks’ pay (known as a ‘protective award’) – and it may also mean any dismissals are unfair.

(b) The Selection Procedure

The employer must first decide whether an individual is self-selecting for redundancy or whether it is appropriate to identify a “pool” of employees to select employees from. In making the decision, the employer needs to look at which employees’ jobs are similar; interchangeability of skills, etc.

If the employer gets the pool wrong, by including or excluding the wrong people, the redundancy can be challenged as unfair dismissal.

If a pool is identified, the selection procedure applied could be “last in, first out” or based on a scoring system, with the employer giving points to employees based upon factors which should be as objective as possible. The lowest scorers would be those selected.

Any selection procedure itself should be discussed with and agreed by employee representatives.

Each employee must be shown the basis of the proposed selection and must be given a chance to respond and challenge it.

(c) Alternative employment

The employer must consider alternative employment for each employee before declaring them redundant, and if appropriate offer such employment to the employee or at least an opportunity of applying for alternative roles.

The alternative job should be offered as soon as possible. The first 4 weeks of the new job are treated as a trial and if the employee leaves within this period he/she can still claim redundancy payments if his/her refusal is not unreasonable. If the employee stays for more than four weeks, or if he/she unreasonably refuses to accept the job within those four weeks, he/she loses the right to a redundancy payment.

(d) Redundancy Entitlements

The amount due under statutory redundancy is based upon the employee’s age, length of service, and average weekly pay. For the purposes of calculation, a maximum of £544 (from 6 April 21 (£538 before that) per week is allowed, and a maximum of 20 years’ service.

The calculation depends on the age of the employee and uses a multiplier:

Redundancy entitlement – An employee older than 18 but younger than 22
0.5 multiplied by the weekly wage for each year of service

Redundancy entitlement – An employee older than 22 but younger than 41
1 multiplied by weekly wage for each year of service

Redundancy entitlement – An employee older than 41
1.5 multiplied by weekly wage for each year of service

Redundancy entitlement – Therefore the absolute maximum that can be awarded is
20 years at £544 x 1.5 = £16,320

The redundancy payment is not payable to employees aged 65 or over (or, if different, the normal retirement age for their particular organisation). From 64 to 65 the award is reduced 1/12th for every month up to 65 when it becomes nil.

The Government have an online calculator at: Calculator

(e) Unfair Redundancy

A dismissal which purports to be for redundancy reasons can be challenged on two bases. The first is that the reason for dismissal was not a genuine redundancy situation, ie. a sham redundancy. The second is that although there is a redundancy situation there was inadequate consultation, unfair selection or no alternative employment considered.