Redundancy: understanding your rights ahead of the end of the furlough scheme

Since the Covid-19 pandemic began, 11.6 million workers have benefited from the UK furlough scheme. With the government programme coming to an end on 30 September, Thompsons Solicitors and the trade union movement is concerned about the high rates of unemployment that could follow.

Below, employment rights specialist, Jo Seery, gives an overview of redundancy rights.

Your redundancy rights

In general, employees who have two years continuous service and who are dismissed by reason of redundancy have a right to:

• A redundancy payment;
• To be treated fairly in the redundancy process; and
• Reasonable time off work to look for alternative employment.

Reasons for redundancy

The law says a redundancy situation arises when:

• A business closes;
• A workplace closes; or
• There are fewer employees needed to do the work available.

If an employer closes their business and then reopens it as something completely different, that would also count as a redundancy.

If the actual workload has not decreased, but fewer employees are needed to do it, for example, because of a reorganisation, this would be a redundancy situation too.

In each case, you need to work out whether there is a redundancy situation, and if there is, whether the dismissal was caused by that situation. You need to keep an eye out for ‘redundancies’ that are in fact employers covering up a dismissal which would otherwise amount to discrimination or victimisation - such as when trade union activists face redundancy.

Redundancy payments

Two years’ continuous service entitles someone to a statutory redundancy payment.

The payment is calculated according to age, weekly pay (subject to a statutory cap which is reviewed usually in April each year and is currently £544 per week) and the number of years of continuous employment. The formula followed is:

• One and a half weeks’ pay for each complete year of service after reaching the age of 41;
• One week’s pay for each complete year of service between the ages of 22 and 40 inclusive; or
• Half a week’s pay for each complete year of service below the age of 22.

Some people may also have a contractual right to a redundancy payment that is better than the statutory minimum.

Furloughed workers are entitled to have statutory redundancy pay calculated on the basis of their normal pay and not their furloughed pay.

Fair redundancy

Redundancy is deemed to be a fair reason for dismissal. However, the employer must act reasonably and follow a fair procedure. A fair procedure requires the employer to:

• Warn and consult; and
• Apply a fair selection procedure;

A failure to follow a fair redundancy procedure will normally make the dismissal unfair.

Suitable alternative employment

Before making anyone redundant, employers are required by law to look for suitable alternative employment for the employees. 

Someone made redundant who refuses a suitable offer of alternative employment can lose the right to a redundancy payment.

Whether an alternative job is suitable depends on objective factors such as job content, status, pay and benefits and other terms and conditions of employment.

Collective redundancies

Where the employer proposes to make 20 or more employees redundant at one establishment within a period of 90 days, they must consult with the appropriate representatives. This will be the union where the union is recognised or if the union is not recognised, it will be the elected representatives.. 

The duty to consult is in respect of all the employees who may be affected, and it must be in good time before the first stage of the dismissal takes effect. ‘In good time’ means at least 45 days where 100 or more employees are proposed to be made redundant at one company otherwise employees must be consulted at least 30 days before the first dismissal takes effect.

The obligation to collectively consult also applies if the employer is proposing to dismiss 20 or more employees in order to introduce new terms and conditions of employment.

If you find yourself facing redundancy because of the CJRS coming to an end, or you are dealing with other employment issues, your trade union may be able to help.