What is redundancy, who can be made redundant and what are my rights?
Job losses are climbing as businesses feel the financial effects of the coronavirus crisis.
What are your rights if you are made redundant?
What is redundancy?
When a business needs to reduce its workforce, it closes jobs and the people doing those jobs are made redundant.
It is not the same as getting the sack.
If you are made redundant, you have rights written into law.
Who can be selected for redundancy?
You must have been chosen fairly.
Among the reasons that are not considered a fair basis for selection:
- Your age or gender
- You are pregnant
- You have been a whistleblower
- You are a member of a trade union
- You have asked for holiday or maternity leave
Employers may make selections based on length of service (last in, first out) or disciplinary records.
Many firms ask for volunteers, and offer a redundancy payment.
However, it is up to the employer whether they actually select those volunteers for redundancy.
I’m furloughed. Can I be made redundant?
You can be made redundant while on furlough, but the same rules of fairness apply.
Some people will have redundancy rights in their contract which may be more generous than the legal minimum.
Can my employer make me redundant on the spot?
The amount of notice you are given will depend on how long you have been employed:
- At least one week’s notice if you have been employed between one month and two years
- One week’s notice for each year if employed between two and 12 years
- 12 weeks’ notice if employed for 12 years or more
You are entitled to a consultation with your employer if you are being made redundant.
If an employer is cutting 20 or more jobs at any one time, it must organise a collective consultation involving a union or employee representative. This must start at least 30 days before anyone’s job ends.
If 100 or more people are being made redundant, group meetings must start at least 45 days before anyone’s job ends.
Even if a company is insolvent and is shutting down, there is still a consultation process.
What redundancy pay am I entitled to?
If you have worked continuously for your employer for two years or more, you have the legal right to redundancy pay. There is a statutory minimum but some employment contracts and employers are more generous.
The amount is calculated from your age, length of continuous service, and current salary. You will get at least:
- Half a week’s pay for each full year worked when you’re under 22
- A week’s pay for each full year worked when you’re between 22 and 41
- One and a half week’s pay for each full year worked when you’re 41 or older
An employer is not obliged to pay you more than £16,140, or £16,800 if you’re in Northern Ireland.
If you want to check your entitlement, the government has a redundancy calculator as does the Money and Pensions Service.
If you still have holiday owed when you leave, you are entitled to be paid for that too.
If a business has gone bust, then redundancy pay may be provided by the government.
Guides to redundancy
What happens to the tax I’ve paid?
The first £30,000 of any redundancy pay is tax-free.
This amount includes any non-cash benefits that form part of your redundancy package, such as a company car or computer. These will be given a cash value and added to your redundancy pay entitlement.
Any amount over that will be taxed.
At the end of the financial year (which runs from April to March) when you have been made redundant, it is worth checking whether you have paid too much or too little tax. This may depend on whether you have found another job.
What can I do to find another job?
If you are facing redundancy, you may be allowed paid time off to look for another job.
If you have worked continuously for your employer for at least two years, you are allowed to take 40% of your working week off – two days out of a five-day week, for example – to attend interviews.
Your employer will have to pay you for this time. If you take any more time off than this, they do not have to pay you for it, although some employers may be more generous.
Anyone re-training after being made redundant may also be entitled to grants, bursaries, loans, and free courses.