Employers making redundancies have a relatively free hand with employees who
do not have one year’s continuous service, in that they do not have any
entitlement to a statutory redundancy payment or to claim unfair dismissal if
the procedure is in any way faulty. Those employees will only have entitlements
to their contractual notice period (or pay in lieu) in the absence of any issue
of discrimination or other infringement of a statutory right – detrimental
treatment on trade union grounds, for example.
Employees with service of a year or more have unfair dismissal rights, and
employers need to be very careful when carrying out any intended redundancy
exercise in respect of those employees. Technically, unfair dismissal rights
arise for employees with 51 weeks’ continuous service, since statutory minimum
notice is added on to actual service in situations where dismissals occur which
are not for gross misconduct.
Defence of unfair dismissal claims
Briefly, there are four ‘hurdles’ employers must jump to be able to defend
an unfair dismissal claim. The redundancy should be genuine; any selection
process objective; there should be proper prior consultation with the relevant
employees before a decision is finalised, and all reasonable attempts should be
made to locate alternative employment within the group.
Employees with two years’ continuous service or more will be entitled to a
statutory redundancy payment. Statutory redundancy payments are relatively low.
Essentially, employees are entitled to a week’s pay – currently capped at £250,
although this will rise to £260 in February 2003 – for each complete year of
service between the ages of 22 and 40; half a week’s pay for each completed
year between the 18 and 21; and one-and-a-half weeks’ pay for each complete
year of service between 41 and 64.
Employers should also check whether there is any contractual entitlement to
an enhanced redundancy payment, and whether or not that applies to employees
with less than two years’ service as well.
Express notice periods
In relation to contractual rights, employees with express notice periods in
their contract will obviously be entitled to that period of notice, or to be
paid in lieu. Technically, if there is no specific clause in the contract
entitling the employee to payment in lieu, the employer may be in breach, if it
does wish to pay in lieu putting at risk restrictive covenants and other
post-termination restrictions concerning confidentiality. This should be
Employees without express notice periods are entitled to reasonable notice
commensurate with their seniority, status and length of service, with the
absolute minimum being the statutory minimum notice periods (a week for each
year of service up to 12 weeks, with the first entitlement of one week arising
after one month’s service). Although not strictly required, employers will
often follow these procedures to avoid unfair dismissals even when employees do
not have a year’s service, as a matter of good practice.