As part of Talk Money Week, Chartered Financial Planner Josh Richardson FPFS touches on the difficult subject that is redundancy. Below is a Q&A session on what redundancy is, what peoples’ rights are and how much they may receive in the form of compensation if they are facing redundancy.
2020 has undoubtedly been a challenge. Whether you are running a business, have been furloughed or have struggled with the lockdown restrictions; peoples’ lives have been very different at the start of the new decade.
One of the unfortunate consequences that is going to come towards the end of 2020, and as we enter the new year, is the likelihood of redundancies across many sectors.
Unlike the word ‘furlough’ when it was first announced in Spring, redundancy is a word most have heard of. However, not everyone knows what it means.
What is redundancy?
Ultimately redundancy occurs when an employer is forced to cut their workforce. Redundancy is a form of dismissal from your role, although this is unlikely to be through any fault of your own.
What are my rights?
When an employer is looking to make employees redundant, you have certain rights.
One of these main rights is the right to be selected fairly for redundancy. An employer cannot select an individual or a group for redundancy based on things like age, gender, religion, or race.
If you feel this has occurred, you should seek advice from someone like ACAS or Citizens Advice.
You do have the right to appeal the decision to make you redundant. If you wish to do so, you should write to your employer explaining the reasons for your appeal.
How will I be selected for redundancy?
There is no set method an employer must follow to select individuals for redundancy. However, the method selected should be fair and objective.
Your employer could base their decisions on:
- Who was the last employee/s to join the company;
- Your disciplinary record;
- The skills and experience of the individuals within the workforce.
People may also be offered voluntary redundancy.
What is voluntary redundancy?
Your employer may ask staff members if anyone would like to volunteer for redundancy.
Whilst it may be a daunting prospect for some, others may have found a job elsewhere so redundancy may represent a good opportunity. Redundancy may also be offered alongside an option to retire early, which may be attractive for some.
If you do volunteer, there is no requirement for your employer to select you.
Accepting redundancy or applying for voluntary redundancy can often be a difficult decision. If you would like advice on your options, including whether you can afford to retire, please contact us.
How much redundancy pay will I receive?
Redundancy pay is a term many associate with the word redundancy and can often represent a good offer for some.
Some contracts of employment offer superior redundancy packages and, sometimes, when an employer needs to get rid of staff quickly a higher than required redundancy pay package can be offered.
However, if this is not the case, employers will have to pay you statutory redundancy, which is based on how long you have worked for your employer. To be eligible you must have worked for your employer for at least two years.
Statutory redundancy is based on your age, how many years you have been employed and your earnings.
To check what you may be entitled to, use the following Gov.UK calculator:
Will I always get Statutory Redundancy pay?
There are circumstances where you may not be entitled to redundancy pay, including:
- If your employer offers to keep you on; or
- Your employer offers you a suitable alternative role, which you refuse without good reason
There are also certain industries and roles which are not entitled to this pay including members of the armed forces and police service. You should check the Gov.uk information to ensure your role qualifies for statutory redundancy.
Will I be taxed on my redundancy pay?
The first £30,000 of your redundancy pay is tax free. Anything above that will be subject to income tax and national insurance contributions. Tax will be collected by your employer, as they do normally with your wages.
Do I need to be consulted about a possible redundancy?
Yes, your employer should consult with you to let you know why you are being made redundant and also discuss the alternatives available to you.
However, if your employer is making less than 19 people redundant, there is no set procedure about the format of this consultation.
If 20 or more people are being made redundant certain rules apply and your employer must consult you and your elected or trade union representative. If this applies there are greater legal requirements on your employer to get things right. Citizens Advice and ACAS will be able to offer further guidance on this if you are impacted by this.
Will I be given notice of redundancy?
Yes, and this is a legal requirement. Your notice period will depend on your length of service, as follows:
- If employed between 1 month and 2 years – at least one week’s notice
- If employed between 2 and 12 years – one week’s notice for each year you have been employed
- If employed for more than 12 years – 12 weeks’ notice is required
You should check your contract of employment though. Your employer may have agreed to give you more notice; but they cannot have agreed to give you less.
Your employer may offer to pay you in lieu of notice, meaning you won’t have to work your notice but will still get paid. This is at their discretion but must be included in your contract if they wish to do so.
What if I need more advice or think my employer has got things wrong when making me redundant?
There are many services out there who offer free guidance to those who have been made redundant or are being consulted on it. Some of the following are good options:
Citizens Advice: https://www.citizensadvice.org.uk/work/leaving-a-job/
I’m an employer; how do I make an employee/s redundant?
As you can see from above, there are things you must consider and do when considering this route for your staff members.
We strongly advise you speak to a Solicitor or Human Resources Consultant who can guide you on the process and what action you must take. Without doing so you may follow the wrong process and open yourself up to liability. Please get in touch if you would like us to refer you to a Solicitor or HR Consultant in our local area.
If you wish to speak to one of our award winning Chartered Financial Planners about redundancy, regardless of if you are a business owner or an employee facing redundancy yourself, please do not hesitate to contact us on 01482 219325 or at [email protected]