Everything You Need To Know About Being Made Redundant

Over the past two years we’ve seen record numbers of redundancies from businesses who have suffered due to the pandemic. Companies in the hospitality and events sector in particular suffered when bars, clubs and restaurants were forced to shut. But it wasn’t just that. Some high street retailers such as Arcadia Group who owned Debenhams and Topshop, went bust. And plenty of other businesses just decided to downsize. If you’ve not suffered from being made redundant I’m sure you know someone who has.

The recorded level of redundancies in September to November 2020 was the highest of any quarter since records began in 1995 at 402,000. Since then numbers have been falling, but redundancies are a part of businesses when they decide to restructure, change direction or downsize. Being made redundant isn’t something anyone should expect to face, but it’s a good idea to know how it works so you can prepare if it does happen.

Why would you be made redundant?

You may be made redundant if your business doesn’t need you to do your job anymore. For example if systems have been brought in to replace manual work, or the business no longer need the service you provide. Your particular workplace or site might be closing. This may be permanently or they may be relocating to somewhere further away. Or your employer may be going out of business or downsizing so needs fewer employees.

The redundancy process

If you are being made redundant there will be a consultation period. The length depends on the number of people being made redundant. If there are more than 20 people then you’ll be part of a collective redundancy meaning there will be a group consultation. This consultation period must start at least 30 days before anyone’s job ends. Or 45 days before if more than 100 people are being made redundant.

During the consultation period you’ll have the chance to ask questions about why this is happening and what to expect. This is also the time to consider and suggest other options to redundancy if you want to stay. For example what other roles in the business may be available. In some cases you may be competing for roles against colleagues if the number of people doing a particular role is reduced. This is when you’ll find out what criteria will be used, but length of service can’t be used against you.

If you are offered another role and you decide not to take it, remember that any reason for rejection needs to be solid otherwise you may reduce your redundancy package. You may reject a role as it’s different days or hours and you don’t have childcare. Or it’s a lot further away and you can’t travel there.

Notice period

Your redundancy notice period depends on your length of service so if you’ve been there over 12 years then it’s 12 weeks. If you’ve been employed between two and 12 years then its one week’s redundancy notice for each full year worked. If you’ve been employed between one month and two years then it’s at least one weeks notice.

This period starts as soon as you’ve been formally notified that you’re being made redundant and not from when you’re told your ‘at risk’.

Are you being unfairly dismissed?

There’s a long list of reasons that can’t be used as the basis for redundancy such as your age, race or gender. You can’t be made redundant if you’ve made a flexible working request, made a grievance against another member of staff or because you are pregnant or on maternity leave.

If you think you’ve been selected unfairly for any reason you can appeal. You will need to contact Acas before you can make a claim to an employment tribunal.

How much is redundancy pay?

If you’ve been employed in the same job for at least two years, your employer has to pay you statutory redundancy. This depends on your current salary, how many continuous years of service you have and your age. Age affects things because anyone under 22 will get half a week’s pay for each year of service; but if you’re over 41, it’s a week and a half’s pay for each year of service. Statutory redundancy pay is capped at £16,320 in 2020/21 (£16,980 in Northern Ireland).

During your consultation period make sure you ask for a breakdown of your redundancy pay and how this has been calculated. Depending on your contract you may be owed more than statutory pay. You may also get more pay such as:

• Holiday pay. If you’re owed holiday your employer has to either pay you for it, or let you take it before you leave. Remember you don’t have to take holiday to go to interviews etc as you’re entitled to reasonable time off for this.
• Pay in lieu of notice. In some cases you may be asked or allowed to leave your role earlier than the original planned date. If this happens you’ll get pay in lieu of notice. This is compensation from your employer for ending the contract early.

Is redundancy pay taxable?

As redundancy pay is compensation for losing your job it qualifies for special tax treatment. The first £30,000 is tax free, and you don’t have to pay National Insurance. Although any holiday pay or pay in lieu of notice you will be taxed on.

How you can prepare for being made redundant

Whether you’ve heard things around the office and fear redundancy may be coming, or you just want to know your rights the first thing you should do is check your contract of employment. In your contract it will show your company’s policy around redundancy and what you’d be entitled to.

It’s also useful to think about what you’d do in that situation. For example if the right package was offered would you take it? You may take it as a chance to change jobs, or take early retirement.

From a financial perspective you should always have an emergency fund of 3-6 months worth of expenses. This should include mortgage/ rent, bills etc. This way if the worst does happen you have enough money to survive off for a period before you find a new role.

If you think redundancy may be coming it’s worth looking at areas where you can cut down spending so you can save more.

If you’re unsure about anything free help is available through Citizens Advice or Acas.

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