Redundancy – Ensuring a Fair Consultation and Selection Process

Redundancy is a potentially fair reason for dismissal where an employee’s job no longer exists, but it is important that the employer has followed a proper consultation or selection process.  Even if there is a justified reason for the dismissal, an employee may still be eligible to bring a claim for unfair dismissal if an employer has failed to follow the correct process. 

In Polkey v A E Dayton Services Ltd [1987], the House of Lords held that an employer will not act reasonably unless:

1. It warns and consults any affected employees.

This is an important part of the process and could be directly with employees or with their representatives.  There is no legal maximum time period but there is a minimum:

• Less than 20 redundancies: there are no set rules, but guidelines set down for individual consultations must be followed;
• 20 or more redundancies: Collective redundancy formal procedures must be followed;
• 20-99 redundancies: the consultation must start at least 30 days before any dismissals take effect if employees are to be made redundant at one establishment over a period of 90 days or less;
• 100 or more redundancies: the consultation must start at least 45 days before any dismissals take effect at one establishment over a period of 90 days or less.

Failure to comply with the consultation requirements could result in an employee making a claim for compensation, known as a ‘protective award.’

2. It adopts a fair selection process for redundancy.

The selection criteria must be objective, fair and consistent.  Examples could include attendance record, disciplinary record, skills or experience, standard of work performance or aptitude for work. 

It is unlawful for any criteria to involve discrimination on the grounds of disability, sex, race, religion, sexuality or if an employee works part-time or is pregnant.  

3. It takes such steps as may be reasonable to avoid or minimise redundancy by finding suitable alternative employment.

An employer should consider whether there are any alternative jobs available for the employee, whether they are capable of doing the job, and, if so, offer the job to them.  Failure to do so could result in a claim for unfair dismissal. 

An employer should also establish an appeals process. 

Where an employee has not worked continuously for the employer for at least two years they can still challenge a proposed redundancy if they have been subject to discrimination or the reason for redundancy was automatically unfair.  

In a genuine redundancy situation, an employee is entitled to a redundancy payment calculated based on their length of service, age and weekly pay.  The Government website provides a useful tool to undertake this calculation:

Calculate your statutory redundancy pay – GOV.UK 

The maximum statutory redundancy payment changes yearly and is currently capped at £21,570. 

If you are an employer considering making redundancies or an employee who has received an offer of payment in a redundancy situation, and require further advice, please contact Emma Davies [email protected] Tel: 01392 848950.