Greater Manchester Pay and Employment Rights Advice Service Factsheet

• Give as much warning as possible that redundancies might happen.
• Try to avoid redundancies by cutting down on overtime, not taking on new people, bringing in short-time working, retraining workers, etc.
• Give workers a chance to volunteer for redundancy if they want to.

Consultation

There are rules laid down which say how and when an employer must consult with trade unions or employee representatives about redundancies if 20 or more employees are to be made redundant within a period of 90 days. Employers must consult with trade unions in companies where unions are recognised, otherwise they must consult with representatives who are elected or appointed by the affected employees. If your employer does not consult properly when making you redundant, you may be entitled to extra money which is called a “protective award”. Employers should also individually consult workers who may be made redundant and a failure to do so is likely to be grounds for unfair dismissal claims.

Selection procedures

There are two parts to a fair selection procedure. First of all the employer must correctly identify the “pool for selection”. This is the group of employees affected by redundancy. To give an example, a company decides to centralise its clerical work at one of its 3 sites where most of the paperwork will be done in future. The correct pool for selection in this case is made up of all the clerical workers in the company, not just the ones that work at the 2 sites where the clerical work will stop. Secondly, the employer must use a fair selection procedure to decide which of those employees are to be made redundant.

Time off for job hunting

If you are chosen for redundancy your employer should allow you reasonable time off to look for another job or to arrange training, and this should be paid time off if you have worked for your employer for two years or more.

Redundancy payments

Employees (not workers in the wider sense of the word) who have been employed for two years are entitled to statutory redundancy payments if are dismissed because of redundancy. The amount of payment depends on age, length of service, and weekly earnings. If you have the right to a payment you get it whether or not you have another job to go to.  You do not pay tax on redundancy payments (unless they are over £30,000.)

There should be a chart with this factsheet which shows how to work out a statutory redundancy payment, if it is not included then please contact us for one. In addition to the statutory redundancy payments set out in this factsheet, you should check your written contract of employment if you have one because some employers give contractual redundancy payments which are higher than the statutory ones.

Length of service

To find out if you are entitled to a redundancy payment you need to work out how long you have worked for your employer. You must have worked for two years or more, no matter how many hours a week you work.

• When working out how long you have worked, you count all the time up to the date when your employment ends (including notice you have or should have been given).
• If your firm has changed hands whilst you have been working there, you count your length of service from the time you started work, not from the time the new employer took over.
• You can only count “continuous employment”. This means that if you had a job with a firm, left, and later came back again, you can only start counting your time at work from the time when you came back, unless you went back within a week. (The rules on this are complicated and if your record of employment is not straightforward you may need to take advice on this.)

The maximum number of years` service which you can count towards redundancy payments is twenty.

Your age

How many weeks` pay you will receive for a redundancy payment depends on how old you are.

• Up to the age of 21; ½ a week’s pay for each completed year of service
• 22 – 40 years; 1 week’s pay for each completed year of service
• 41+ years of age; 1.5 week’s pay for each completed year of service

A week’s pay

When working out how much redundancy payment you are entitled to you will need to know what counts as “a week's pay”. A week's pay is average wages before deductions. It does not include overtime unless your contract says that your employer must provide it and you must work it.

• If your normal working hours are the same every week and your pay is the same every week, a week's pay is what you would receive if you worked a normal week.
• If your pay varies according to the work you have done but your working hours are always the same each week, a week's pay is worked out by multiplying the number of hours you work each week by the average hourly pay you have received over the last twelve weeks of your employment.
• If you work different hours in different weeks, a week's pay is worked out by taking the average pay and the average hours worked over the last twelve weeks.

Limit on a week`s pay

Statutory redundancy pay is capped at £380 per week (to 31^st Jan 2011, rising to £400 per week on 1^st February 2011).  If you normally earn more than this per week it is not counted, but your employer can choose to pay you more and you should check your contract to see if it improves on your statutory rights.

The offer of another job

You cannot claim a redundancy payment if your employer has offered you another suitable job and you have been unreasonable in turning it down. The rules about this are as follows:

• The offer must be made to you by your employer or an “associated employer” ;
• The offer must be made before the end of your present job;
• It can be a written or a verbal offer;
• The new job must start immediately after your old job ends, or within four weeks of it ending;
• It must be either on the same terms and conditions as your present job (e.g. the same hours and rate of pay) or it must be “suitable” for you. If the job offered is not on the same terms and conditions as your present job, you can have a trial period of four weeks to decide whether it is "suitable'' for you. You must not work longer than four weeks unless you and your employer agree in writing before you start that it will be longer.

Change of workplace

Often employers with more than one site may consider closing one site down to cut costs. Whether or not they can expect employees to move to another site depends on the contract, the distance, and on individual circumstances. Contact us for more advice about this if necessary.

“Suitable” and “reasonable”

You must be very careful about refusing an offer of a different job because it is not “suitable”. The law on this is very complicated. If you are thinking about turning down a job because you do not believe it is “suitable”, take advice first. If you turn down a reasonable offer you are not entitled to a redundancy payment. If you decide the new job is not “suitable” and leave it within the trial period, the law says that your employment ended when your old job did.

Notice of redundancy

The amount of notice your employer must give you that you are to be made redundant varies according to how long you have worked for your employer.  You have the right to:

• one week's notice if you have worked for one month or more but less than two years;
• one week's notice for each year you have worked if you have worked for your employer for two years or more but less than twelve years;
• twelve weeks' notice if you have worked for twelve years or more.

Your contract may give you more notice than these legal minimum periods.

Leaving your job early

If you leave your job before your period of notice ends, you will lose your right to a redundancy payment unless your employer agrees to pay it to you anyway. You must ask your employer and, if s/he agrees, you must get this in writing.

Right to contributory Jobseeker's Allowance

If you get a redundancy payment this should not affect your right to contributory Jobseeker's Allowance. To get contributory JSA you will have to meet the normal conditions (e.g. to have paid National Insurance, and to be available for and actively seeking work).

The only time your contributory Jobseeker's Allowance may be affected is if the amount you have been paid includes a payment “in lieu of notice”.  There are two ways in which this can happen.  If your contract allows your employer to pay you instead of giving you notice, then this amount will count as pay.  For example, if your employer has to give you six weeks notice, you may be asked to leave before this time but would be paid the full six weeks as if you have worked them.  However, in some cases the contract does not allow this, and the payment you are being given “in lieu of notice” may actually be compensation for breaking your contract.  In this case it is not pay, and your employer may not have taken out tax and National Insurance.

Job Centre Plus will count this money as wages, whether it is pay or compensation, and your benefit will not start until the time when your notice runs out.  However, if you have been given compensation, and no National Insurance contributions have been taken out, it is very important that you sign on at once and ask Job Centre Plus to credit you with National Insurance contributions.  If you do not do this your benefits could be affected in the future. See our factsheet Notice for more information about this.

Pension

If you have been paying into a company pension you may need to decide what to do about the contributions you have paid in. If you have built up pension contributions in your employer's scheme, take advice from your trade union or another independent body before you decide what to do.

Non-payment of redundancy pay and other amounts

• If you think you are entitled to a redundancy payment and your employer does not automatically pay it, you should send your employer a grievance letter; see our factsheet on Grievances for guidance about how to do this.
• If your employer owes you wages, holiday pay, notice pay or anything else as well as redundancy pay, you should also list those monies on your grievance letter.
• If your employer is insolvent, he or she will not be able to pay you, and you should make a claim to the Redundancy Payment Service (RPS). They may be able to pay you all or some of any unpaid wages, outstanding holiday pay and notice pay. Contact the RPS for a claim form on 08451 450 004.
• If your employer is not formally insolvent and has made you redundant without paying you a redundancy payment, then you may still be able to claim a redundancy payment from the Redundancy Payment Service but not payment of other monies you may be owed. You will be expected to make a claim to the Employment Tribunal first, and you should start the procedure by sending a grievance letter.

Lay-off and short time working

Sometimes employers lay employees off or put them on short-time working. If you are laid off or on short time for four weeks at one go (or six weeks within a period of thirteen weeks) you may be able to claim that you have been dismissed and be eligible for redundancy payments, if you`ve worked for 2 years or more. You should see our factsheets on “Lay-off and Short Time Working” and “Claiming Redundancy If You Are Laid-Off Or On Short Time”.  As you will see, the procedure for doing this is very complicated and you should also take advice before deciding whether to proceed.

If you need more information about pay and employment rights, contact

Greater Manchester Pay and Employment Rights Advice Service

( 0161 839 3888 phone and answer machine)

We provide telephone advice only and cannot see people face to face

visit our website: www.gmemploymentrights.org.uk

Trade Unions

Trade unions help workers to get better pay and work conditions.

For further information contact the: North West TUC, Tel: 0151 236 5432

updated Feb 2011

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18* - It is possible that an employee could start to build up continuous service before age 16, but this is unlikely and therefore we have started Table 2 from age 18.

61* – The same figures should be used when calculating the redundancy payment for a person aged 61 and above.