16 Mar 2020
Redundancy is another form of dismissal. It can occur as a result of a business closing or a changing location. You may also consider redundancy to eliminate or outsource certain roles to reduce expenses.
During the process, by law, you must give your staff a redundancy notice period, pay and time off to find a new job – amongst other entitlements.
For urgent enquiries regarding your responsibilities during the redundancy process, contact Croner today on 0808 145 3380. We’re experts in employment law and our services help to keep you on the right side of the law.
Otherwise, continue reading this piece as we explore the requirements for a notice period during the process. We’ll highlight the minimum notice period and the circumstances under which you can make an employee redundant without a notice period.
Employment law and redundancy notice period
After selecting employees for redundancy, you’re required to give them appropriate notice before dismissing them. The redundancy notice period is the time in between when you inform them of the redundancy and their last working day.
It’s important to know how much notice for redundancy you must provide your staff with. While some employers may decide to give their employees more than the minimum period required by law, you can’t give them less.
What is the minimum notice for redundancy?
According to the law, you must give your staff:
- At least one week’s notice if they’ve been with the organisation between one month and two years.
- An extra weeks’ notice for every year they’ve been in your employee between two and twelve years.
- Twelve weeks’ notice if they’ve been in your employee for twelve years or more.
You’ll apply the same notice period for voluntary redundancy.
Depending on the circumstances surrounding the redundancy, you should either:
- Pay employees through their notice period.
- Or pay them in lieu of working through their notice period (if included in their contract).
It’s worth noting, while there’s no maximum redundancy notice period, you can include wording in your employee’s contract of employment offering them a longer period than the statutory minimum period.
When does redundancy notice period start?
The period only begins after you’ve informed your staff that you’ll be making them redundant.
If you inform them in person, for example, the period should begin the next day. If you inform them by post or email, the period should begin after giving them a reasonable amount of time to receive and read the letter.
How to calculate the redundancy notice period?
You’ll give your staff a notice period after the redundancy consultations. While the period may vary depending on their contract of employment, it must be at least the statutory notice period calculated based on the length of their employment.
So this means if they’ve been with your organisation longer than a month but less than two years, you must give them at least a week’s notice and if they’ve been with you for longer than two years and no more than 12 years, you must give them a week’s notice for every year they were at your company.
When employees have been with you for 12 years or more, their statutory notice period should be no less than 12 weeks.
Making someone redundant without notice
Under certain circumstances, you may dismiss an employee without allowing them to serve their notice period.
This can occur if you’ve included a clause in your staff’s contract of employment stating that you may dismiss them without notice. In this situation, they must receive payment for the period that would have served as their notice period.
Is payment in lieu of notice taxable when made redundant?
Yes, it is. Following the government’s changes to taxes for payment on termination of employment that went into effect on the 6th of April 2018, payment in lieu of notice (PILON) for redundancy now classes regarded as earnings.
This means any payment over £30,000 is liable for tax and national insurance contributions as their ordinary pay will.
Extension of redundancy notice
Depending on the circumstance, you may need to extend the redundancy notice period. This may occur because of changes to the business’s financial situation.
Receiving a notice of redundancy is legally binding and you cannot withdraw it without your employee first agreeing to it. Whatever your reason is for extending the redundancy notice period, you’ll need your employee’s express consent.
However, according to section 141 of the Employment Rights Act of 1996, if you offer them alternative and suitable employment by way of extending their notice period and they refuse, they may lose their right to a statutory redundancy payment.
Notice pay and redundancy pay
You’ll base the amount your staff receive on their age, weekly pay and length of service.
If they’ve been at your organisation for two or more years, they’ll receive:
- Half a week’s pay for each full year they were under 22.
- One week’s pay for each full year they were 22 or older but less than 41.
- A week and a half pay for each full year they were 41 or older.
In terms of payment in lieu of notice, you’ll need to give your staff all the pay they’d receive during the notice period. It’ll cover their basic pay and include other benefits such as commission and compensation for the loss of certain benefits including medical insurance, mobile phone and the use of company car.
The same applies when an employee’s off sick during the redundancy notice period. If the period is the same as the statutory notice period, employees should receive their normal full pay.
If the contractual notice period is longer than the statutory notice period and they’re off sick, you should pay what they’d normally get as sick pay.
As well as their entitlement to pay, your staff must also continue to receive other contractual benefits as set out in their employment contract. This includes the continued use of a company car during the redundancy notice period.
Redundancy notice periods and new jobs
It’s not unreasonable for your staff to request for some time off to look for another job or to arrange for training that’ll help them find a new job.
In fact, by law, if they've been with the organisation for two or more years by the date of their notice period, they’re allowed a reasonable amount of time off.
While there’s no information on how long is ‘reasonable’, you should base this on individual circumstances.
It’s worth noting, some employees may secure alternative employment and might decide to start their new job before the end of their notice period.
If the employee does so without your consent, you can consider them to have resigned. If they do inform you of their intention, it might be a good idea to allow them to leave earlier as it’d mean you would save of paying out wages.
Still not sure how to go about the redundancy process? Speak to a Croner expert today for help with your selection process or general redundancy guideline. Call us free on 0808 145 3380.
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