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What is Redundancy?

By: Chris Hogan MSc - Updated: 7 Oct 2012 | comments*Discuss
 
Workers' Rights Employee Workplace

Being made redundant is the term used to describe the process where an employee loses their job because it's no longer required, as opposed to being dismissed because of some misdemeanour. Generally the amount of compensation that employees' receive depends on the salary they are on at the time of redundancy and the length of time they have been with the business. Depending on the circumstances surrounding the organisation, employees may be offered voluntary redundancy, or it could be compulsory.

Reasons For Redundancy

There may be many reasons why a firm considers redundancy. It might simply be that the company is in trouble and needs to cut staff costs to remain in profit, or it could be that restructuring or new technology means that a job no longer exists. Two other situations that occur relatively frequently are the Relocation Of The Workplace to another part of the country or the Outsourcing Of Jobs To Another Company. In both these cases, there are specific regulations that apply which are covered by individual articles in this section.

Government regulations require organisations to consider all other alternatives before selecting redundancy and this process should be fair and equitable. Redundancy is one of the areas where the regulations only apply to employees, not workers or the self-employed, and those who are unsure of where they stand should find out from the government's website, www.direct.gov.uk.

Compensation Payments

Generally, only employees with longer than two years service will be eligible for a compensation payment. There are other conditions too, although these should be explained to any employees facing redundancy. The statutory minimum compensation is calculated as follows:
  • 0.5 week’s pay for each full year of service where age during the year less than 22.
  • 1.0 week’s pay for each full year of service where age during the year is 22 or above, but less than 41.
  • 1.5 weeks’ pay for each full year of service where age during the year is 41.
In reality, many employers offer better terms than this, particularly with voluntary redundancy, where workers are asked to apply. If there are signs that a company is going to have to restructure radically and there may be more than one round of redundancies, it is sometimes worth applying for the first round, as the subsequent compensation packages can be less attractive. If, after several rounds of voluntary redundancy have been processed, there's still a need to get rid of some more staff, that's where the compulsory redundancies come in.

If you are unable to find another job and you have received the statutory redundancy pay, this should not affect your rights to Jobseeker's Allowance or other benefits, nor will it be subject to tax. If you have received a package that delivers more than the minimum levels, then that may affect both of these situations.

Advice Will Be Required

Redundancy is a complex area and no two situations are identical, so if it looks like it may be about to affect you, you should definitely get independent advice. If you are not a Union Member, then consider joining one as they will be a tremendous source of help. Failing that, the Citizens Advice Bureau (CAB) is a good place to start, and the various government websites, but consider getting the advice of a Lawyer Who Specialises In Employment Law, which may prove to be money well spent in the long run.

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