Collective redundancies – a quick guide

What is a collective redundancy?

A collective redundancy is when an employer is proposing to make 20 or more employees redundant within 90 days. If there is a collective redundancy, your employer has to hold a group consultation.

The relevant legislation is section 188 of Trade Union and Labour Relations (Consolidation) Act (TULRCA), which implemented the European Collective Redundancies Directive (Directive 98/59).

If there are fewer than 20 proposed redundancies, no set rules are required to be followed.

Where there is a collective redundancy, the proposed dismissal is based on situations whereby an organisation is downsizing or closing rather than on an individual’s performance or conduct.

What happens in a collective redundancy consultation?

Your employer will arrange a meeting with you to explain the issues, the reason(s) for your redundancy and they will also discuss other alternatives to the redundancy. You can ask to be accompanied by employee representative or a trade union.

The consultation should include:

  • reasons for the redundancies
  • the method of selecting employees for redundancy
  • ways to avoid or reduce the redundancies
  • how the redundancies will be carried out
  • redundancy payments

The group consultations should happen at least:

  • 30 days before the dismissal (for 20-99 proposed redundancies)
  • 45 days before the dismissal (for 100 or more proposed redundancies)

What happens if my employer fails to follow the correct collective redundancy procedure?

If your employer fails to follow correct procedure, you may bring a complaint before an employment tribunal within three months. If the tribunal finds the complaint is justified, a protective award may be made. The protective award requires the employer to pay the employees remuneration for a protected period consisting of up to 90 days’ normal gross pay for each affected employee.

The employee can bring a claim for unfair dismissal and/or protective award within 3 months from the effective date of termination.

You do not need to have been employed for two years to qualify for a protective award,

If a fair process is not followed, there is a possibility of the following risks for the employer:

  • Legal claims in the Employment tribunal
  • Compensation to employees for unfair dismissal and/or compensation for financial loss
  • Compensation to employees for failure to collectively consult
  • Reputation risk
  • Negative impact on employee relations with continuing employees.

The election of employee representatives

There is a legal duty to consult elected employee representatives.

The employee representatives can be representatives of a recognised trade union, or directly elected representatives elected by employees for the purpose of the redundancy consultation.

The employer must ensure the election is fair and reasonably practical.

The main purpose of electing employee representatives is to represent your interests during the redundancy consultation.

If the employees fail to elect representatives within the required reasonable period, then each affected employee must be provided with the necessary information on a individual basis.

Both the organisation and elected employee representatives will have meetings regarding the consultation process. The elected employees will then discuss the outcome of the meetings with the other employees.

Am I part of a collective redundancy?

You are part of a collective redundancy if your employer is making 20 or more employees redundant. The collective redundancy consultation rules must be followed in this case.

Fair reasons for redundancy

In employment law, for redundancy to be a fair reason for dismissal, the grounds for redundancy must be reasonably established.

There is a criteria for selecting employees for redundancy. This must be objective and includes; qualifications, skills, performance & attendance, standard of work, disciplinary record and, at times length of service. Although length of service and the ‘last in, first out’ approach for selection may be used, it is only worth using this if it can be justified, as this could lead to indirect discrimination.

Each employee in the redundancy pool is scored against each of the above criteria; and the employees with the lowest scores are selected for redundancy.

Redundancy can arise in several situations:

  • The requirement for the employee has diminished or ceased
  • The job no longer exists and/or work is completed by others
  • There are new systems in the workplace
  • The workplace has closed down
  • The business has relocated
  • The business is transferred to another employer

In order for the redundancy process to be fair, the employer will need to explore other alternatives such as:

  • Reduction in working hours
  • Period of unpaid leave
  • Lay offs
  • Redeploying staff
  • Restricting over time
  • Early retirement

If the reason for your dismissal was not fair or genuine and the correct procedure was not followed, the dismissed employee can bring a claim alleging that the dismissal was unfair or discriminatory.

What questions should I ask in a collective redundancy consultation?

It is important to be prepared and raise any concerns you may have about the redundancy in the consultation. The following are common questions usually raised by affected employees:

  1. Why me and who will do my work?
  2. Who else is at risk?
  3. How has the pool of employees at risk been identified?
  4. Is the process of selection fair?
  5. What are the alternatives, are there any other roles available?
  6. When will my employment end?
  7. How will my redundancy pay be calculated?
  8. Will I be given a reference for future employment?
  9. Do I need to return anything?
  10. How do I say my goodbyes?

Redundancy payment calculation

When an employee is made redundant, they are entitled to receive a notice of termination of their employment. This will be either their contractual notice or statutory notice (approximately a week for each year of employment, subject to maximum of 12 weeks’ notice after 12 years’ employment).

If an employee has at least two years’ service at the date of their dismissal, they are entitled to receive a statutory redundancy payment which is calculated as follows:

Age x Complete years of continuous employment x week’s pay

The correct age factor is calculated as follows:

  • Half a week’s pay for each complete year of employment in which the employee was under the age of 22
  • One week’s pay for each complete year of employment in which the employee was aged between 22-40
  • One and a half weeks’ pay for each complete year of employment in which the employee was over the age of 41.

The length of service is capped at 20 years and the figure used for weekly pay is capped at £544. The maximum amount of statutory redundancy pay is £16,320.

Employees are also entitled to receive pay in respect of any accrued but untaken holiday pay.

Your total redundancy pay, both contractual and statutory, may be tax-free up to a maximum amount of £30,000.