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Myth busting – redundancy

Legal Question Time with Gardner Leader

Myth busting – redundancy

Michelle Morgan

Redundancies have become a common occurrence in recent times. During an economic downturn, employers need to reduce their overheads as much as possible, and as most business owners will tell you the highest cost to a business is usually their employees. From redundancy on maternity to ‘last in first out’, Michelle Morgan and Julie Taylor of Gardner Leader Solicitors answer some common redundancy misconceptions.

1. I am entitled to redundancy pay if I am made redundant

Not necessarily. You are only entitled to statutory redundancy pay once you have worked for your employer for at least two full years.
Qualifying employees will receive:

  • Half a week’s pay for each full year the employee was under 22 years old.
  • One week’s pay for each full year they were 22 or older, but under 41.
  • One-and-a-half week’s pay for each full year they were 41 or older.

A week’s pay for this purpose is subject to a cap, currently set at £508 and the overall cap for a statutory redundancy payment increased to £525 and £15,750 on April 6.

Contractual redundancy schemes may choose not to apply the above two-year
qualifying rule, in which case there would be a contractual rather than statutory right to redundancy pay.

2. I can’t be dismissed for redundancy because I am pregnant

Pregnant employees and those on maternity leave can be made redundant; but care must be given.

Selecting an employee for redundancy purely on the grounds of pregnancy or maternity leave is unlawful and could give rise to a discrimination claim.

When consulting with staff regarding redundancy, employers will still need to include those on maternity leave as part of the process, even if they are not physically at work.

Although they are not afforded protection from dismissal on grounds of redundancy, employees on maternity leave are entitled to be offered a suitable alternative vacancy (where one is available) ahead of others also at risk of redundancy.

This gives women on maternity leave first refusal on any vacant roles that may be suitable.

3. Last in, first out applies, right?

Length of service used to be one of the most common ways of deciding which employee(s) to make redundant.

This is however no longer considered to be a fair, nor safe criterion when used as the sole means for selecting possible employees for redundancy.

4. I will get a reference when I leave

An employer is not obliged to provide a reference, let alone a favourable one – however, if a negative reference is provided, it must be done on the employer’s belief that it is fair and accurate.

5. I’ve received a Settlement Agreement – what is this?

It’s a formal, binding, agreement between an employer and an employee dealing with the settlement of claims that the employee may have arising out of their employment or its termination (it is sometimes referred to as a Compromise Agreement or exit package).

Usually an employee accepts a sum of money in return for agreeing not to bring certain legal claims against the employer.

The employee needs to be advised of the terms of the agreement by a lawyer and a contribution towards the fees for taking this advice is often paid by the employer.

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