Redundancy ― an introduction

Produced by Tolley in association with Andy Williams at Charles Russell Speechlys LLP

The following Employment Tax guidance note Produced by Tolley in association with Andy Williams at Charles Russell Speechlys LLP provides comprehensive and up to date tax information covering:

  • Redundancy ― an introduction
  • Individual redundancy ― definition
  • Collective redundancy ― definition
  • For employees
  • Was the dismissal by way of redundancy?
  • For employers
  • Number to be made redundant
  • Consultation
  • Entitlement to a redundancy payment
  • Calculating a statutory redundancy payment
  • More...

Redundancy ― an introduction

Redundancy is a dismissal that occurs because the employer’s business, or its requirements for a particular type of work, ceases either generally or in the specific location where the employee works. The reason for the dismissal is effectively unrelated to the individual’s performance but is the result of commercial decision-making by the employeror some specific economic circumstances that an employerfaces.

Redundancies entitle employees to various statutory rights and, in the case of collective redundancies, involve rigorous requirements for consultation with the work force. This means that redundancies have the potential to expose the employerto liability stemming from successful employee challenges and claims. Careful planning for and structuring of a redundancy process is therefore required. This note provides a brief introduction to redundancy. The supporting guidance notes in this sub-topic provide further guidance on the specific important aspects of the redundancy process.

The law to be considered depends on whether the redundancy arises as part of a collective redundancy situation or is simply an individual redundancy.

Individual redundancy ― definition

Redundancy is dismissal that is wholly or mainly attributable to either:

  1. the fact that the employerhas ceased or is going to cease carrying on the business for the purposes of which the employee is employed, either altogether or in the place where the employee was so employed

  2. the fact that the requirements of the business for employees to carry out work of a particular kind or to carry on such work at the place where the employee was so employed have / are going to cease or diminish

ERA 1996, s 139(1)

Collective redundancy ― definition

The definition of collective redundancy is somewhat wider and for this purposes redundancy is defined as dismissal for a reason not related to the individual(s) concerned or for a number of reasons that are not so related.

For employees

Employees facing dismissal by reason of redundancy have a right to expect fair procedures to be followed, which include:

  1. adequate warning

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