Employment Law – Redundancy Payments

As the Credit Crunch worsens employers are being faced with making difficult decisions to reduce their costs in an effort to secure the future of their business. Unemployment levels are currently the highest they have been for a decade and numbers are expected to increase by the end of the year.

In many cases an employer will offer their employees a ‘Compromise Agreement’ in which both parties agree to terminate the contract of employment on agreed terms, which normally provide for the payment of a lump sum to the employee.

In the event that the employee decides not to accept the proposed terms, no payment is offered or the dismissal is disputed, they may opt instead to bring a claim for a Redundancy Payment in the Employment Tribunal.

Employee's eligibility

An employee must have 2 years’ continuous employment before they are eligible to claim a redundancy payment. They will be entitled at a minimum to a statutory award based on the employee’s age, their length of service and their weekly earnings. A dismissal by reason of redundancy may also give rise to potential claims for wrongful and/or unfair dismissal.

Where an employer is proposing to dismiss 20 or more employees on the ground of redundancy he ought to consult with any appropriate representatives of his employees, such as trade unions. Consultation must begin in good time, the employer must adopt a fair selection process and they should consider making a suitable offer of alternative employment.

We recognise that for both employers and employees contemplating redundancy is a worrying time. Whether you are an employer considering making redundancies to meet the needs of your business or an employee facing possible redundancy, we can provide timely and practical legal advice to help you decide on the most appropriate course of action.

Further information

If you need further advice on redundancy, a compromise agreement or any other matter related to employment law please contact Edward Jeffery.