Employers making workers redundant have to follow a fair and lawful redundancy process.
As part of this, employers must ensure affected workers are given their legal entitlement to redundancy notice and pay. Failing to meet your obligations can expose your organisation to claims for unfair dismissal.
In this guide for employers, we explain the rules on giving notice for redundancy, and employees’ rights and entitlements you need to be aware of during the redundancy process.
How much redundancy notice do you have to give?
If you have completed the required redundancy consultation and selection process and have identified which employee (or employees) are to be made redundant, by law you have to give them sufficient notice that their employment is being terminated.
The amount of notice an employee is entitled to will depend on their length of service with the organisation.
The statutory redundancy notice periods are:
- No notice if employed by you for less than a month
- At least 1 week’s notice if employed between a month and 2 years
- 1 week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
These are minimum periods required by law. If the employee’s contract includes an enhanced notice period for the employer to terminate employment due to redundancy, this must be followed. The contractual notice period may be longer than the relevant statutory period, but it cannot be less.
In the case of voluntary redundancy where the organisation is trying to incentivise employees to volunteer for redundancy, you may wish to consider offering a longer notice period than the relevant statutory period.
You should formally notify employees that they are being made redundant, and confirm how long their notice period will be and confirm the date their contract will end.
During this redundancy notice period, the employee retains their usual employment entitlements and rights, such as being paid their usual rate of pay, entitlement to sick pay and annual leave.
When should the redundancy notice period start?
The redundancy notice period should start from the date on the redundancy letter notifying the employee of their contract termination by redundancy.
Importantly, the notice period does not start when the employer commenced the redundancy process or when staff were first notified of being at risk.
Can employees leave before the end of their notice period?
Strictly speaking, leaving during the redundancy notice period before their contract officially ends puts the employee at risk of losing their entitlement to statutory redundancy pay. However, employers can use their discretion. Discuss with the employee their reasons for leaving early, for example they may want to start their new job. If you can accommodate an early exit, this can be beneficial in maintaining positive relations after what may have been a stressful period.
Can you extend the redundancy notice period?
Depending on the circumstances, you may be able to prolong the notice period. If you have already notified affected employees of redundancy, the date of termination and the given notice period stated in the redundancy letter will be legally binding on both you and the employee. However, just as the employee may wish to negotiate an earlier exit, you may wish to negotiate an extended notice period to retain the employee for a longer. This would require the employee’s express consent and should be confirmed in writing.
Sick leave during the redundancy notice period
Employees continue to be entitled to take sick leave and be paid sick pay in the normal way during the redundancy notice period.
Pay during the redundancy notice period
The length of the redundancy notice period is significant since the employee is entitled to be paid for this period, or to receive payment in lieu of notice (PILON) if the contract of employment provides for this. This is in addition to any edundancy pay they are entitled to.
If the employee works their notice period, they should paid their normal rate as stated in their contract. For PILON, the rate must be based on the employee’s usual rate of pay, and must also include any contractual entitlements such as pension contributions.
How much is redundancy pay?
Employees are generally entitled to statutory redundancy pay if they have worked for you for two years or more. This entitlement will not be available if you offer to keep the individual on at work or if you make an offer for suitable alternative employment which they refuse without good reason.
If the employee is eligible, the amount of redundancy pay they are entitled to will depend on their age and length of employment:
- Half a week’s pay for each full year they were under 22
- One week’s pay for each full year they were 22 or older, but under 41
- One and half week’s pay for each full year they were 41 or older
A 20-year cap applies to the length of service.
Weekly pay is calculated using the average earned by the employee per week over the 12 weeks before the day they received their redundancy notice.
Redundancies on or after 6 April 2022 have a weekly pay cap of £571. This means the maximum statutory redundancy pay available (for those with 20 years’ service) is £17,130.
If the employee’s contract of employment makes provisions for a higher rate of redundancy pay, this should be followed. Any contractual redundancy pay rate cannot be less than the relevant statutory entitlement.
Avoiding unfair dismissal claims
In addition to giving the correct notice and paying the correct amount of redundnacy pay, employers also have to ensure that they act lawfully throughout the redundancy process.
The key elements include having lawful grounds for the redundancy and when identifying the jobs that are at risk, using fair selection criteria, consulting with affected employees and their representatives as required, and offering redundancy pay and notice period.
Alternatives to redundancy
Before initiating the redundancy process, employers are required to explore alternatives to avoid making people redundant.
For example, employees may be open to reducing their working hours to become part time. Or if the issues facing the organisation are short term, such as the loss of a key client or cash flow problems, you could consider asking employees to take a period of unpaid leave. Depending on the circumstances, employees may find this a preferable alternative to being made redundant and losing their job altogether.
Employers cannot, however, compel employees to take unpaid leave unless this is specifically stated and permitted within their contract of employment. Forcing someone to take unpaid leave without their agreement or contractual provision would be a breach of contract.
By law, employers making more than 20 employees redundant have to carry out a formal consultation process by following the ‘collective redundancy’ rules.
For 20 to 99 redundancies, the consultation must start at least 30 days before any dismissals take effect.
For 100 or more redundancies, the consultation must start at least 45 days before any dismissals take effect.
If there will be fewer than 20 redundancies, there are no rules on how consultation has to take place but you should discuss with the employee why they are being made redundant and any potential alternatives to redundancy that may be available in the circumstances.
Redundancy selection process
Employers generally have to be able to show that they used fair and objective selection criteria when deciding which employees are to be made redundant. The exception to this requirement is where the employee’s job no longer exists, ie the business is closing altogether or the workforce as a whole are being made redundant.
Employers can also opt to offer voluntary redundancy.
In practice, it can be helpful to use a redundancy matrix to score at-risk employees in a transparent and consistent manner. This will also act as evidence of objective decision-making in the event of a complaint for unfair selection.
Importantly, employers must ensure that the decision-making process does not discriminate against any employee on the grounds of a protected characteristic. Under the Equality Act 2010, it is unlawful for employers to treat someone unfairly because they have, or are perceived to have, or are associated with someone who has, one of nine protected characteristics, which are: age, gender, sexual orientation, disability, pregnancy, or race and religion. It is also unfair to harass or discriminate against someone for enforcing or availing of their legal rights.
Redundancy notice period FAQs
Do you get paid notice period when made redundant?
When made redundant an employee is still entitled to their notice period or to pay in lieu of notice (PILON). The PILON calculation will be based on the minimum statutory redundancy notice periods of between 1 to 12 weeks.
Do employees have to work their redundancy notice period?
An employee may not be required to work their notice period if their contract of employment allows their employer to provide pay in lieu of notice. Where a business is forced to close, or shuts down unexpectedly, an employee will be entitled to what they would’ve been paid if they had been able to work.
What is the statutory notice period?
The minimum statutory redundancy notice periods are 1 week’s notice if employed between a month and 2 years, 1 week’s notice for each year if employed between 2 and 12 years, and 12 weeks’ notice if employed for 12 years or more. The contract of employment may provide for longer periods.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.