As furlough ends, redundancies may be inevitable. Trevor Drury clarifies the rules around the issue
Companies in the construction sector will have benefited from the government’s furlough scheme. That scheme ended in October, and although the chancellor has announced the new Job Support Scheme, this is not as generous as the furlough scheme.
Employers with reduced turnover, less cash and lower or negative profits will inevitably have some difficult decisions to make with regard to redundancies.
An employee is entitled to, as a minimum, statutory redundancy, as set out in the Employment Rights Act 1996 (ERA 1996), although an employee’s contract of employment may provide a more generous redundancy payment. To be eligible for statutory redundancy, an employee must have two years’ continuous service.
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Employees dismissed due to redundancy have the right to a redundancy payment based on their length of service, age and pay up to a statutory maximum. Many employees on furlough have recently received less pay than their normal wages but legislation was brought in, effective from 31 July 2020, to ensure that redundancy pay is based on an employee’s normal wages. This also applies to the statutory notice pay, where notice must be given of between one and 12 weeks depending on length of service.
Dismissal on the grounds of redundancy may also give rise to potential wrongful dismissal and/or unfair dismissal if the employer fails to provide:
- proper notice;
- consultation;
- a fair basis for selection;
- consideration of alternative employment; and
- a process for the employee to appeal.
A case of wrongful or unfair dismissal could be referred to the employment tribunal.
If dismissed on grounds of redundancy, the employer must give the employee a written statement of how the redundancy payment is calculated.
If there is a dispute over the right to receive payment or the amount, an employee can refer the dispute to the employment tribunal.
Where an employer is legally insolvent and payment has not been made, application can be made to the Redundancy Payment Office.
It is hoped that the chancellor’s interventions will protect many of the jobs that may otherwise be at risk.
Trevor Drury is a barrister at 12 Old Square Chambers and specialises in construction law and employment
