By Suliat Jimoh, Paralegal at Winckworth Sherwood

As tech companies move towards investment in artificial intelligence for further expansion, thousands of employees have been made redundant since the start of this year as they reshuffle their resources. It is widely accepted that redundancy can be an unnerving and emotionally difficult experience.  For that reason, it is essential to know how redundancy works and what to do if you are faced with it.

Genuine Redundancy

In short, a redundancy arises when there is no longer a need for an employee to carry out their role. A redundancy situation occurs when the business or office is closing down, or there is a reduced requirement for the type of employee. Therefore, redundancy is strictly not personal, it should not be used to dismiss an employee for performance related issues or any other reasons. If you do not believe it is a genuine redundancy situation, it may be worth seeking legal advice to challenge the termination as an unfair dismissal.

Consultation & Criteria

An employer has a duty to consult their employees about the proposed redundancies, there are additional requirements and time limits depending on the number of employees being placed at risk of redundancy. In most circumstances an employer will need to consider a selection pool and make a list of roles to be considered for redundancy.  In practice, this can be a good deal trickier than it sounds, with there being no fixed rules about how the pool should be defined.  Essentially, though, the exercise is about identifying which type of work is reducing or diminishing, for example, software engineers. Selection criteria should be created and applied to those in the pool of roles at risk of redundancy, criteria should be fair and objective. The employees will then be scored against the criteria to determine and provisionally select those who are to be made redundant.

After the scoring exercise, those who have scored well may be told they are no longer at risk.  Others, who have been provisionally selected for redundancy, will be informed and consulted further.  During these discussions any suitable alternative roles within the organisation should be considered, as well as whether there is a way to avoid the redundancy and what payments the individual would receive if made redundant. It is important that employers consider how the number of redundancies can be minimised and the consequences of the dismissals mitigated. An employee should be allowed to make their own suggestions on how they feel it may be best to avoid the redundancies, some may even offer their services on a part-time or freelance basis.

Redundancy Pay

Of course, losing your job is a horrible experience and may cause financial and emotional difficulties. Although statutory redundancy payments are not generous, if an employee is made redundant, they are entitled to their notice pay and any other contractual entitlements. An employer may ask the employee to work out their notice period, place them on garden leave or simply pay a lump sum in lieu of notice.

Only those who have two years’ service will be eligible to receive statutory redundancy pay. This is calculated based on age, length of service and pay. Currently this is subjected to a cap of £643 per week gross earnings, making the maximum statutory redundancy pay of £19,290, however this is subject to a small uplift each April. A helpful calculator has been provided on gov.uk.

As redundancy payments may not amount to much some employers may offer discretionary enhanced packages, to compensate the employee for losing their job. Some may include additional severance pay.  This is commonly agreed via a settlement agreement and is widely used in the tech sector, as it is usual for employees to have incentive awards and bonuses which have to be considered when they are being made redundant. 

Supporting employees

Non-financial support can also be of great value, whether external outplacement advice or simply giving the employee time off to find a new role, helping with writing a CV or application letter, recommendations to other employers or advising on which recruiters or agencies to work with.

With the UK currently facing a recession it is important to remember that redundancy is not personal and has nothing to do with the actions of the employee, quite plainly it can happen to anyone but knowing how to deal with it is essential.