It is hard to avoid the media furore following the events at P&O Ferries last week, where approximately 800 staff were reportedly dismissed for redundancy, without notice and without prior consultation, before being replaced with cheaper staff. Leaving aside the specifics and merits of P&O’s actions (which are complicated by international and seafaring considerations), the broader circumstances have prompted discussion about employee rights in a redundancy situation, and what is lawful conduct by employers. This blog provides an overview of the law on redundancy in England and Wales, and provides guidance on best practice:

  1. A redundancy situation arises, broadly, in one of three situations: a business closure; a workplace closure; or where there is a reduced requirement for employees to carry out particular work. If the business and workplace still exist, and the need for personnel has not diminished, it will be hard to establish that there is a genuine redundancy situation.
  2. Redundancy is still a dismissal, and usual unfair dismissal principles apply. In the absence of a genuine redundancy situation and/or a fair procedure, the dismissal is likely to be unfair, and eligible employees may seek recourse in the employment tribunal. Compensation for an unfair dismissal is the lower of 52 weeks’ pay or the statutory maximum (currently £89,493, rising to £93,878 on 6 April 2022), at the date of dismissal.
  3. Where an employer proposes to dismiss 20 or more employees at the same establishment in a 90 day period, there is an obligation to consult with representatives of affected staff. The minimum consultation period is 30 days where 20-99 redundancies are proposed, and 45 days where 100 or more are, meaning the first dismissal should not take place before this period has passed. Prescribed information must be provided to the representatives, and consultation with them should be meaningful, with a view to reaching agreement on ways to avoid or reduce dismissals or mitigate their impact, and on the way in which the redundancy process will be carried out. A failure to comply with these collective consultation requirements can result in claims for a ‘protective award’ of up to 90 days’ gross pay per employee.
  4. Employers proposing 20 or more redundancies are also required to notify the Secretary of State for BEIS (Business, Energy and Industrial Strategy) on form HR1 of their plans at least 30 or 45 days (depending on the numbers affected) before the first dismissal takes effect. A failure to do so is a criminal offence, with exposure to an unlimited fine.
  5. In addition to any collective consultation requirements, individual consultation should take place with any employees selected for redundancy in order to discuss their particular circumstances.
  6. A fair redundancy process should consider whether there is any suitable alternative employment for potentially redundant employees. It is also important to remember that certain employees (e.g. those on maternity, adoption or shared parental leave) are afforded special protection in respect of alternative vacancies.
  7. Although there is no legal requirement to offer an appeal against a redundancy dismissal, a failure to do so may affect the overall fairness of the decision. Whether to offer an appeal should therefore be considered when considering the redundancy process to be followed.
  8. Redundant employees are (subject to eligibility criteria) entitled to at least a statutory redundancy payment, calculated by reference to their age, length of service, and pay. They are also entitled to their contractual notice and any accrued benefits to the termination date.
  9. Settlement agreements are a valid way for employers to mitigate the consequences of any legal or procedural shortcomings in their redundancy exercise. A settlement agreement has the effect of employees waiving their employment rights in return for a financial payment. However, it is not possible to compromise a claim for a failure to collectively consult in this way.
  10. Employers should not underestimate the reputational damage arising from a badly handled redundancy exercise. A mishandled redundancy programme from a legal perspective, poor communication with affected employees, and/or poor treatment of affected employees, can have detrimental consequences for the organisation’s brand and reputation as an employer. Careful planning, legal advice and a clear communications strategy will help to alleviate this risk.