Organisations operate within a political, economical, social and technological environment. The requirement to seek improved efficiencies and cut costs can mean changing structures and processes. This can have a huge impact on the way things are done and where they are done with the consequent effects that this has on employees.
The Employment Rights Act s 139 (1) states:
… an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to -
(a) The fact that his employer has ceased or intends to cease -
(i) to carry on the business for the purposes of which the employee was employed
The closure may be temporary or permanent.
In broad terms there are 3 main redundancy situations:
- Closure of the business as a whole.
- Closure of the particular workplace where the employee was employed.
- Reduction in the size of the workforce.
Whenever an employer decides to implement changes which effects employees the Employment Rights Act 1996 (ERA) states that the employer must provide suitable alternative employment to those facing displacement.
What is a suitable alternative?
In any change situation there is always the prospect of employees being displaced, this can then lead on to an employee being “at risk” or being in redundancy situation. An employee with a minimum of two years continuous service has the right to a redundancy payment if a suitable alternative position is not available. Any offer of alternative employment must be with the same employer, or an associated employer or a successor employer who takes over the business. The new job must start either immediately after the old job ends or within a period of 4 weeks from that time.
If a suitable position is offered before the old contract of employment expires, then there would not be an entitlement to a redundancy payment. A payment would only be due if there is no alternative suitable position or if the new employer does not fall under the aforementioned categories.
Any dispute over whether or not the alternative job was suitable can only be determined by an employment tribunal only after having gone through a procedure to seek a resolution to a grievance.
What obligations does an employer have with regard to offering suitable alternative employment?
It is important as part of a fair and reasonable redundancy procedure for an employer to consider whether it, or any associated employer, has any vacancies that would be suitable for staff who would otherwise be made redundant. The employer is not obliged to create new jobs for redundant employees, but failure to offer any available suitable alternative may make a dismissal by reason of redundancy unfair. Where an employee’s contract is renewed, or they are re-engaged under a new contract following an offer made before the end of their employment under the previous contract, and the renewal or re-engagement takes effect on or within four weeks of the end of the previous employment, there will be no redundancy dismissal.
What if my employer offers me another job?
In order to overcome a redundancy situation an employer would have to offer an employee suitable alternative employment.
If this is offered and is unreasonably refused by the employee then the employee cannot make a claim for a redundancy payment. The question of suitability will depend entirely on the job the employee did before and what is now on offer.
Important questions of suitablity are:
- type of job
Even if the alternative job is deemed to be suitable the employee may still refuse to accept it and claim their redundancy payment, if they can establish that their refusal was reasonable. This relates much more to their own personal circumstances, for example:
- family commitments
- status of the new job
To help an unsure employee decide whether to accept the new job on offer the act allows a trial period of 4 weeks, during which time they can leave and still claim redundancy.
Can an employee try out a new job offered as suitable alternative employment?
Where the terms and conditions of the new job differ from those of the old position, the employee is entitled to a four-week statutory trial period in the new job.
This period may be extended for training in the new job, but only if the agreement is made in writing before they start work under the new contract, and it specifies the date that the retraining period will end, and the terms and conditions that will then apply.
If the employee terminates the new contract or gives notice to do so for any reason during the trial period, or the employer terminates their employment or gives notice to terminate it for a reason connected with any difference between the old and new contracts, the employee will be treated as having been dismissed by reason of redundancy on the date the old contract ended.
Where, however, the new work is suitable, and the employee acts unreasonably in terminating the contract, they will lose the right to redundancy pay.
Can an employee refuse an offer of suitable alternative employment?
An employer cannot force an employee to accept an offer of alternative employment. However, staff will not be entitled to a statutory redundancy payment if they unreasonably refuse the offer of employment, and:
- the offer to renew the employee’s contract or re-engage them under a new contract is made before the end of the employment
- the renewal or re-engagement is to take effect on or within four weeks of the contract’s termination
- the provisions of the new or renewed contract of employment are the same as those of the original contract, or, if they differ, the offer is still one of suitable alternative employment.
The right to redundancy pay will also be lost if they undertake a trial period in the new job, and the employment is suitable, but they unreasonably terminate it during the trial period.
What rights do staff who are under notice of redundancy have to take time off work?
Under the Employment Rights Act 1996, section 52, an employee who is under notice of dismissal by redundancy has the right to take reasonable paid time off during working hours to look for new employment or make arrangements for training for future employment. To exercise this right, they must have accrued two years’ continuous service by the end of the notice period.
What is ‘reasonable’ will depend on the individual circumstances of the case. Relevant factors may include how difficult finding new employment is likely to be, the distance the employee may have to travel to do so, and the needs of the employer.
An employee may bring a complaint to a tribunal that time off has been refused unreasonably. If the complaint is upheld, the employee will be entitled to a payment equal to the amount they would have received had the time off been permitted, subject to a limit of 40 per cent of one week’s pay.
Can there be more than one trial period?
Yes. If it becomes apparent during a trial period that the new job is unsuitable for the employee, the employer can offer an alternative. If the employee accepts this further offer, a new four-week statutory trial period will apply.
What if part of my salary is calculated using commission?
If your contract states that your salary is comprised of an element of commission payments then for the purposes of the severance scheme weekly salary will take into account an individuals commission earnings.
One week’s commission is to be defined as the average of the last 12 months commission divided by 52.