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Understanding redundancy notice periods
Redundancies are never easy and present several challenges to businesses in the UK. Managing the process legally and in a way that minimises the potential adverse impact on both those affected and those who remain is essential. Doing so helps mitigate the risk of Employment Tribunal claims and reputational damage.
One key element to get right is the notice of dismissal an employee is entitled to once the decision to make their role redundant has been confirmed. When making redundancies, mishandling notice periods can lead to legal consequences, including claims for wrongful dismissal or breach of contract.
In this blog, we’ll answer some common questions about notice periods to hopefully ensure you have a clear understanding of the rules and how to manage them effectively.
What is a notice of redundancy?
The notice of redundancy is essentially the amount of warning an employee must be given that their employment is coming to an end. This provides the employee with time to prepare for the change, seek alternative employment, or adjust their personal arrangements. Notice periods are a legal obligation and employers must adhere to them unless the employee’s contract allows otherwise – see Pay In Lieu of Notice (PILON) below.
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How much notice do I have to give my employees for redundancy dismissals?
Notice periods are governed by the contract of employment but often statutory rules determine the minimum notice period that must be given.
Under legislation, the minimum periods of notice an employer must provide are based on the employee’s length of service as follows:
- Less than one month’s service – no notice.
- More than one month but less than two years’ service – one week’s notice.
- More than two years’ service – one week’s notice per full year of service, up to a maximum of 12 weeks.
However, it’s important to check your employees’ contracts of employment as some contracts may provide for a longer notice period than the statutory minimum. If they offer less, the above statutory rules override this and apply instead.
If the employee contract offers a more generous notice period than the statutory requirements, you must follow the terms of the contract. Failing to do so would risk a claim for wrongful dismissal or breach of contract.
What is pay in lieu of notice?
Pay in Lieu of Notice (PILON) is a contractual option that allows employers to terminate an employee’s contract immediately or shorten part of the employee’s notice period, rather than requiring them work it (or placing them on a period of Garden Leave). Instead of an employee working their notice as normal , an employer can pay them a lump sum equivalent to the salary or wages they would have earned during the notice period. The employee’s employment then ends on the day they stop working.
Before considering PILON, you should check whether you have the contractual right to do so and how the PILON will be calculated.
PILON implications:
A well drafted PILON clause should clearly outline what is due to be paid, including how salary is calculated and what is included (benefits, bonuses or commission). Generally, PILON payments are subject to tax and National Insurance contributions.
Even if PILON is not explicitly mentioned in the contract, both parties can mutually agree on when it will take effect and on what terms.
Important: During redundancy dismissals, if a PILON clause is used or agreed upon, the calculation date for any Statutory Redundancy Payments is based on when the employee’s notice period would have expired, not the actual termination date.
Notice period requirements
Always check the contract for requirements on serving notice. Subject to this, it is advisable to communicate a redundancy dismissal in writing, :
- The termination date
- The reason for redundancy
- The redundancy pay information
- Information about the notice period
- Any rights the employee has to appeal or complain
Unless utilising a PILON clause or otherwise with the agreement of the employee in question it’s important that the employer provides the statutory notice period before the employment ends. Employers who fail to provide the correct notice period could face claims of wrongful dismissal, i.e. for breach of contract.
Can employers withdraw a redundancy dismissal?
In some situations, an employer can offer to withdraw a redundancy dismissal. However, once notice has been served, the employee must agree to this; otherwise, the dismissal will proceed as originally planned. The employer might be able to argue that the redundancy payment should be forfeited if the employee refuses, but this isn’t guaranteed.
If gross conduct concerns arise during an employee’s notice period, the employer may, subject to following the appropriate disciplinary procedures, dismiss the employee sooner. This could result in the loss of any remaining notice pay and the Statutory Redundancy Payment.
Both scenarios can be complex and depend on the specific circumstances. We recommend seeking appropriate advice from an employment law professional.
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Managing redundancies with WorkNest
Redundancies come with a wide range of legal implications that must be managed carefully to ensure compliance and reduce the risk of legal disputes. WorkNest’s fixed-fee service makes us the ideal partner for businesses looking for clear, commercially-focused support throughout the redundancy process. We can ensure legal compliance and guide you through:
- The correct redundancy notice periods
- Statutory redundancy pay calculations
- Offering PILON and its wider implications
- Handling the withdrawal of redundancy notices
Get in touch on 0345 226 8393.
