Handling redundancies fairly not only helps you avoid unfair dismissal claims but also allows you to balance business needs with the compassion your employees deserve.
To stay compliant and prevent wrongful dismissal claims, you must provide employees with the correct notice period and notice pay. Our expert employment law solicitors break down the key details to ensure you get it right.
Contents:
- What notice period should I usually give an employee being made redundant?
- Payment in Lieu of Notice
- What pay should I give to a redundant employee?
- What notice pay should I give to a redundant employee?
- What happens if the Employee is absent during a contractual notice period?
- How do I calculate a week’s pay during the statutory notice period if the employee does not have normal working hours?
- What should I confirm in writing to the employee about redundancy and notice?
- Summary
What notice period should I usually give an employee being made redundant?
Start by reviewing your employee’s contract to determine if a contractual notice period is specified. In most cases, this will dictate the length of notice required to terminate their employment.
If no notice period is stated, you must provide reasonable notice, which can be difficult to determine. Factors such as the employee’s role, level of responsibility, and your organisation’s standard practices should be considered. Given the complexities, seeking legal advice on a case-by-case basis is advisable.
You must give at least statutory minimum notice period. Statutory notice is calculated as follows:
- one week’s notice if the employee has been employed between one month and two years
- one week’s notice for each full year employed between two and 12 years
- 12 weeks’ notice if the employee has been employed for 12 years or more. The maximum entitlement to statutory notice is 12 weeks’
The notice period will only start to run from the date you confirm the termination of an employee’s employment and not from the date they are placed ‘at risk’ of redundancy, or some other earlier date. When calculating the employee’s period of continuous employment, the qualifying employment is calculated up to the date on which the notice is given. If the employee’s work anniversary happens to fall within the notice period, it shouldn’t increase the employee’s entitlement. You are only required to count the service worked up to the date that the notice is given.
Payment in Lieu of Notice
If the contract of employment allows it, or if it is otherwise agreed in writing with an employee, you could pay in lieu of the notice period (PILON). This would allow the employee to leave your employment earlier and still receive the notice pay that they would have received, had they worked the entirety of the notice period.
Our employment law team can help you with drafting or updating your contracts of employment.
Generally, a PILON clause will state that only the basic pay an employee would’ve received during the notice period will be paid in lieu and that benefits such as bonus payments, holiday accrual, pension contributions or private health care insurance will stop on the last day of employment.
If a PILON clause is not included in the contract, offering to cover benefits alongside the basic salary for the notice period can reduce risk and increase the likelihood of employee agreement.
If your employee commits gross misconduct before the expiry of their notice, you may be able to summarily dismiss your employee and discontinue their notice period and pay. If you are unsure, it is advisable to seek legal guidance first. They will also not be entitled to a notice payment. Similarly, if an employee refuses to work during their notice period and you have not agreed to garden leave they are in breach of contract. If you incur additional costs due to the employee’s breach (for example the cost of paying temporary staff to cover the absent employee’s work) you may be able to claim this from the absent employee. Our employment lawyers can offer guidance on breach of contract and remedies available to your business.
If the contract of employment contains restrictive covenants, we would advise you to always seek legal guidance before paying in lieu of notice or dismissing during a notice period to avoid invalidating the covenants.
What pay should I give to a redundant employee?
There are a number of payments that an employee may be entitled to due to their employment terminating on grounds of redundancy, including:
- a redundancy payment if the employee qualifies for a statutory redundancy payment or under any company-enhanced scheme
- any holiday pay that they have accrued and not taken to the end of their employment
- contractual payments such as bonuses and their normal pay through their notice period or payment in lieu of notice
What notice pay should I give to a redundant employee?
Contractual notice pay should be paid during the notice period. This should normally include basic salary and any other usual payments such as overtime, bonuses or commission unless the contract specifically limits this in any way.
For statutory notice pay, the employee is entitled to be paid a week’s pay for each week of the statutory notice period. This means that, even if an employee is absent from work during a statutory notice period e.g. on holiday, maternity leave, sickness absence, or because they are ready and willing to work but have not been allocated any, the employee is still entitled to receive a full week’s pay for the applicable statutory notice period. There are, however, some exceptions below.
What happens if the Employee is absent during a contractual notice period?
If the employee does not attend work during their notice period after being served with notice of termination on grounds of redundancy, and their contractual notice period is one week (or more) than their statutory notice entitlement, they are only entitled to be paid for the reason they are not attending.
If an employee is absent because of maternity leave (or other family-related period of leave) or illness, they should receive their contractual entitlement to pay. If the employee has a contractual entitlement to enhanced maternity pay (or other enhanced family-related benefit), or company sick pay (and they have not already exhausted their entitlement), they should receive pay in line with those contractual benefits. If the employee is not entitled to enhanced maternity pay (or other enhanced family-related pay) or company sick pay, but they qualify for statutory payments (and have not exhausted those entitlements), the employee should receive statutory pay for the period of notice.
An example
Olivia has a contractual entitlement to receive 14 weeks’ notice. She is absent from work during an extended period of sickness when she is given notice to terminate her contract of employment on grounds of redundancy. She has already exhausted her entitlement to contractual sick pay and has not received pay for three weeks at the point that notice is given.
In this scenario, Olivia wouldn’t be entitled to receive full pay during her notice period, unless she returned to work. This is because she was entitled to receive contractual notice from her employer, which was at least one week longer than her statutory entitlement.
Had Olivia’s employer only been required to give her statutory minimum notice, she would have been entitled to receive a full week’s pay for each week of notice, whether she was able to work her notice period or not.
How do I calculate a week’s pay during the statutory notice period if the employee does not have normal working hours?
Normal Working hours
An employee’s entitlement to receive pay during a statutory notice period also varies depending on whether the employee has normal working hours. An employee with normal hours of work is entitled to receive their average hourly rate of pay for every hour that the employee works (or is ready and willing to work, but no work is given), or:
- absent due to approved holiday
- incapable of work due to sickness or injury
- absent from work wholly or partially because of pregnancy or childbirth (including during maternity leave) or because of other family-related leave including adoption leave, shared parental leave, carer’s leave, parental bereavement leave, parental leave, or paternity leave
The hourly rate should be calculated by dividing a week’s pay by the number of normal hours worked.
No normal working hours
An employee who doesn’t have normal hours of work is entitled to an average week’s pay for each week of the statutory notice period that the employee works (or is ready and willing to work, but no work is given), or:
- absent due to approved holiday
- incapable of work due to sickness or injury
- absent from work wholly or partially because of pregnancy or childbirth (including during maternity leave) or because of other family-related leave including adoption leave, shared parental leave, carer’s leave, parental bereavement leave, parental leave, or paternity leave
If an employee requests a leave of absence to perform public duties, to look for work, to arrange training, to attend antenatal or adoption appointments or to perform trade union duties or activities, there is no obligation to pay statutory notice pay during any agreed leave of absence. We would advise you to check your contractual obligations with each of those scenarios and if you are unsure, you should seek legal guidance.
What should I confirm in writing to the employee about redundancy and notice?
Once a fair redundancy process has been completed, you have served notice of termination on the grounds of redundancy, and you have advised the employee of any right of appeal, it is good practice to confirm the following in writing to your employee:
- the length of their notice period
- whether they will serve their notice or be paid in lieu and whether they will be expected to attend work or be on garden leave during their notice period
- the date their notice period starts and ends
- whether you are prepared to agree that the employee can leave before the end of their notice period and be paid instead of the remainder of their notice or whether this cannot be agreed
- whether they are expected to use their unused holiday before the end of their employment (if there are specific dates you want the leave to be taken you will need to give correct notice) or whether they will be paid in lieu for any remaining days accrued and not taken;
- how contractual benefits will be dealt with during their notice period
- how notice pay will be calculated and whether this will differ depending on attendance (if attendance during notice is expected)
- the extent of their right to time off to search for employment, which they may want to use during their notice period if they are serving this
- Any contractual provisions that will continue to be relevant beyond the final date of employment, such as restrictive covenants and obligations of confidentiality
Finally, if you find that your business is struggling financially, as is often the case in redundancy situations, and cannot afford to pay your employee their redundancy entitlements, the redundancy payments office can help in certain circumstances. This is usually dependent on the employee making an application to the secretary of state for payment of outstanding statutory payments and unpaid wages out of the state-guaranteed national insurance fund.
We understand that these conversations can often be difficult to have, please get in touch with any questions that you might have.
Summary
Notice periods and notice pay can sometimes be complex. If you are unsure about the correct length of notice or want to better understand the options available to you relating to notice, or if you have any questions about notice pay or any of the themes addressed in this article, our expert employment lawyers would be very happy to help.
