If you are making employees redundant fairly in order to avoid unfair dismissal claims, you will also need to ensure that you are providing your employees with the correct notice period and notice pay to avoid claims for wrongful dismissal. If you would like more information on other redundancy payments is some guidance, otherwise, below is more detail on the correct notice period and pay to give your employees if they are made redundant.
What notice period should I usually give an employee being made redundant?
You will need to review your employee’s contract of employment and see if there is a contractual notice period. Generally, this will be the length of notice you will have to give your employee to terminate their employment contract. If the contract does not contain a notice period, then you need to give reasonable notice (and there are a number of factors to consider in order to determine whether the notice is reasonable). The contractual notice period or reasonable notice may exceed the statutory notice period, which is:
- at least one week’s notice if the employee has been employed between one month and 2 years;
- one week’s notice for each full year employed between 2 and 12 years; and
- 12 weeks’ notice if the employee has been employed for 12 years or more.
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. Alternatively, if contained in an employee’s contract of employment or otherwise agreed in writing with an employee, you could pay in lieu of the notice period that should have been provided, so that the employee can leave your employment earlier. 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 first.
What notice 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 annual leave that they have accrued and not taken to the end of their employment, other contractual payments such as bonuses, plus normal pay through their notice period or payment in lieu of notice (PILON) if a PILON is in the employee’s contract of employment, or has been agreed between you and your employee.
As with the notice period, contractual notice pay should be paid during the notice period. This should normally include basic salary and any other usual payments such as for overtime, bonuses or commission unless the contract specifically limits this in any way.
Where an employee is dismissed for redundancy and the notice period is the same as the statutory notice period or longer, but less than a week longer, they should be paid either their average hourly rate if they have normal working hours or a week’s pay (as defined in the relevant legislation) if they have no normal working hours for each week of the statutory notice period if the employee:
- serves their notice at work;
- is on a holiday
- is on certain family leave ; such as pregnancy, childbirth, adoption leave, shared parental leave, parental bereavement leave, parental leave or paternity leave;
- is off sick;
- is ready and willing to work, but has not been given work to do or has been placed on garden leave
Note that the employer can count certain payments towards its statutory obligation to pay the employee during the 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 a week or more than a week longer than their statutory notice, they are only entitled to be paid for the reason they are not attending. If an employee is off sick, they may only be entitled to SSP during their notice period (assuming they are either not entitled to enhanced company sick pay or they have exhausted this entitlement) and so if the employee remains off sick, the pay they would receive during their notice period would be SSP provided they qualify.
If an employee is serving their notice period, they should be paid all their normal pay and benefits throughout their notice period unless this has been specifically excluded. If you want to pay the employee in lieu of their notice, your employee’s employment contract must allow for this and should stipulate what will be paid in those circumstances. If you would like assistance with drafting or updating your contracts of employment, our can assist with this. Generally, a PILON clause will state that only basic pay an employee would’ve received during the notice period will be paid 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 PILON has not been agreed in the employee’s contract, it is less risky and more likely an employee will agree to a PILON if you agree to pay benefits for the length of the notice period in addition to basic salary during that time.
If an employee commits gross misconduct, they will 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 and have requested that they work and provide work for them during their notice period, they are in breach of contract and are not entitled to notice pay. 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 can offer guidance on breach of contract and remedies available to your business.
What should I confirm in writing to the employee about redundancy and notice?
Once a fair redundancy process has been completed and you have served notice of termination on the grounds of redundancy, as well as confirming any right of appeal it is good practice to confirm 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 in lieu 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); and
- the extent to their right to time off to search for employment, which they may want to use during their notice period if they are serving this
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, our can help.