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Redundancies and the Lockdown

If you’ve been offered a Settlement Agreement, you’re not alone! The Times reported 800,000 fewer workers on the nation’s payroll since February. I’ve seen all kinds of crises come and go and from that, I would say absolutely that the main thing any employee should think about is how best to protect their future. With the Covid crisis being Worldwide and businesses nervous about Brexit, unless you have a really straightforward legal challenge supported by clear evidence, then the best advice I could give you is to soak it up and start making plans for what you are going to do next. This could be an ideal opportunity to reinvent your career: you might want to work nearer home, consider setting up your own business or even look at using part of your settlement payment and the time to do a spot of training. With the possibility of a Vaccine on the horizon, this might be a good time to look after your safety before re-joining the working world.

In terms of the future, with so many redundancies, if you bring a complicated claim you might cause your next employer to think twice before taking you on. Expect recruiters to be very risk-averse… But this is something we can discuss when we speak. If you have a serious claim and the offer doesn’t offer fair compensation, I can explain your likely claims and their value.

The legal issues

The first question to ask is, what is the real reason for the dismissal? If it’s redundancy, then the Law then looks at fairness. If it’s not redundancy (for example to manage out someone for an improper purpose) then you may have a claim for unfair dismissal and possibly others such as discrimination. But remember you will need clear details and evidence to support any claim so please make sure you have it ready. A redundancy has to be procedurally and substantively unfair. The normal procedures include: warnings, consultation and attempts to avoid redundancy followed by a formal meeting at which you can be accompanied by a workplace colleague or union rep. You also have the right to an appeal. With larger dismissals of over 20 employees or over there are specific consultation obligations such as the appointment of elected representatives and periods of consultation. If your employer doesn’t do this then you might be entitled to a ‘Protective Award’ of up to 13 weeks’ pay.

But for a procedurally unfair dismissal to have any financial value you will need to show that if an actual fair procedure took place the outcome would have been different. Without that you may just get a finding that there has been a procedurally unfair dismissal and a couple of weeks’ pay for all your trouble!

To get a substantively unfair dismissal off the ground you would ideally need a reason as to why your employer would mismanage the process. Strong cases tend to have a ‘smoking gun’ such as an employee who recently ‘blew the whistle’ or announced they were pregnant who then gets a very unlikely low score in the redundancy compared with others.

Challenging unfairness

Given you will need a reference and peace of mind you probably don’t want a stressful dispute with your present employer unless you have a very clear case. During any procedures, it’s best to ask politely for explanations and documents which might prove the truth (eg: bonus assessments/point scoring). This puts all the work on your employer without upsetting the relationship. In more serious cases you can put in written representations or perhaps even a Grievance.

How much should I get?

The basic calculation is simple:

  • Redundancy – this is a week’s pay capped at £538 for each year worked under the age of 41 and £807 over the age of 41 to a maximum of 20 weeks. This is tax-free.
  • Notice- you are entitled to the notice in your contract, but this cannot be less than 1 week for each complete year worked up to a maximum of 12 weeks. This is taxable and subject to NI.
  • Contractual payments- you must receive a payment for all untaken holiday. If you have a contractual bonus scheme or other rights your employer must honour that. Many bonus schemes are discretionary which makes them very hard to enforce. For that reason, you are better looking at the compensation payment (below).
  • Compensation- employers can pay up to £30,000 tax-free. This is often referred to as ‘ex-gratia’ (a gift). Employers often have a formula for calculating this under an internal policy.
  • Protective Award- if your employer intends to dismiss 20 or more employees, failure to follow specified procedures can lead to a maximum payment of 13 weeks; pay.

If you are considering a claim, then please remember that on a redundancy items (1) and (2) are already being paid under redundancy so you would focus only on items (3) and (4). Compensation for lost earnings is capped at 1 year’s pay capped for high earners at £88,519. Legal costs are paid by the parties and there is no tax efficiency in the tribunal so you have to look at the net benefit to you of threatening a legal claim which can often be quite low compared to a Settlement Agreement.

Settlement Agreements

These are quite long documents and can seem quite complicated but basically, they offer you benefits in return for not bringing tribunal type claims and promises by you not to harm the company for example by making damaging comments. They contain a number of benefits including: compensation, a binding reference and protection of your reputation and the tax efficiency I have mentioned above.