Redundancy is one of the trickiest things for a small business owner to get right.
As redundancy means dismissing people through no fault of their own, there are many employment laws you need to consider. And getting the process wrong can be a costly mistake, putting you at risk of unfair dismissal claims.
Once you’ve selected employees for redundancy, you need to make sure you follow the correct process regarding notice periods.
In this guide, we’ll explain how to calculate redundancy notice period, how to manage notice pay, and alternatives to a notice period.
What is the Statutory Notice Period for Redundancy
The length of time someone has worked for you will determine how much notice they get for redundancy.
- One month to two years: At least one week’s notice.
- Between two and twelve years: One week’s notice for each year employed.
- More than twelve years: Twelve week’s notice.
It must be continuous service to be counted towards the notice period. If an employee left the business for a time during their employment, their redundancy would be based on the most recent employment period.
The notice period for voluntary redundancy and involuntary redundancy both use this calculation.
You can provide a different redundancy notice period for your staff, but it can’t be less than these statutory limits. Any alternate notice periods you offer should be specified in the employment contract.
What is the Minimum Notice for Redundancy?
You must give employees the statutory minimum for redundancy, as listed above.
However, there is no statutory notice for people that have been employed with you for less than one month.
You can also offer pay in lieu of notice (PILON) if you don’t want someone to work their notice period.
What is the Maximum Redundancy Notice Period?
There is no maximum redundancy notice period. The maximum statutory notice period is twelve weeks, but you can choose to extend that notice period. Your notice period must be fair to employees who are attempting to find new employment though .
There’s a lot of uncertainty around redundancy and circumstances can change. Because of this, you can sometimes issue an extension of redundancy notice as well.
A notice of redundancy is legally binding so you must seek an agreement from the employee before making any change to the notice period. Rejecting this offer could cost employee’s their entitlement to redundancy pay under the Employment Rights Act 1996.
When does the Redundancy Notice Period Start?
The redundancy notice period starts from the moment you let an employee know they have been selected for redundancy.
Although employees will already have been informed that redundancies will be taking place and that their role could be at risk, you can’t use that time when calculating the notice period.
You must provide staff with an end date for their employment in the confirmation of redundancy letter. This means you must work out the details of someone’s notice period before you let them know they have been chosen for redundancy.
Notice Pay and Redundancy Pay
You might not want someone to work a notice period. In this case, you have two options for making someone redundant without notice:
- Garden leave: where you pay the individual until the end of their notice period, but they don’t have to come to work.
- Pay in lieu of notice (PILON): where the full amount of notice pay is provided and the employment ends straight away.
There are many reasons you might choose one of these options. Such as, to protect sensitive business information, or allow staff to focus on finding a new role.
As well as PILON, employees are usually entitled to payment in lieu of contractual benefits, such as a company car during the redundancy notice period.
If you offer pay in lieu, you must compensate staff with an appropriate amount for the loss of contractual benefits as well.
You can avoid having to pay for benefits such as the loss of a company car, but you must include this as a clause in the employment contract.
Is Payment in Lieu of Notice Taxable When Made Redundant?
Payment in lieu of notice (PILON) is fully taxable and the same National Insurance contributions will be required from both employer and employee.
Money paid to the employee through PILON is subject to all the same taxes that you would pay across a notice period. This would only change if you had to pay a different amount, such as with pay in lieu of contractual benefits.
Off Sick During Redundancy Notice
You can’t control when you feel unwell, and sometimes employees will need time off during their notice period.
What this means for the redundancy notice period depends on the type of notice.
An employee working the standard statutory notice period is entitled to their usual full pay for most types of leave:
However, if you provide a notice period that’s at least one week more than the statutory notice period, workers entitlement will change.
They should receive their normal full pay while working, but for absences you should pay them what you would pay for that absence in their usual contract. For example, they might get sick pay, but it could be less than full pay.
Redundancy Notice Periods and New Jobs
In most cases, those facing redundancy will be looking for new employment during their notice period.
Employment law around redundancy notice periods grants many employees the right to time off to find a new job.
If they’ve worked for you for two or more years, they’re allowed a reasonable amount of time off to help with finding their next role.
There’s no legal definition of “reasonable”, you should base this on their individual circumstances.
They may find a new role and be asked to start before their notice period has ended. In this case, they may ask you to release them from their contract early.
You should review whether doing so would cause problems for your business. If you’re able to complete all necessary work without that resource, it can be beneficial to let an employee leave before the end of their notice period.
This can save you money as you only have to pay them up to the date they agreed to end the contract.
Get Help with Redundancy with BrightHR
There are strict rules to keep in mind at all stages of the redundancy process.
Whether you need staff to work their full notice period or opt for PILON instead, there’s different rules which can be easily confused.
Use BrightHR’s redundancy navigator tool to lead you through each step of the redundancy process. And access redundancy letter templates to free up time and make sure you don’t forget any vital information.
Book in a free demo today to see just how easy it is to manage HR with our app. Give us a call on 0800 783 2806.