Redundancy and notice payments Factsheet number: 6.2 Last Updated: 05 January 2021 Introduction As an employer, you may find yourself in a situation where you need to make one or more of your PAs redundant. This may happen, for example, if you are receiving less funding to pay for your care and can no longer afford to employ as many PAs. If you are considering making redundancies it is very important that you treat all of the PAs involved fairly and follow the correct processes. This factsheet will guide you through the process of selecting individuals for redundancy and also shows you how to calculate their entitlement to statutory redundancy pay. Further information can also be found in the factsheet below: 6.1 Ending PA Employment Contents 1. What is redundancy? 1.1 What are my key responsibilities as an employer? 1.2 Voluntary redundancy 2. Compulsory redundancy 2.1 Fair selection criteria 2.2 Unfair selection criteria 2.3 Notice of termination 2.4 Other redundancy rights 3. Statutory redundancy payments (SRPs) 3.1 How do I calculate the SRP? 3.2 Calculating an SRP online 3.3 Written statement of statutory redundancy pay 4. Notice payments 4.1 Calculating notice payments 4.2 Frustration of contract on death of employer 1. What is redundancy? Redundancy is a type of dismissal caused by the employer needing to reduce their workforce This will usually happen because you have: ‘Ceased - or intend to cease - carrying on the activity for the purposes of which the PA is employed or because the requirement for work of a particular kind has ceased or diminished’ This is very different from dismissal for a reason relating to the poor conduct or capability of a PA which may follow after a disciplinary process. For a redundancy to be genuine, the job that the PA does must disappear. You can still take on new PAs but not to do the work the redundant PA was doing. The test for a genuine redundancy situation is whether you require… …fewer or no workers to do work of a particular kind because …the work has ceased or diminished. The most common reason that you will need to make redundancies is because you are reorganising your workforce and as a result there will be less work to do. 1.1 What are my key responsibilities as an employer? If you are considering making one of more of your PAs redundant you must: Decide which PAs are candidates for redundancy- this is your ‘selection pool’. You must notify all PAs who you are considering making redundant. Schedule individual meetings (‘consultations’) with each of these PAs to explain that you are considering making redundancies and that they are in the selection pool. Explain the selection criteria that you will be using to each of the PAs during their consultation meeting. If it is appropriate, request volunteers for redundancy If you need to make compulsory redundancies apply the selection criteria fairly and objectively If any of your PA’s that are being made redundant are on Maternity Leave please speak to your Insurance Provider or Independent Lives before any action is taken. 1.2 Voluntary redundancy If you need to make redundancies, you could ask employees if they are willing to volunteer for redundancy and then select those to be made redundant from the list of people who volunteer. The advantages of voluntary redundancy are that: it is less demoralising for your PAs than compulsory redundancy it can be less disruptive less work is needed to check that redundancy selection criteria are fair The disadvantages are that: it is often more expensive: longer-serving PAs requiring higher redundancy payments tend to volunteer you may wish to offer enhanced redundancy payments to make redundancy more attractive which you may not be able to do you may get more volunteers than needed and those not ultimately selected for redundancy may then react negatively you could end up with an imbalance in the skills and experience of remaining PAs If there are no suitable volunteers for redundancy you will need to make compulsory redundancies. Section 2 guides you through how to do this fairly and legally. 2. Compulsory redundancy If no one volunteers for redundancy you will need to make compulsory redundancies instead. In this situation the first thing you should do is create a ‘selection pool’ i.e. decide which PAs you are considering for redundancy. Once you have decided who will be in your selection pool, you must consult each PA individually to explain the situation and the criteria that you will be using for selection. If you fail to do so, any subsequent dismissals may be unfair. In most cases you will not be making all of your PAs redundant and so you will need to show that you have followed a fair selection process when choosing from your selection pool. You must be able to show that the selection criteria you used were: objective, non-discriminatory and applied consistently 2.1 Fair selection criteria The list below outlines the types of selection criteria that you can apply when selecting individuals for redundancy. standard of work With this criteria, you will need to provide supporting objective evidence e.g. supervision notes as proof. experience, skills and aptitude for work You could look at each PA’s CV and application form as well as considering the skills they have developed whilst working for you. You might have evidence of this in their supervision notes. attendance record If you use this criteria you must not include absences for maternity, ordinary paternity, additional paternity or adoption leave and you should make sure all your records are accurate and complete. disciplinary record If you use this method you must make sure that your records are accurate. To avoid the possibility of unlawfully discriminating against anyone in the selection pool, you should use more than one criterion where possible. Some selection criteria will automatically be unfair (see section 2.2 below) and your PA will be able to claim for unfair dismissal. 2.2 Unfair selection criteria Using certain selection criteria will make any subsequent redundancy dismissal automatically unfair. This includes selection: on maternity related grounds or in relation to other rights for working parents because the PA has asserted any statutory employment right on the grounds of any of the protected characteristics listed in the Equality Act 2010 for a reason relating to rights outlined in the Working Time Regulations 1998 or the National Minimum Wage Act 1998 for requesting flexible working arrangements for accompanying another colleague to a disciplinary meeting or appeal because the PA is a member of a trade union For a full list of automatically unfair reasons for dismissal see: http://www.direct.gov.uk/en/Employment/RedundancyAndLeavingYourJob/Dismissal/DG_10026692 Employees normally need at least two year's service to claim unfair dismissal, depending how long they have been employed with you. However, if an employee is selected for redundancy on the basis of any of the grounds listed above, their dismissal will be automatically unfair, and they do not need a minimum amount of service to claim. 2.3 Notice of termination Once you have decided which PAs you are making redundant you must issue them with a notice of termination letter to let them know they are being made redundant. This letter must contain the following details: the length of their notice period the date their employment will end whether you wish them to work during their notice period and if not, detailing that you will be making a payment in lieu of notice whether or not they are entitled to a statutory redundancy payment and if so, how much it will be and how it was calculated It is also a good idea to thank the PA for their work and offer to provide them with references in this letter. If you wish you can use the employer template below for these purposes: 6.2b: Template notice of termination (redundancy) letter 2.4 Other redundancy rights PAs under notice of redundancy also have the right to: be offered suitable alternative employment wherever possible. have a trial period in the alternative employment without losing their right to a statutory redundancy payment. reasonable time off on full pay for job-hunting or to arrange training. not be unfairly selected for redundancy. 3. Statutory redundancy payments Any PA with two or more years of continuous service, who is being made redundant, has the right to: a statutory redundancy payment a written statement setting out the payment amount and how it was calculated. You must make the payment when or very soon after you dismiss the PA. You will usually make this payment along with their final wage payment. As long as it's not more than £30,000, SRP is not taxable. Any redundancy payment you make in addition to SRP is however subject to tax and National Insurance (NI). You must also be careful if you are making other payments to the PA at the same time, e.g. a payment in lieu of notice and/or outstanding holiday pay, as you will need to deduct tax and NI for these. 3.1 How do I calculate the SRP? The SRP due the PA is based on the PA’s: 1. Age For each full year of service when the PA’s age was... They are entitled to... Less than 22 0.5 week's pay 22 - 40 1 week's pay 41 + 1.5 week's pay 2. Amount of continuous employment To qualify for a SRP the PA must have a minimum of two years continuous employment with you. The length of service for SRP is capped at 20 years. Continuity of employment is not broken by: sick, maternity, paternity, adoption or parental leave holidays (annual leave) Where a PA has worked an incomplete year, you should round down e.g. 2 years and 7 months = 2 years for the purposes of calculating their SRP. Their length of continuous employment should be calculated to include their notice period. 3. Weekly gross pay This is pay that has not been subject to tax or National Insurance deductions. This is the PA’s gross weekly pay on the day they were given notice or the day the job ended if they were not given notice. This is called the ‘calculation date’. If your PA works varying hours each week, you should calculate the average over the past 12 weeks. For an SRP there is a maximum of £538 per week. If your PA earns more than this the amount is capped at £538. 3.2 Calculating an SRP online You can calculate the SRP due to your PAs by clicking on the following link: https://www.gov.uk/calculate-your-redundancy-pay This website has an online calculator, which simply asks you to input your PA’s age, length of continuous service and weekly gross pay. They will then come up with the total SRP that your PA is entitled to. Alternatively you can speak with an Independent Lives adviser who will be able to help you calculate the SRP due to your PA. To speak to an adviser please call our Information & Advice Service on 01903 219482. 3.3 Written statement of statutory redundancy pay If your PA has two or more years of continuous service and you make them redundant you must provide them with a written statement of statutory redundancy pay. This should detail how much statutory redundancy pay the PA is entitled to and how you calculated it. You can speak to Independent Lives to help in creating a written statement. 4. Notice payments 4.1 Calculating notice payments Notice pay is calculated according to length of service as follows: During the probationary period 1 weeks’ notice will be given by the employer. After the probationary period: Employees with 6 months - 2 years’ service will be entitled to 2 weeks’ notice. Employees who have worked for more than 2 years will receive 1 weeks’ notice for each full year of employment, up to a maximum of 12 week’s notice. The employer may choose to give payment in lieu of the notice period being worked. 4.2 Frustration of contract on death of employer In circumstances where the direct payment recipient has passed away and they were the employer, then this is classed as ‘Frustration of Contract’ under Employment Law. In this circumstance PAs are not entitled to notice pay, however, they are still entitled to a Statutory Redundancy Payment if they meet the eligibility criteria. If the direct payment recipient was not the employer, then PAs are entitled to notice pay as shown in item 4.1 above.