Difficult redundancy situations

Whether you are dealing with one employee or a wider workforce, certain circumstances can make it difficult to achieve the right balance for your business. You may already be aware of common pitfalls, such as inadequate redundancy pools and subjective selection criteria. Here, we consider some of the more complex issues employers should address when planning redundancies.

Redundancy and maternity leave 

Common misconception: ‘Pregnant employees or employees on maternity leave cannot be made redundant’.

It is possible to make an employee redundant during pregnancy or maternity leave, provided the redundancy is genuine and the selection and dismissal are not discriminatory or otherwise unlawful. However, employees with redundancy protection have priority for suitable alternative vacancies where the statutory requirements are met.

The protected period for pregnancy and maternity generally starts when the employee informs the employer of the pregnancy and extends to 18 months after the child’s birth, subject to the applicable statutory rules. Similar protections apply to eligible employees taking adoption leave and shared parental leave. Additional protections also apply to certain employees taking neonatal care leave and bereaved partner’s paternity leave. ACAS provides guidance on redundancy protection for pregnancy and new parents.

This does not mean that a protected employee must automatically be retained in their existing role. They must still be assessed fairly as part of the redundancy process. However, where a suitable alternative vacancy is available, the employer must give the protected employee the statutory priority, rather than requiring them to compete for the role with other employees.

Employers should also ensure that employees on leave receive relevant information and have a fair opportunity to participate in consultation. Relying solely on a work email account that an employee cannot access during maternity leave, for example, may undermine the fairness of the process.

Redundancy during pregnancy or family-related leave requires careful handling. We can help employers assess their obligations, identify suitable alternative roles and manage consultation and selection to reduce the risk of discrimination and unfair dismissal claims.

Bumping 

Common misconception:  An employer cannot make an employee redundant to allow another employee, whose own role is redundant, to take their position.

Bumping occurs when an employee whose role is not otherwise redundant is dismissed to make way for an employee whose role is redundant. For example, a business might consider moving a more senior employee into a junior role and making the junior employee redundant instead.

There is no automatic obligation to bump employees in every redundancy exercise. However, whether an employer should consider bumping forms part of the wider question of whether it has acted reasonably in the circumstances. The appropriate approach depends on the roles involved, the business’s needs and the alternatives available.

In Mirab v Mentor Graphics Limited, the Employment Appeal Tribunal considered the circumstances in which an employer had placed a senior employee in a redundancy pool of one and whether it had adequately considered alternative roles and bumping. The case illustrates the importance of assessing the facts and the employer’s decision-making process rather than applying a blanket rule.

Employers should therefore consider whether bumping is a reasonable option, particularly where a potentially suitable alternative role is occupied by another employee. A failure to consider relevant alternatives may contribute to a finding of unfair dismissal, depending on the circumstances.

Redundancy and parachute clauses 

Common misconception: Golden parachute clauses are unenforceable because they are penalty clauses.

Employees who qualify for statutory redundancy pay are entitled to a payment calculated by reference to their age, length of service and weekly pay, subject to the statutory limits in force at the relevant time. Contractual arrangements may provide for additional payments, particularly for senior executives.

Some employment contracts and directors’ service agreements contain ‘golden parachute’ provisions, which provide enhanced payments following a takeover or redundancy within a specified period. These provisions may be intended to attract senior talent or provide certainty over the financial consequences of termination.

However, employers should consider the potential cost and enforceability of such provisions before agreeing to them. The tax treatment of a termination payment depends on its nature and the circumstances; contractual payments do not automatically qualify for the £30,000 exemption.

Whether a contractual payment provision is an unenforceable penalty depends on the applicable legal principles and the wording and purpose of the clause. In Murray v Leisureplay plc, the Court of Appeal considered a contractual provision requiring payment of a year’s salary, pension and benefits in the event of termination without the required notice. The case demonstrates that a substantial contractual payment is not automatically unenforceable simply because it exceeds the damages that might otherwise be recoverable.

Employers negotiating executive contracts should consider how termination provisions interact with notice rights, redundancy arrangements and potential claims. Careful drafting can help clarify the parties’ obligations and reduce the risk of unexpected costs when employment ends.

How can Gannons help?

Redundancy exercises can create significant legal and commercial risks, particularly where protected employees, alternative roles or senior executive contracts are involved.

Gannons can help employers assess their options, review redundancy procedures and identify potential risks before decisions are implemented. We work with you to develop practical, commercially focused solutions that help manage redundancies properly, reduce legal exposure and avoid unnecessary costs.