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Related to redundancy: Redundancy pay


the termination of an individual's employment when the employer ceases trading or the job ceases to be required because of rationalization, change of product etc. When an employer decides to make part or all of a workforce redundant the European Collective Redundancies Directive requires that the workforce be consulted on the extent, distribution and rationale for redundancy. Advance notice must be given with the extent of this dictated by the number of planned redundancies. Consultation must take place with union representatives, specially elected employee representatives where a TRADE UNION is not present, or (exceptionally) directly with all employees.

Employees with more than two years' service are statutorily entitled to a redundancy or severance payment. For adult employees under 40 this is one week's pay for each year of service, for those of 40 plus it is one and a half week's pay for each year up to a maximum of twenty years. Many employers choose to make payments substantially above the statutory level (in some public sector organizations there are special schemes to support this) to sweeten the pill of redundancy.

Selection of employees for redundancy can be a traumatic process and, if the organization is to continue trading, needs to be conducted fairly if the morale of those remaining is not to be irretrievably dented. A favoured option is to seek voluntary recruits for redundancy among older employees, backed up by generous redundancy payments and possibly early access to pension benefits. An alternative method is ‘last-in-first-out’ (LIFO),i.e. those with shorter service are selected for redundancy. Whilst superficially fair the problem with this is that it potentially removes those young workers who have most to offer the organization in the long term.

Whatever the method chosen, redundancy is undoubtedly a distressing process for all those involved. Some more progressive organizations offer counselling services to aid adjustment and to rebuild confidence. Others, especially where very large numbers have been made redundant, have set up employment agencies in an attempt to find alternative work. Although trade unions sometimes declare their intention to fight redundancies, they and their members are generally unwilling to take any form of industrial action since this could imperil redundancy payments. Unions, therefore, usually come to devote their efforts to ensuring that individuals are treated fairly by those handling the redundancy process.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


the loss of jobs by employees, brought about by company RATIONALIZATION and reorganization that results from falling demand or PRODUCTIVITY improvement. In the UK, adult employees under 40 years of age are entitled to redundancy or severance payment of one week's pay for each year of service, and for those over 40, it is one and a half week's pay for each year up to a maximum of 20 years. See UNEMPLOYMENT.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
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