What Is a Suitable Alternative Employment in a Redundancy Situation?

When an employer makes a role redundant, they often have a legal obligation to offer suitable alternative employment to the affected employee before proceeding with dismissal. This duty is a critical part of a fair redundancy process and understanding it is essential for both HR professionals and employees at risk.

What Is Redundancy and How Does It Differ from Other Dismissals?

Redundancy is a form of dismissal that occurs when an employer needs to reduce their workforce because a particular job role is no longer required. This can happen due to business closure, workplace relocation, or a diminished need for specific work. It is crucial to distinguish redundancy from other dismissals, such as those for misconduct, because redundancy is not the employee's fault. As a result, employees made redundant are entitled to specific rights, including statutory redundancy pay (if they have at least two years of service) and the right to be considered for alternative roles.

The key differentiator is the reason for dismissal: redundancy is based on the employer's operational needs, not the employee's performance or conduct.

What Constitutes a Suitable Alternative to Redundancy?

A suitable alternative employment is a role offered to an employee facing redundancy that serves as a valid option to avoid dismissal. For the offer to be legally "suitable," it must be broadly similar to the employee's previous position. The onus is on the employer to make a genuine effort to find such a role within the organization or an associated company.

Several factors determine suitability, including:

• Skills and Duties: The employee should be able to perform the new duties without requiring excessive retraining.
• Pay and Benefits: The salary, bonuses, and benefits package should be comparable. A significant downgrade may render the role unsuitable.
• Status and Seniority: A substantial loss of seniority or status could be a factor.
• Work Location: The new job's location should be reasonably accessible. A move that necessitates a long or difficult commute may not be suitable.
• Working Hours: Major changes to working patterns or hours can affect suitability.

If an employee unreasonably refuses a suitable offer, they may risk losing their entitlement to statutory redundancy pay.

What Are the Key Steps in the Redundancy and Alternative Employment Process?

A fair process is legally required to avoid claims of unfair dismissal. Based on our assessment of standard HR practices, the key steps involve consultation, selection, and offering alternatives.

1. Justification and Fair Selection? The employer must first establish a genuine redundancy situation. They must then select employees for redundancy using fair, objective, and non-discriminatory criteria. Common criteria include skills, experience, disciplinary record, and standard of work performance. Using criteria like length of service ("last in, first out") can be acceptable but must be applied carefully to avoid age discrimination.

2. The Consultation and Offer Stage? Employers are legally required to consult with employees individually. This is the stage where alternative employment should be discussed. The employer must provide details of any available vacancies. If a suitable alternative role is identified, a formal offer is made.

3. Understanding the Trial Period and Employee Rights? Employees have the right to a four-week trial period for any alternative role offered. This period allows both parties to assess suitability. It can be extended by written agreement if training is required. If the employee decides the role is unsuitable after the trial, they can resign and will still be entitled to their full redundancy payment.

During their notice period, employees with over two years of service are also entitled to a "reasonable" amount of paid time off to look for a new job or arrange training.

How Is Redundancy Pay Calculated?

Eligible employees are entitled to statutory redundancy pay. The calculation is based on the employee’s age, weekly pay (up to a statutory limit), and length of service (capped at 20 years). The following table illustrates the calculation based on the UK's statutory rules (as of April 2024, with a weekly pay cap of £700).

Example: An employee aged 45 with 10 years of service would receive (10 years x 1.5 weeks) = 15 weeks' pay as a statutory redundancy payment.

Key takeaways for a smooth redundancy process: For employers, documenting every step is crucial to demonstrating a fair process. For employees, understanding your rights to alternative employment and a trial period is vital before making a decision. Always seek the offer and any related communications in writing.