Understanding the Key Differences: Redundancy vs. Dismissal

Redundancy

A redundancy situation occurs when a role (not an employee personally) is no longer required by the employer. This could be because the business as a whole is closing, as a result of a headcount reduction (where the work can be carried out by fewer employees, or even automated) or outsourcing.

Prior to making compulsory redundancies, an employer must consider all alternatives. If redundancies cannot be avoided, then roles must be selected for redundancy using fair criteria – often this involves putting similar roles into a selection pool and scoring against a matrix.

Employers must always consult with employees when redundancies are a possibility – how long and in what form the consultation takes place will depend upon the number of redundancies happening at the same time.

Alternative employment should be offered to those employees whose roles have been identified as redundant – although there is no requirement to create new roles. Finally, employees whose roles are made redundant will be entitled to a redundancy payment – either the statutory payment or enhanced if the employee’s contract provides for this.

Dismissal

In contrast, a dismissal might occur when an employee has not been performing in their role, or is guilty of misconduct. Prior to a dismissal for either reason, the employer should (in all but the most serious cases of misconduct) have gone through a procedure allowing the employee a chance to improve their performance or behaviour. That procedure must include making sure the employee is aware of what they are said to have done, and has been given a chance to give their own version of events.

In the context of performance, dismissal might be appropriate where, for example, the employee has been provided with time, extra training, and support to allow them to meet their performance targets, but are still not capable of fulfilling the requirements of their role. In a disciplinary scenario dismissal may occur either where there have been previous warnings for misconduct, or where a single act is so serious as to constitute gross misconduct.

When a decision has been made to dismiss an employee, they must be given clear reasons for that decision, and must be given the opportunity to appeal against their dismissal.

It is vital that the employer evidences all aspects of the decision making process, to demonstrates that the relevant policies and procedures for a fair dismissal have been followed.

Legal advice can be provided prior to the dismissal to minimise your risk of an unfair dismissal claim. If a claim is issued, expert advice can be offered alongside tribunal representation.

Key Differences

It is not up to an employer to choose whether an employee’s employment will terminate by reason of redundancy or by dismissal – they are entirely different situations. Dismissal will arise from something that the employee has, or has not, done. Redundancy arises as a matter of law when the employer has a reduced need for a particular type of work to be carried out.

The key difference is that, upon redundancy, an employee with at least 2 years’ service will be entitled to redundancy payment (as well as notice pay and pay for untaken annual leave). An employee who is dismissed will be entitled to nothing more than notice pay and pay for untaken leave.