What is redundancy?
In general terms, redundancy arises when :-
- the whole business closes down, or is expected to close down;
- the business closes down in a particular place, or is expected to close down;
- the requirements of the business for employees to carry out work of a particular kind cease or diminish because :-
- the business diminishes
- productivity increases
- the work is done in a different way
What is a redundancy payment?
Wit. An employee will have a right to receive a redundancy payment, subject to a qualifying period of two years continuous service, if they are dismissed by reason of redundancy. For the purposes of the Law an employee is taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:
- either that the employer has ceased or intends to cease to carry on the business for the purposes of which the employee was employed,
- or has ceased or intends to cease to carry on that business in the place where the employee worked.
Consequently, employees in Jersey who are made redundant who have been continuously employed for two years or more will normally be entitled to receive redundancy payments.
Further information can be found in JACS Guideline No. 11
What is fair selection?
When an organisation has a redundancy policy that provides for redundancy payments, a useful first step is to seek volunteers for redundancy from the work force, as some members of staff may decide to seek careers elsewhere on a voluntary basis. If redundancy selection becomes necessary, responsible employers normally have a fair and reasonable set of criteria that is used in such selection.
The selection criteria for redundancy can be based on factors such as skills, qualifications, and the employee's employment record with the company, including attendance, discipline, time keeping etc, however please remember that absence for maternity related illnesses should not be included and additional consideration needs to be given in respect of those with a disability. The employer should also be able to demonstrate that a comprehensive consultation procedure had been carried out and that all suitable alternative jobs had been made available to the employee(s), if any such jobs existed. If 12 or more redundancies are anticipated within a 30 day period then collective consultatation with employee representatives is a statutory obligation.
Automatically unfair dismissal
Under the Employment (Jersey) Law 2003 it is automatically unfair to dismiss a person by reason of redundancy in circumstances where the redundancy applied equally to other employees who have not been made redundant. Click on the following link for a Model redundancy procedure and a fair selection process
What is a suitable alternative?
In a redundancy situation, efforts should be made to offer an employee a suitable alternative position. Any offer of alternative employment should be with the same employer, or an associated employer or a successor employer who takes over the business, ideally before the old contract of employment expires.
Income tax implications
We have received a great many questions about the tax implications of certain lump sum payments.
The income tax law has changed and the department has now issued general advice. This can be found in our guidelines Redundancy Payments and taxation.