As thousands lose jobs due to Arcadia collapse, we explain your rights when being made redundant

Thousands of employees have recently heard the difficult news that they will be made redundant, after former retail giant Arcadia collapsed.

Asos acquired the Topshop, Topman and Miss Selfridge labels – however, it has only taken on the brands and not the physical stores or the staff.

Its fellow online fashion giant Boohoo then took over the rest of Sir Philip Green’s empire, buying Dorothy Perkins, Burton and Wallis – but again, it will not be keeping stores open. 

This has left just a fraction of Arcadia’s 13,000 employees with a job, and the rest have been made redundant.

They join hundreds of thousands of others who have lost their jobs since the start of the pandemic, which has resulted in a wave of business closures.  

Many will have been left with questions about how redundancy works, what money they can expect to receive and how they can move forward.

This is Money, with the help of Donna Seferta, an employment lawyer at Irwin Mitchell, and Hayat Rafique-Fayez, an employment lawyer at Slater and Gordon, have addressed some of the most common problems.

1) Why would a company make someone redundant?

Redundancy is a form of dismissal from your job. It happens when employers need to reduce their workforce.

In the case of Arcadia, the vast majority of staff were made redundant because their roles in stores no longer existed. 

Many of the redundancies that have happened in recent times are a direct response to the ongoing pandemic and businesses closing permanently or moving online, meaning less staff are needed. 

But if an employer is only letting some staff go and keeping others on, it must select them in a fair way – for example based upon their level of experience or capability to do the job.

You cannot be selected because of age, gender, or if you’re disabled or pregnant. If you are, this could be classed as an unfair dismissal. 

2) For what reasons can you be made redundant?

There are a number of grounds for redundancy. These include the employer changing location, the employer closing part or all of its business and a change in what the employer does. 

A change in how the employer carries out its work, such as the use of technology or machinery instead of people, is another factor that can lead to redundancy.

The criteria an employer is allowed to use to select employees for redundancy includes a workers skills, qualifications, capabilities or conduct, as well as the nature of the work that will be done by remaining staff. 

3) How will you be told you are being made redundant?

Employers should follow a process where staff are warned about being at risk of redundancy as part of a ‘consultation’. 

They should advise you of the reason for the redundancies, the number of redundancies they intend to make, the selection procedure they intend to use, how they will carry out the redundancies and how they will work out redundancy payments. 

After the consultation has concluded, your redundancy should be confirmed in writing. 

You must be given a notice period before your employment ends. You should be given at least one week’s notice if you were employed at the company for between one month and two years, one week’s notice for each year if employed between two and 12 years, and 12 weeks’ notice if employed for 12 years or more. 

Your employer may give you more than the statutory minimum, but they cannot give you less.

However, your employment can be ended without notice if ‘payment in lieu of notice’ is included in your contract. Your employer will pay you instead of giving you a notice period.

You get all of the basic pay you would have received during the notice period. 

4) What redundancy pay are you entitled to?

You will normally be entitled to statutory redundancy pay if you are an employee and have been working for your current employer for two years or more, according to  Government legislation.

You will get half a week’s pay for each full year you worked there and were aged under 22; one week’s pay for each full year you were 22 or older, but under 41; and one and a half week’s pay for each full year you were 41 or older. Length of service is capped at 20 years.

During the coronavirus pandemic, you have the same redundancy rights, including redundancy pay.

If you have not been employed for two years or more, then you are not entitled to statutory redundancy payment. 

You should also check your contract of employment and your employer’s policies, as they may offer a redundancy payment even if you have not been employed for the minimum period.

Some employers offer ‘enhanced’ redundancy packages which contractually entitle employees to a higher sum than the statutory redundancy payment.

5) What happens if your employer cannot pay?

If your employer cannot pay but is still solvent, then you will have to pursue a claim in the Employment Tribunal.

Whilst this does not mean you will definitely receive the money, once you have an Employment Tribunal judgment, there are other steps that can be taken to try and get hold of the redundancy payment.

If your employer is insolvent and makes you redundant, you can apply for the redundancy payment through the Government’s Redundancy Payments Service.

6) What happens to your pension?

You will need to check the specific rules for your pension, but generally the rules for pensions if you are made redundant are the same as if your employment ended for any other reason.

You can keep your pension benefits where they are and you could continue contributing to the scheme yourself, or you may transfer your pension pot into a new scheme. You may also be able to use the redundancy payment to make additional pension contributions.

Some employees reach an agreement with their employer to ‘give up’ some of their redundancy pay and instead the employer makes an additional contribution to the employee’s pension. 

This is known as a ‘redundancy sacrifice’. Not all employers are willing to do this, however.

7) What are your rights?

A redundancy is a type of dismissal. If you are legally considered an employee and have been employed for two years or more, you have the right to be ‘fairly dismissed’.

In a redundancy context, that means that there has to be a genuine redundancy situation and the process and decision to make you redundant should be fair. 

You also have the right not to be discriminated against or penalised for being a ‘whistleblower’ – in other words, speaking out in public about your grievances with the company. 

You therefore should not be made redundant for a discriminatory reason or because you have blown the whistle.

8) What should you ensure is in your redundancy package?

You might be entitled to a few things as part of your redundancy package and these include redundancy pay, notice pay, enhanced redundancy payment, outstanding holiday and outstanding bonus or commission. 

Your employer may also provide support from a third party to help you get a new job.

9) Will you be given an allowance to get legal advice in the package?

You are not entitled to an allowance for legal advice if you are made redundant. However, if your employer wants you to sign a settlement agreement – a legally binding agreement which settles claims that the employee may have against their employer – then they should offer you a sum to cover legal advice. 

This is because a settlement agreement must be reviewed with you and signed by a relevant person, which is usually a lawyer.

10) What else should those being made redundant be aware of?

If you are being made redundant due to the Coronavirus pandemic, you can ask your employer to instead retain you through the furlough scheme. 

Unfortunately there is no right to be retained and furloughed – but some employers may consider it.

There may also be tax issues to be aware of. Statutory redundancy payments are tax-free, but if you have received an ‘enhanced’ redundancy payment of more than £30,000, you will liable for tax on some part of the payment.

What do I do after being made redundant?

Firstly, start looking for a new job. This might be challenging at the moment, given the country is still in lockdown, but there are still positions out there.

However, whilst you are looking you can sign up to Universal Credit which is a payment to help you with your living costs if you are out of work or on a low income. 

How much you are paid will depend on your earnings.