Reduction in Headcount Not a Requirement for Dismissal by Redundancy

Circumstances when a redundancy will occur include where an employer has a reduced need for employees to perform work of a particular kind.  A case has recently been heard by the Employment Appeal Tribunal ('EAT') which considered whether a dismissal could be by reason of redundancy where there had not actually been a reduction in the number of employees within the business.

Ms F was employed to provide largely book-keeping services by her employer. There was a downturn in business and her employer introduced an accountancy software package, the combination of which reduced the number of hours for which it was necessary that a book-keeper should work.  The employer sought to persuade Ms F to reduce her working hours, but she refused to do so. The employer therefore dismissed her, as there was no longer a need for her to work the hours she had contracted to work.  No redundancy payment was made because, despite the reduction in work, there was no reduction in the actual number of employees required to perform the work – and this seemed to be the correct approach based on the prevailing case law.

The employment tribunal found that it was, in fact, a redundancy dismissal, as the dismissal resulted from a diminished need for book-keeping, and the EAT agreed that this was correct.

Employers therefore need to be wary when dealing with such situations, as a dismissal for refusing to accept a reduction in hours will be classed as a redundancy, meaning the dismissed employee would be entitled to a statutory redundancy payment (or, if there is a contractual redundancy payment, they will be entitled to that).