NHS redundancy arrangements - Section 16

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These arrangements are currently under review by the NHS Staff Council.

It is important for NHS employers to be aware of the key issues involved in managing the redundancy process.

This page has been updated with the focus on issues covered in Section 16 of the NHS terms and conditions of service handbook. 

A summary of the key components of the agreement are outlined below.  We have also developed answers to some of the more frequently asked questions on the agreement, with links to other useful information, to provide additional support to employers on the redundancy processes.

Calculating redundancy pay

Service requirements

Continuous service

Reckonable service

Exclusions - when reckonable service is not counted

Early retirement and redundancy

Suitable alternative employment

Information for staff

Other sources of information 

Calculating redundancy pay

Staff who are made redundant should receive one month’s pay per year of reckonable service, with a maximum of 24 months’ pay (only full years of reckonable service can be counted when calculating redundancy pay as employment for part of a year should be disregarded).

A month’s pay will be either an amount equal to 1/12th of the annual salary at the date of termination or 4.35 times a week’s pay whichever is more beneficial to the employee ( the average month has 4.35 weeks). The calculation of 4.35 times a weeks pay should be made in accordance with the Employment Rights Act 1996.

Service requirements

Redundancy entitlements are, in the main, determined by service criteria. In redundancy compensation, there are two concepts of “service” - continuous service which employers need to consider first and “reckonable service” which then determines the period(s) of service to be counted in paying redundancy.

Continuous service

Employees must first have sufficient “continuity of service” to be eligible for redundancy compensation as follows:

  • Two years or more continuously employed service with one (or several) NHS employers is required – if with more than one employer then the break must not be more than a week
  • Where an employee has had a break in NHS service of more than one ‘statutory’ week, the prior service is not counted as continuous so continuity would be broken.

Reckonable service

  • All continuous NHS employment with one (or several) NHS employers counts as reckonable service for redundancy compensation, unless it has been taken into account in a previous redundancy – or loss of office payment (paragraph 16.6 of the NHS terms and conditions of service handbook) or Mutually Agreed Resignation Scheme (MARS) severance payment (paragraph 20.18 of the NHS terms and conditions of service handbook)
  • Providing the employee has not had a break in NHS service of over twelve months the period of NHS employment prior to the break counts as reckonable service and therefore previous service can be included when calculating redundancy.

Exclusions - when reckonable service is not counted 

  • Service counted previously in respect of a redundancy by an NHS employer.
  • Any previous employment for which an  employee has received NHS pension benefits.
  • Loss of office payment.
  • MARS severance payment (which is offset against any subsequent redundancy payment).

Early retirement and redundancy

Redundant employees who have reached the minimum pension age and are members of the NHS pension scheme can, if they wish, take their pension early without reduction in their pension benefits.  In such case the employer will pay the NHS pension scheme a sum equivalent to the cost of paying the pension early.  

The payment will be met from the lump sum redundancy payment that the employee would have received but in cases where the cost to the employer of paying the single payment is less than the value of the redundancy payment, the employee will also receive any  balance due.  However if the cost of early retirement is more than the redundancy payment due, the employer will pick up any additional cost.

More details about early retirement provisions and redundancy can be found in paragraphs 16.10 - 16.17 of Section 16 of the NHS terms and conditions of service handbook.

Suitable alternative employment

Suitable alternative employment is a concept of the Employment Rights Act 1996 and an important part of a robust redundancy process. It is an employer’s responsibility to seek suitable alternative employment for staff before making redundancies. Paragraphs 16.18 -16.20 of the NHS terms and conditions of service handbook provides information for employers on the issue.

In general terms, whether a job is 'suitable' will depend on a number of key factors including:

  • how similar the work is to the employee’s current job
  • the terms of the job being offered
  • skills, abilities and circumstances in relation to the job
  • the pay (including benefits), status, hours and location.

The question of suitable alternative employment should be determined on a case by case basis.  See the findings of the Employment Appeal Tribunal - Readman v Devon Primary Care Trust

Information for staff

Individual members of staff should contact their employer or trade union representative for information and guidance on NHS redundancy arrangements.

Employers should e-mail queries to agendaforchange@nhsemployers.org

Other sources of information

ACAS has produced guidance on redundancy.

A factsheet on Premature Retirement has been produced by NHS Pensions.

 

 

 

 

 

 

 

 

 

 

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