19 / 3 / 2015 00:00 AM
From 1 April 2015, new NHS redundancy arrangements have come into effect in England for staff covered by Section 16 (a) (England) of the NHS terms and conditions of service handbook. It is important for NHS employers in England to be aware of the key issues involved in managing the redundancy process.
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 that support employers on the redundancy processes.
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, subject to a total annual earnings floor of £23,000 and cap of £80,000, 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 week’s pay should be made in accordance with the Employment Rights Act 1996.
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.
Employees must first have sufficient continuity of service to be eligible for an NHS contractual redundancy payment:
- a minimum of two years NHS service with one or more NHS employer (See Annex A, NHS terms and conditions of service handbook) with a break of no more than one statutory week
- where an employee has had a break in NHS service of more than one statutory week, the prior service is not counted for the purposes of accruing the necessary minimum period of 2 years continuous service.
Once an entitlement to redundancy has been determined, NHS reckonable service will then be used as the basis for determining the eligible service to be used in calculating the amount of the contractual redundancy payment.
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, Section 16 (a) (England) 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 any break counts as reckonable service and therefore previous service can be included when calculating contractual redundancy.
Exclusions - when reckonable service is not counted
Reckonable service is not counted when:
- service is 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.
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 employee will have the one-off option to make up all or part of the difference out of their own personal funds.
More details about early retirement provisions and redundancy can be found in paragraphs 16.12 - 16.15 of Section 16 (a) (England) 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 16.21 -16.23 of Section 16 (a) (England) 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 email@example.com
Other sources of information
ACAS has produced guidance on redundancy.
A factsheet on Premature Retirement has been produced by NHS Pensions.