NHS redundancy FAQs

SAVE ITEM

12 / 12 / 2012 11:02 AM

These FAQs have been developed to assist employers in answering queries about NHS redundancy arrangements for staff covered by Agenda for Change.

 

  • What if an employee has several breaks in service but when the breaks are added together they are for less than 12 months?
  • If an employee has over 2 years reckonable service but falls short of 3 years service, what period of reckonable will be used in the redundancy calculation?
  • What about a pregnant employee on maternity leave? Can they be made redundant?
  • What are these “special provisions”?
  • How is suitable alternative employment defined?
  • How long should employees wait before they can obtain another post within the NHS?
  • Are bank staff eligible for NHS redundancy?
  • What about employees on fixed term contracts?
  • Does employment outside of the NHS count towards reckonable service?
  • What about service in a GP practice?  Could this count for NHS redundancy?
  • How should career breaks be treated in a redundancy situation?
  • If an employee had taken advantage of the salary sacrifice arrangements but is later made redundant, how would you calculate their redundancy payment?
  • Is an employee entitled to a redundancy payment if they have previously been made redundant?
  • What is included in a month’s pay?
  • Is the redundancy lump sum tax free?
  • Is there a redundancy calculator for employers?
  • What is the position for staff who are made redundant but who are over the minimum pension age?
  • What about employees who have retired, returned to work in the NHS and subsequently made redundant?  Does their previous NHS service count for redundancy?
  • How do employers calculate capitalised costs? 
  • How does continuous service and reckonable service interact?

    An employee is required to have two years (104 weeks) of continuous service in order to qualify for an NHS redundancy payment. This is service where there has not been a break of more than one week (measured Sunday to Sunday). Once the employee has earned the two years continuous service, they then qualify for an NHS redundancy payment.  Any service over these two years will then count towards reckonable service, as long as they have not had a break of more than one year.

    What if an employee has several breaks in service but when the breaks are added together they are for less than 12 months?

    Providing the employee satisfies the qualification/continuity of service  criteria for redundancy, then the period(s) between the breaks counts as reckonable service for redundancy purposes though the period of the break itself will not count.

    If an employee has over 2 years reckonable service but falls short of 3 years service, what period of reckonable will be used in the redundancy calculation? 

    The NHS terms and conditions of service state that fractions of a years reckonable service are not counted when calculating redundancy pay, so therefore if the employee had 2 years and an amount of days below a further complete year, then they would not be entitled to have that third year of reckonable service counted as it would only be a part year. 

    What about a pregnant employee on maternity leave? Can they be made redundant?

    A pregnant employee or one on maternity leave can initially be treated the same as other employees in the pool for selection for redundancy. However, an employee must not be selected for redundancy for a reason connected to her pregnancy, the birth of her child or maternity leave. If you do not establish a fair reason for the employee’s dismissal, you may face an unfair dismissal and sex discrimination claim, irrespective of the employee’s length of service. However, if employees on maternity leave are selected, special provisions concerning offering alternative employment apply to protect them.

    What are these “special provisions”?

    An employee on maternity leave is entitled to priority over those not on maternity leave as far as suitable alternative employment is concerned. If a vacancy exists, she must be offered the alternative employment under a new contract immediately following the day on which her previous contract comes to an end.  The new work must be suitable and appropriate for her to do and must not be substantially less favourable than that of her previous contract. Where a suitable vacancy exists and the employer fails to offer it, an employee’s dismissal will be deemed automatically unfair.

    How is suitable alternative employment defined?

    Section 141 of the Employment Rights Act 1996 governs the rules on suitable alternative offers of employment in relation to redundancies. The legal framework establishes the duty on employers to take reasonable steps to find, where possible, suitable alternative employment for affected staff. Whether a job is 'suitable alternative employment' depends on several things including:

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

    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.

    How long should employees wait before they can obtain another post within the NHS?

    Section 16.17 of the NHS terms and conditions of service handbook states that employees are not entitled to a redundancy payment if, at the date of the termination of their contract, they have obtained without a break or with a break not exceeding 4 weeks, suitable alternative employment in the NHS. We therefore advise that if employees obtain suitable alternative employment within 4 weeks of the termination of their contract, they would not be entitled to their redundancy payment.

    Suitable alternative employment is a concept in the Employment Rights Act 1996 and invariably there is a degree of interpretation involved.  Suitable alternative employment would normally include duties of the post, salary, earnings protection, location of post, qualifications and aptitude and need for training. 

    If the employee is made redundant again in the future, they would only be entitled to NHS redundancy for the period post re-employment, as described in section 16.6 of the NHS Terms and Conditions of Service Handbook.

    Are bank staff eligible for NHS redundancy?

    The terms and conditions of service handbook does not cover redundancy arrangements for bank staff so entitlement to redundancy will be a matter for individual employers and will largely depend on the detail in the contract of employment of the individual concerned. However, if the employee fully satisfies the qualification criteria set out in paragraph 16.3 of the handbook you may wish to consider paying redundancy to that employee for the period concerned.

    What about employees on fixed term contracts?

    If the reason for termination of the fixed term contract is redundancy, then the employee should be treated in the same way as any other employee on a permanent contract. Section 16 of the NHS Terms and conditions of service handbook states that employees on fixed term contracts are entitled to redundancy payments, as long as they have 104 weeks continuous service.

    Does employment outside of the NHS count towards reckonable service?

    It is at the employers discretion as to whether periods of employment outside of the NHS are counted as reckonable service. We suggest that where employment is outside of the NHS, but relevant to NHS employment, it would be reasonable to include this in the NHS redundancy calculation.  However, this should ideally be agreed with the employee when they join the NHS and with any subsequent NHS employer.  

    What about service in a GP practice? Could this count for NHS redundancy?

    Service with a GP practice does not automatically count for an NHS redundancy payment as it is not NHS service which has to be with an NHS employer such as a PCT or Trust. However, employers do have discretion to recognise service outside the NHS. Section 16.5 (third bullet) states that employers do have the discretion to take into account “any period of employment with employers outside the NHS where these are judged relevant to NHS employment”.

    How should career breaks be treated in a redundancy situation? 

    We believe that if the post of an employee on a career break becomes at risk of being declared redundant, the employee should be afforded all the rights he/she would have, where he/she attending work. Being on a career break will not, however, afford any special protection against redundancy; neither will it be used as a reason for identifying the post as redundant.

    The NHS terms and conditions of service handbook is not explicit on the issue of pay to be used to calculate redundancy whilst on a career break and you may wish to seek your own legal advice on the matter before proceeding. However, as there is a requirement to return the employee to full pay during a notice period prior to a contract of employment coming to an end we would assume that using zero pay is not appropriate when calculating a redundancy entitlement. 

    Section 36 of the Agenda for Change terms and conditions handbook contains information relating to the employment break scheme.  With regards to suspending redundancy provisions as outlined in section 36, you should count service before the break but not the break itself.

    If an employee had taken advantage of the salary sacrifice arrangements but is later made redundant, how would you calculate their redundancy payment?

    This is not covered in the NHS terms and conditions of service handbook.  Salary sacrifice is covered by employment and contract law and describes a legally binding change in the contractual arrangements between an employer and an employee -  whereby an employee gives up the right to receive part of their cash salary, under their contract of employment, usually in return for some form of non-cash benefit. As salary sacrifice is about varying the employee’s terms and conditions, it is a matter for agreement between the employer and the employee concerned and you may wish to seek legal advice on the implications of a salary sacrifice scheme before proceeding.

    In implementing salary sacrifice arrangements we are aware that employers adopt different contractual approaches in relation to the terms of their local schemes.  In a redundancy situation, providing employees have been made fully aware of the implications on their terms and conditions of service, it would be appropriate to calculate redundancy pay on the reduced salary, after taking away the salary sacrifice element, where the individual had not opted to end their salary sacrifice arrangement prior to the end of their employment contract.  Further guidance on salary sacrifice is also available from  HMRC.

    Is an employee entitled to a redundancy payment if they have previously been made redundant?

    Yes, but they must start again to build up their service before they would qualify again for redundancy.  So in effect the clock starts again on return to work. Therefore, if the employee meets all qualifying criteria, they would be entitled to a redundancy payment for their service in the new post but remember that service can only be counted once for the purpose of redundancy. 

    What is included in a month’s pay?

    As set out in Section 16.7 of the NHS terms and conditions of service handbook, a month’s pay is defined as whichever is more beneficial from the 2 calculation as follows:

    • 4.35 times a week’s pay, calculated in accordance with the provisions of Section 221 to 229 of the Employment Rights Act 1996;
    • an amount equal to 1/12th of the annual salary in payment at the date of termination of employment.

    Payment should be calculated on the basis of the employee’s "normal working hours" so would include unsocial hours but would not normally include overtime unless the employee is entitled to it under their contract of employment  i.e. if the employer must provide overtime and the employee must work it. This would include any contractual payments for that period. 

    Is the redundancy lump sum tax free?

    The first £30,000 is tax free.  Anything above this is taxable.

    Is there a redundancy calculator for employers?

    Employers can calculate redundancy payments on Pensions Online (POL), via the NHS Pensions website.  POL was upgraded to process estimates of redundancy benefits.  Further details can be found in the NHS Pensions newsletter TN9-2008.

    What is the position for staff who are made redundant but who are over the minimum pension age? 

    Employees who have reached minimum pension age and have two year’s membership to the NHS pension scheme can opt to take their pension early without reduction in the value of the pension benefits. In effect the employee “buys out” the reduction with their redundancy payment. The employer will meet any additional costs using the employee’s redundancy payment (if they would otherwise be entitled to one) and pay any balance to the employee.

    What about employees who have retired, returned to work in the NHS and subsequently made redundant? Does their previous NHS service count for redundancy?

    Section 16.6 of the NHS Terms and Conditions of Service Handbook states that reckonable service does not count for employment where the member has taken pension benefits.
    16.6      The following employment will not count as reckonable service:

    • employment that has been taken into account for the purposes of a previous redundancy, or loss of office payment by an NHS employer
    • where the employee has previously been given pension benefits, any employment that has been taken into account for the purposes of those pension benefits.

    However, if the employee has a break of less than one week after they have retired, they would be entitled to statutory redundancy.  In order to prevent this situation arising, employers may require a break of 14 days between retirement and re-engagement to ensure that there has been a ‘statutory’ break in service.

    How do employers calculate capitalised costs?

    Employers are able to run the redundancy quotes through the Pensions On-line (POL) programme that can be accessed via NHS Pensions.  This will produce the member's pension and lump sum figures, which are required to calculate the capitalised cost, however pensions on-line will calculate all three.



     

     

     

      


     

     

     

     

     

     

     

     

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