8 November 2023 by Susanna Spencer

Redundancy payments and alternative employment

Under section 141 of the Employment Rights Act 1996, where an employee at risk of redundancy unreasonably refuses an offer of suitable alternative employment, they will lose their right to a statutory redundancy payment. The same principle often applies to any enhanced contractual redundancy payment, although it will depend on what the contract says.

When considering if an employee has unreasonably refused an offer of suitable alternative employment, the Employment Tribunal will consider a two-stage test:

1 was the new offer of employment suitable?

This entails objective consideration of matters such as salary, tasks, hours, location and status. Broadly speaking, the more similar the role offered to the employee’s existing role, the more likely it will be suitable.

2 did the employee unreasonably refuse the offer?

This is a subjective question and could, within reason, encompass any matter of importance to the particular employee. Reasonable grounds for refusal have included domestic commitments, uncertainty of job security, and finding another job before receiving the offer of alternative employment.

A recent Employment Appeal Tribunal (EAT) decision has highlighted the importance and distinction of both stages of the test.

In Mid and South Essex NHS Foundation Trust v Stevenson [2023] EAT 115, three Heads of HR were placed at risk of redundancy following a restructure. They were offered alternative employment as ‘Senior HR Leads’ but turned down the offers, on the basis that they perceived the jobs would entail a loss in autonomy and status.

The EAT upheld the earlier decision of the Employment Tribunal (ET) that the employees had not unreasonably refused an offer of suitable alternative employment. The ET had found that the job offers were indeed offers of suitable alternative employment as, despite a change in line management, the employees day-to-day operation would not have changed. However, the employees had not acted unreasonably in refusing the job offers; they had genuinely perceived that the roles would entail a loss of status, even though objectively this was not the case. Consequently,they were entitled to receive a redundancy payment.

We would recommend that employers managing restructures and redundancy situations ensure that there is clear communication and sufficient detail provided as to the particulars of any alternative employment. This should minimise the potential for inaccurate perceptions as to what the job actually entails.

If you require any assistance for your business with handling restructures and redundancy exercises, or issues relating to suitable alternative employment and redundancy payments, please do not hesitate to get in touch with our expert Employment team.

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