HR & Employment · 27 March 2021

Can you work for the same company after a redundancy payout?

Can you work for the same company after a redundancy payout?

Redundancy and all things related to it are, unfortunately, hot topics around the globe, with a lot of economies lurching forward through the pandemic. Redundancies do need to be done correctly from an ethical and legal perspective which we cover in our article How to make someone redundant.

Your redundancy would have occurred for one of three reasons:

  1. a) As a result of a business closure or closure of the section of the business. For example, a business is no longer doing their deliveries themselves, or
  2. b) The business is moving to another location which is too far away or in another country. For example, manufacturing is moving to India, or
  3. c) The business needs to reduce expenses radically, and headcount has had to form part of that.

Can you apply for a job with the same company after being made redundant?

If the company you worked for initiated and executed a redundancy process due to economic reasons, like Covid19, they might have survived due to their economic austerity. This is fantastic news, and if they are receiving a renewed abundance of orders, they will soon be able to hire or re-hire.

There is no restriction on companies with regards to re-employing someone they have made redundant. They absolutely can re-hire you. They will need to be careful how they go about it to avoid legal claims being submitted with accusations of unfair dismissal by other employees who were made redundant at the same time as you. Do not be surprised if this does occur, as some employees may experience bitterness when they see your fortunes changing.

Because the risk of this occurring is quite high, it will mean that the process may not be as simple as you wish it to be.

The company will need to be prepared for this and, therefore, have hopefully been very fastidious in collating records during the redundancy process, proving that the redundancy was genuine. This comprehensive and full set of records will need to show the redundancy’s economic necessity at the time that it occurred.

A complementary set of documents should be collated when the company recommences recruiting to show that this is now happening due to a change in the company’s financial situation.

How long after redundancy can I work for the same company?

The company that made you redundant might not automatically rehire staff when the orders start flowing again. They might debate the pros and cons between hiring and training new employees versus re-employing the individuals that already have the training and knowledge of their business, the relevant skills, the knowledge of the company culture etc.

The company has done well if, after being made redundant, you are still willing to consider going back to work for them. This means they have treated you well throughout the redundancy process. This bodes well for your future career with them.

Some companies believe that if they are re-hiring you very quickly or even immediately, then it is a continuity of employment. Based on this assumption, they then might request for the return of any statutory redundancy payment that was made to you by them during the redundancy process.

This is incorrect in the eyes of the law as an employee who is re-employed after being made redundant can retain their statutory redundancy payment without any repercussions or clawback opportunity. This stands true whether or not they are immediately re-employed or return to work for the same employer at a much later date.

Under s.214 of the Employment Rights Act 1996, the fact that money has been paid AND been received under the title of Redundancy Payment then an immediate break occurs in the employee’s continuity of employment for the purposes of the statutory redundancy pay scheme. There is a general favouring in the market, however, of allowing for a one week break to show a true intent of breaking the continuity of employment.

It is important to note that where this does affect you is IF you are AGAIN made redundant by this same company. They will not automatically be entitled to make a statutory redundancy payment UNLESS you have accrued another two years’ service. It is only at that stage that the statutory redundancy pay calculation will be relevant, and then it will be based on the latter period of service only.

This is a benefit that companies will weigh into their considerations of hiring redundant staff versus new staff.

However, in addition to the unfair dismissal legal action noted in the beginning of this article, if the company re-hires you immediately after making you redundant, then they might open themselves up to investigation by HMRC. The HMRC may wish to analyse whether the company tried to take advantage of the tax-free status of a redundancy payment.

When you are rehired, even as a previously redundant employee of the company, you will be seen legally as a brand new employee entering the business with a new contract, a new period of employment, a new need to collate leave days, a new need to collate maternity leave, sick leave, years of service, etc.

In conclusion, if you have just been made redundant and your employer has a fortuitous stroke of luck with new orders flooding in, then do not be surprised if they wish to wait a few weeks before rehiring you. They need to be cautious in order to create a distinct break in employment between termination on the grounds of redundancy and the employee recommencing work. This will allow them to avoid the risk of casting doubt over whether their reasons were legal and ethical in the execution of a redundancy process. They will avoid the HM Revenue and Customs to consider raising questions on the potential abuse of the tax-free status of the redundancy payment.

Then all that is left to do is to wish you well in your re-employment. Global economies are slowly recovering, so the future looks brighter and more stable. Good luck!

 

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