Redundancy is an unfortunate fact of working life, and can often occur to a person more than once. When the need arises, redundancies have to be carried out correctly from an ethical and legal perspective, which we cover in our article How to make someone redundant. But there are occasions when an employer might look to re-hire their previous employee.
The original redundancy would likely have occurred for one of three reasons:
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
The business is moving to another location which is too far away or in another country. For example, manufacturing is moving to India, or
The business needs to reduce expenses radically, and headcount has had to form part of that.
When this first occurs, the employee may not even consider the possibility that their employer might look to re-employ them a short time after, but re-hiring a previously made redundant employee is not as uncommon as you might think and is perfectly legal.
Are you allowed be re-employed by your previous employer after previously being made redundant by them?
If the company you worked for initiated and executed a redundancy process, often due to financial or economic difficulties at the time, they might have survived due to their austerity. For you this may be fantastic news, and if they are receiving a renewed abundance of new orders, they will soon be needing to hire or even re-hire.
There is no restriction on companies with regards to re-employing someone they have previously been made redundant, either in the same role or through suitable alternative employment. They absolutely can re-hire you.
However, the employer will need to be careful how they go about re-hiring in order to avoid legal claims being submitted, potentially with accusations of unfair dismissal by other employees who were made redundant at the same time as you but have not been asked to return. Do not be surprised if this does occur, as some employees may experience bitterness when they see your employment fortunes changing and you returning to your previous employer.
Because the risk of this occurring is quite high, it will mean that the re-hiring 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 a redundancy situation can I work for the same company without affecting statutory redundancy pay?
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 will likely have treated you well throughout the redundancy process and that 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 rather than a redundancy situation. 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 original 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. There is no minimum period between making roles redundant and re-hiring
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. Your old employment contract and terms will not necessarily apply, so ensure you check what you are signing yourself up to.
Conclusions
In conclusion, if you have just been made redundant and your employer has a change in fortunes 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 the employer to avoid the risk of casting doubt over whether their reasons were legal and ethical in the execution of a redundancy process. This will also avoid HM Revenue and Customs raising questions on the potential abuse of the tax-free status of the redundancy payment.
Redundancy is an unfortunate fact of working life, and can often occur to a person more than once. When the need arises, redundancies have to be carried out correctly from an ethical and legal perspective, which we cover in our article How to make someone redundant. But there are occasions when an employer might look to re-hire their previous employee.
The original redundancy would likely have occurred for one of three reasons:
