Could alternative employment be better than redundancy?

Redundancy should always be a last resort. No business owner wants to lose valuable employees — you’ve invested in them, and they know your business. Offering alternative roles – whether before notice, during notice, or even after dismissal – can retain talent. However, it must be handled correctly to avoid legal risks.

Search for alternatives before you give notice

The search for alternative employment should start early in the consultation process. If an employee accepts a new role before notice is given, there’s no dismissal—just a contract update. However, they should be aware that if they reject a suitable role unreasonably, they may lose their right to a redundancy payment (s141 Employment Rights Act 1996).

To withhold redundancy pay, the employer must:

• Make a formal job offer (not just a casual mention).
• Provide clear details on pay, responsibilities, and terms.
• Ensure the role starts immediately after, or within four weeks of, termination.

Offering a new role during the notice period

The duty to search for alternative roles continues throughout notice. If an employee accepts a new role, they enter a statutory four-week trial period (s138 ERA). If the trial fails, redundancy rights remain, unless the refusal was unreasonable.

Alternative job offers after employment ends

Once dismissed, employers no longer have a legal duty to offer alternative roles, but re-hiring is an option.

Key considerations include:

• Continuity of service
  A break of over one week (Sunday to Saturday) resets employment rights.
• Reset service clock for redundancy pay
  Rehired employees keep their redundancy pay but must build up two years’ service again for future entitlements.
• Don’t breach HMRC rules
  Rapid re-hiring may raise tax avoidance concerns. So be prepared to justify the redundancy.
• Before you advertise new roles
  Be aware, if you recruit for a similar role too soon, an ex-employee could challenge the redundancy’s legitimacy. You should wait for the tribunal claim window to close.

Top tips for offering alternative employment vs redundancy

• Put offers in writing
  Include job title, salary, location, and trial period terms.
• Why offer a trial period?
  This can encourage acceptance and clarify employment terms.
• Don’t force alternative employment
  Changing the employee’s contractual terms without consent may lead to constructive dismissal (if the employee resigns in response to the (likely) repudiatory breach) and/or a Hogg v Dover College dismissal, in which case the employee can continue to work in the new role (with continuity of employment intact) whilst bringing a claim for unfair dismissal and redundancy pay in respect of the old role.

Handled well, alternative employment can be used to retain skills and reduce redundancies.

Further reading

• Code of Practice on “fire and rehire” in force.  Note that when the Employment Rights Bill is enacted, “fire and rehire” is due to become automatically unfair.
• EAT stresses the need for proper consultation in redundancy cases

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