Contract Termination

What Is the Difference Between Redundancy and Contract Termination?

Posted on Posted in Business, Legal Advice

As an employer, it’s extremely important to make sure that you’re familiar with common legal jargon to ensure you’re following the correct procedures and not unknowingly breaking the law. Consulting with employment lawyers is never a bad idea, as they will be able to explain everything and direct you if you’re not quite doing things right.

A lot of inexperienced employers get confused about the differences between redundancy and standard contract termination, and they make mistakes as a result. In the rest of this article, we’ve explored both of these, as well as what each one involves and what your obligations as an employer are.

What Is Redundancy?

Redundancy refers to removing a position because it’s no longer needed. In many cases, a person will lose their job when a position is made redundant, but it won’t always happen. Redundancies occur because:

  • A person’s job has been automated or taken over by a machine of some sort.
  • A company downsizes and therefore the position isn’t required anymore.
  • A person’s job is no longer required because the work is split between other existing positions.
  • A company goes bankrupt or insolvent and can’t afford to keep the employee on.

Unfortunately, redundancies are all too common in the modern world. But, the good news is that employees who are made redundant are usually entitled to a redundancy payout which, in some cases, can be quite large.

What is Contract Termination?

If redundancy refers to losing your job because a position is no longer available, contract termination effectively refers to losing your job for any other reason – as long as your position is filled by someone else once you leave. Contract termination may occur because:

  • A person hasn’t met expected performance criteria, despite been given a clear chance to improve.
  • A person has committed a breach of contract.
  • A person has committed some form of misconduct, including sexual or racial discrimination, theft or even continually arriving late to work or taking days off without good reason.

As an employer, you have to be careful to ensure you follow the correct procedures when you’re terminating a contract. Provide an adequate amount of notice, and make sure the person in question knows what they’ve done wrong and why they’re being fired. If you don’t, you may find yourself up against an unfair dismissal claim, which could end up costing you a lot of money if you lose.

What if I Need Help With Redundancy or Contract Terminations?

If you don’t have a strong understanding of employment law and your general obligations as an employer, you need to be careful to ensure you’re following the rules. Otherwise, you may end up facing significant financial or other penalties.

Ultimately, we’d recommend hiring a lawyer with significant experience dealing with employment law. They will be able to help you determine whether you should make a position redundant or terminate a contract, and will be able to help ensure you follow the right procedures when doing so.