Ill Health Redundancy Pay - A Guide For Businesses

Managing redundancy due to ill health can be challenging and requires a careful, compassionate approach to ensure fair treatment for employees while meeting your legal obligations as an employer.

In this guide, we’ll walk you through the key steps in handling ill health redundancies, including assessing employee capability, making reasonable adjustments, understanding legal requirements, and meeting redundancy pay obligations.

What Is Ill Health Redundancy?

Ill health redundancy arises when an employee can no longer fulfil their role due to long-term health issues, despite reasonable efforts by the employer to support them.

Unlike other types of redundancy, it is specific to situations where an individual’s medical condition prevents them from carrying out their duties.

This type of redundancy is legally complex, and employers must approach it carefully to avoid claims of unfair dismissal or discrimination.

Checklist for Ill Health Redundancy

To streamline the redundancy process and ensure compliance, download our Ill Health Redundancy Checklist.

This resource provides a step-by-step guide for managing ill health redundancies, from initial assessment to fair redundancy pay calculation.

When Ill Health Can Lead to Redundancy

An ill health redundancy process should be considered only after all other options have been explored.

Here’s when it may apply.

The employee has been unable to attend work for a prolonged period, with no reasonable prospect of return.

The employee is no longer able to meet the demands of their role, even with reasonable adjustments.

Their absence or reduced capacity significantly affects business operations, making it difficult to fulfil job requirements through alternative measures.

Before proceeding, it’s crucial to assess the situation thoroughly and document every step to support your decision.

Legal Obligations for Employers

Employers must follow strict legal guidelines when handling ill health redundancies to ensure the process is fair and compliant.

These include several key responsibilities.

An employer must follow a fair and transparent process, which typically includes consultations with the employee and a comprehensive assessment of the situation.

Under the Equality Act 2010, if the employee's ill health qualifies as a disability, employers have a legal duty to make reasonable adjustments before considering redundancy.

Employers may need to obtain a medical report (with the employee’s consent) to determine if adjustments could help the employee perform their role.

Assessing Reasonable Adjustments

The Equality Act requires employers to consider reasonable adjustments to enable employees with disabilities to stay in work.

Adjustments could include a range of accommodations.

This might include adjusted hours or remote working if it supports the employee’s health.

Employers may alter job duties to make tasks manageable within the employee’s health limits.

Providing equipment or modifying the work environment to support their capabilities can also be effective.

Only after exhausting these options should redundancy due to ill health be considered.

Consultation and Communication

The consultation process is essential for a fair redundancy procedure.

This process should include several critical steps.

The initial meeting should discuss the employee’s situation and possible adjustments, considering any medical advice.

Employers should give the employee an opportunity to share their perspective and ideas for possible support.

It’s important to document all discussions, assessments, and steps taken to ensure transparency and fair treatment.

Consultation not only fulfils your legal obligation but also demonstrates empathy, which can protect your business’s reputation and minimise disputes.

Calculating Ill Health Redundancy Pay

If redundancy due to ill health is necessary, the employee may be entitled to redundancy pay, which can vary based on several factors.

Statutory redundancy pay is calculated based on the employee’s age, length of service, and weekly pay (subject to a statutory cap).

Some companies offer enhanced redundancy terms, especially if ill health is a contributing factor.

Review the employee’s contract for any specific clauses related to redundancy or ill health.

When calculating redundancy pay, consult with your HR team or seek legal advice to ensure compliance and fairness.

Key Considerations for Employers

Handling ill health redundancies requires sensitivity and a structured approach.

Here are some key points to consider to protect your business.

Keep a record of all communications, assessments, and steps taken to support the employee.

Obtaining medical reports can substantiate decisions regarding capability and redundancy.

Employment law and redundancy rights are subject to change, so regularly reviewing current legislation can help prevent legal issues.

Conclusion

Redundancy due to ill health should always be a last resort after exhausting other options and making reasonable adjustments.

By following a structured and fair process, employers can manage these complex cases with empathy, ensuring they meet their legal obligations and protect their business from potential claims.