Who Qualifies for Redundancy Pay While on Sick Leave?

Employees on sick leave remain fully protected under UK employment law, including when redundancy situations arise. Being absent due to illness does not remove entitlement to redundancy consultation, fair selection, or redundancy pay where eligibility conditions are met.

Redundancy during sick leave must be handled carefully by employers, as additional legal protections apply alongside standard redundancy law. These protections ensure that illness is not used as a factor in selection and that employees are not disadvantaged due to their absence.

This article explains who qualifies for redundancy pay while on sick leave, how entitlement is determined, and the legal safeguards that apply in England and Wales.

Legal Framework for Redundancy During Sick Leave

Redundancy while on sick leave is governed by:

• Employment Rights Act 1996 (ERA 1996)
• Equality Act 2010 (disability discrimination protections)
• Common law principles of fair dismissal
• Statutory sick pay and contractual sick pay rules

These laws require that:

• Redundancy must be genuine
• Selection must be fair and non-discriminatory
• Illness or absence must not be used as a negative factor
• Employees remain entitled to statutory redundancy pay if eligible

Who Qualifies for Redundancy Pay While on Sick Leave?

1. Employees with genuine redundancy whose role is eliminated

Employees on sick leave qualify for redundancy pay if:

• Their role genuinely ceases to exist
• The redundancy is not related to their illness or absence
• The employer follows a fair redundancy process
• They meet statutory redundancy pay requirements

Sick leave does not prevent redundancy, but it must not influence the decision.

2. Employees with at least 2 years' continuous service

To qualify for statutory redundancy pay, employees must have:

• At least 2 years' continuous employment
• Employee status (not contractor or self-employed)

Time spent on sick leave counts towards continuous service. Employment rights continue during both paid and unpaid sickness absence.

3. Employees included in a redundancy selection pool

Employees on sick leave may be placed in a redundancy selection pool if:

• Their role is at risk
• Objective selection criteria are used
• Absence due to sickness is not used as a negative scoring factor

Selection must be based on fair criteria such as skills, qualifications, or business needs.

4. Employees unable to attend consultation meetings

Employees on sick leave still qualify for redundancy consultation rights. Employers must:

• Make reasonable adjustments to allow participation
• Offer remote or written consultation options
• Ensure they are not excluded from the process

Failure to properly consult may make dismissal unfair, even if redundancy is genuine.

5. Employees offered or considered for alternative employment

Employees on sick leave must still be considered for suitable alternative roles. If a vacancy exists:

• It must be offered if suitable
• The employee does not need to compete for the role
• Reasonable adjustments may be required for illness or disability

If no suitable role exists, redundancy pay may still apply.

6. Employees with disability-related sick leave

Where sick leave relates to a disability under the Equality Act 2010:

• Employers must avoid discrimination in selection
• Reasonable adjustments must be considered
• Absence-related scoring may be unlawful if it disadvantages disabled employees

This can significantly affect redundancy fairness and legal risk.

Who Does Not Automatically Qualify?

Employees on sick leave may not qualify for redundancy pay where:

• They have less than 2 years' continuous service (for statutory redundancy pay)
• The dismissal is not redundancy-related (for example, misconduct)
• They unreasonably refuse suitable alternative employment
• The redundancy is not genuine or is used to disguise dismissal for capability or attendance issues
• They are self-employed or contractors

Sick leave itself does not remove eligibility but does not guarantee entitlement either.

How Sick Leave Affects Redundancy Selection

Protected treatment of absence

Absence due to illness should not be used unfairly in redundancy selection. Employers must ensure:

• Attendance records are not automatically penalised
• Adjustments are made where absence is disability-related
• Objective criteria are applied consistently

Using sickness absence as a negative factor may lead to unfair dismissal or discrimination claims.

Capability vs redundancy distinction

Employers must distinguish between:

• Redundancy (job no longer needed)
• Capability (employee unable to perform role due to illness)

Mixing these grounds can make dismissal legally defective.

Calculation of Redundancy Pay During Sick Leave

Statutory redundancy pay is calculated using:

• Age of employee
• Length of continuous service (including sick leave)
• Weekly pay (subject to statutory cap)

Key points:

• Sick leave does not reduce service length
• Statutory caps still apply to weekly pay
• Contractual enhancements may apply if agreed

Consultation Rights During Sick Leave

Employees on sick leave retain full redundancy consultation rights.

Employers must:

• Inform employees about redundancy proposals
• Provide written information
• Allow input and responses
• Offer flexible consultation methods (e.g. email, phone, written submissions)

Failure to consult properly may lead to unfair dismissal findings.

Alternative Employment and Sick Leave

Employers must still consider redeployment for employees on sick leave.

Where suitable roles exist:

• They must be offered before dismissal
• Adjustments may be required for health conditions
• The employee should not be excluded due to absence

Failure to offer suitable alternative employment can invalidate redundancy dismissal.

Time Limits for Redundancy Claims

Employees affected by redundancy while on sick leave must generally bring claims within:

• 3 months less one day for unfair dismissal claims
• 3 months less one day for discrimination claims
• Mandatory ACAS early conciliation before tribunal proceedings

Strict deadlines apply regardless of illness status.

Common Legal Issues

1. Using sickness absence as a selection criterion

This may be unlawful, particularly where disability is involved.

2. Failure to consult due to absence

Employers often attempt to proceed without involving absent employees, which can make dismissal unfair.

3. Confusion between sickness and redundancy

Illness-related performance issues should not be disguised as redundancy.

4. Failure to consider reasonable adjustments

Where illness qualifies as a disability, employers must consider adjustments throughout the process.

Practical Steps for Employees

Employees on sick leave facing redundancy may consider:

• Requesting written redundancy reasons
• Asking for consultation in accessible formats
• Checking redundancy selection criteria
• Confirming continuity of service records
• Seeking clarification on alternative roles

These steps are relevant for internal resolution and tribunal preparation.

Key Takeaways

Employees on sick leave are fully protected in redundancy situations and may qualify for redundancy pay if their role is genuinely redundant and statutory requirements are met. Sick leave does not reduce entitlement to redundancy pay or consultation rights, and time spent on sick leave counts towards continuous service. Employers must ensure fair selection, proper consultation, and non-discriminatory treatment throughout the process.