Redundancy is one of the most difficult aspects of workforce management. It involves meeting legal obligations while handling the human impact of organisational change. Under UK employment law, redundancies must be managed fairly, transparently, and in line with statutory requirements to reduce the risk of legal claims and maintain trust.
Understanding Redundancy
A redundancy arises when:
- A business closes entirely,
- A particular workplace closes, or
- The need for employees to do certain work reduces.
Restructuring, organisational design, or advances such as AI can also create redundancies. In unionised settings, collective agreements add complexity. Importantly, redundancy is recognised as a fair reason for dismissal under the Employment Rights Act 1996—if the process is fair.
Redundancy Procedure
A fair process typically involves:
- Establishing a genuine business case (e.g., restructuring or cost savings).
- Defining the selection pool of affected employees.
- Applying fair, objective, and non-discriminatory criteria.
- Consulting with employees individually and, where required, collectively.
- Exploring alternatives such as redeployment or reduced hours.
- Issuing redundancy notices in line with statutory or contractual requirements.
Failure to follow these steps can lead to claims of unfair dismissal.
Selection Pool and Criteria
Employers should include employees doing similar roles or whose work is reduced. Fair selection criteria may include:
- Skills, qualifications, and experience,
- Performance and capability,
- Disciplinary record,
- Attendance record (excluding protected absences).
Discrimination on grounds such as age, gender, disability, or part-time status is unlawful under the Equality Act 2010.
Consultation
Consultation is central to fairness:
- Individual consultation: Required for all employees at risk, allowing discussion of alternatives and criteria.
- Collective consultation: Required when 20 or more redundancies are proposed within 90 days. This must involve recognised unions or employee representatives and follow minimum timeframes:
- 30 days for 20–99 redundancies,
- 45 days for 100 or more.
Consultations must be genuine, giving employees a real chance to influence decisions. Depending on agreements an HR01 form may need to be filled and submitted to the respective Govt. body across various establishments of the business.
Statutory Redundancy Payments
Employees with at least two years’ service are entitled to redundancy pay, based on age, length of service (capped at 20 years), and weekly pay (subject to an annual maximum). The formula is:
- 0.5 week’s pay per year under 22,
- 1 week’s pay per year between 22 and 40,
- 1.5 weeks’ pay per year over 41.
Employees are also entitled to notice (or pay in lieu) and accrued holiday pay.
2025 Updates (from 6 April):
- Maximum weekly pay capped at £719,
- Maximum redundancy payment £21,570.
Best Practice
Beyond compliance, employers can protect reputation and employee relations by:
- Communicating openly and empathetically,
- Offering support such as outplacement or counselling,
- Documenting the process carefully,
- Considering voluntary redundancy options.
Conclusion
Redundancy requires balancing legal compliance, fairness, and clear communication. Employers who follow a structured process and treat employees with respect are more likely to avoid legal risks and preserve organisational culture in difficult times.
