Understanding redundancy
Understanding redundancy in UK employment law
Redundancy is a statutory reason for dismissal, occurring when an employer needs to reduce their workforce because a business, workplace, or specific role is no longer required. This may result from business closure, workplace closure, or a diminished need for employees to do work of a particular kind. The legal definition is set out in the Employment Rights Act 1996, and redundancy is only lawful if there is a genuine business reason and a fair process is followed, including consultation and objective selection criteria. Employees with at least two years’ continuous service are entitled to statutory redundancy pay, notice, and time off to look for new work, subject to eligibility and proper process being followed.
Redundancy: key differences in Scotland and Northern Ireland
Employment law on redundancy is broadly similar across England, Wales, and Scotland, as it is reserved to Westminster. However, Northern Ireland has its own employment legislation, which closely mirrors but is not identical to the rest of the UK. Key differences may include tribunal procedures, time limits for claims, and some statutory payment rates. In Scotland, redundancy claims are heard by the Employment Tribunal (Scotland), but the substantive law and process—including consultation, selection, and statutory pay—are the same as in England and Wales. In Northern Ireland, the statutory cap on a week’s pay and the maximum redundancy payment may differ slightly, and claims are made to the Industrial Tribunal. Employers operating across jurisdictions should check local statutory rates and procedural rules.
What is voluntary redundancy?
Voluntary redundancy is when employees are invited to volunteer to leave their employment in exchange for a redundancy package, rather than being selected compulsorily. The process still constitutes a dismissal by reason of redundancy, not a resignation, and employees retain the right to claim unfair dismissal if the process is not fair or if the redundancy is not genuine. Employers may offer enhanced redundancy payments to encourage volunteers, but are not obliged to accept every application—business needs may justify refusal. The same statutory rights apply as in compulsory redundancy, including notice, redundancy pay, and time off to look for work. A fair and objective process must still be followed, and discrimination or improper motives must be avoided.
Voluntary versus involuntary (compulsory) redundancy
Voluntary redundancy involves employees choosing to leave, often incentivised by enhanced payments, but selection must still be fair and objective. Employers retain discretion over which volunteers to accept, ensuring business-critical roles are retained if needed.
Compulsory redundancy occurs when the employer selects employees for redundancy based on objective criteria, after considering alternatives and consulting with affected staff. The process must be transparent, non-discriminatory, and compliant with statutory requirements.
Both types require consultation, consideration of suitable alternative employment, and adherence to statutory notice and pay entitlements. Employees dismissed through either route may challenge the fairness of the process at tribunal.
Features of a fair versus unfair redundancy process
A fair redundancy process requires:
A genuine redundancy situation, supported by business rationale and evidence.
Identification of an appropriate redundancy pool, with clear reasoning for inclusion or exclusion of roles.
Use of fair, objective, and consistently applied selection criteria, such as skills, qualifications, and performance, avoiding criteria that could discriminate on protected grounds.
Meaningful consultation with affected employees (and representatives if 20 or more redundancies are proposed), allowing time for feedback and consideration of alternatives.
Consideration and, where possible, offer of suitable alternative employment, with a statutory trial period if accepted.
Provision of written notice, redundancy pay calculation, and the right to appeal the decision (best practice, though not always legally required). Unfair redundancy processes typically involve subjective or discriminatory selection, inadequate consultation, failure to consider alternatives, or dismissals for reasons unrelated to genuine redundancy (e.g., performance or conduct issues disguised as redundancy). Automatically unfair reasons include selection based on pregnancy, family leave, whistleblowing, or trade union activity.
The redundancy process and employee selection
Redundancy procedures
A fair redundancy process requires employers to establish a genuine redundancy situation, such as business closure, workplace closure, or reduced need for employees to do work of a particular kind. Employers must consider alternatives to redundancy, document their decision-making, and follow any contractual or collectively agreed procedures. The process should include clear planning, consultation with affected staff, use of fair selection criteria, and consideration of suitable alternative employment before any dismissals are confirmed. Failure to follow a fair process can lead to claims for unfair dismissal or discrimination, especially for employees with two or more years' service.
Informing employees of a redundancy process
Employers must inform all affected employees as soon as possible that redundancies are being considered. This should be done via a meeting (in person or online) and confirmed in writing. The communication should explain the reasons for the potential redundancies, the number of roles at risk, the business rationale, and the next steps, including the consultation process. Employees should be encouraged to ask questions and be provided with contact details for further queries. If collective consultation is required (20 or more redundancies in 90 days), employee representatives or trade unions must also be informed and involved.
How to hold redundancy consultations
Consultation must be genuine and meaningful, taking place before any final decisions are made. For fewer than 20 redundancies, individual consultation is required; for 20 or more, both collective and individual consultation must occur. Consultation meetings should cover the reasons for redundancy, the selection pool, proposed selection criteria, possible alternatives to redundancy, and any available vacancies. Employees must be given the opportunity to provide feedback, suggest alternatives, and challenge their selection. Minutes should be taken and shared, and employees should be allowed to be accompanied by a colleague or trade union representative if requested. The consultation period must be sufficient to allow for proper discussion and consideration of employee input, but there is no statutory minimum for individual consultation.
Employee redundancy selection criteria
Selection criteria must be fair, objective, measurable, and non-discriminatory. Common criteria include standard of work/performance, skills and qualifications, disciplinary and attendance records (excluding absences related to disability, pregnancy, or family leave). Criteria should be explained to employees during consultation, and scoring should be supported by written evidence. Employers must avoid criteria that could result in direct or indirect discrimination under the Equality Act 2010. The use of “last in, first out” is discouraged as a sole criterion due to the risk of age or sex discrimination; it may be used as a tiebreaker only. The criteria and their application must be consistent and transparent, with employees given the chance to challenge their scores.
Rights during the redundancy notice period
Employees selected for redundancy are entitled to receive written notice in line with their contract or statutory minimums (one week per year of service up to 12 weeks). During the notice period, employees with at least two years’ service have the right to reasonable paid time off to look for new work or arrange training (capped at 40% of one week’s pay). Employers must continue to consider and offer any suitable alternative employment that arises during the notice period. Employees are also entitled to redundancy pay if they have two or more years’ continuous service, as well as any outstanding holiday pay and other contractual entitlements. Failure to provide these rights can result in claims for wrongful or unfair dismissal.
Informing employees of the outcome of a redundancy process
Once the consultation and selection process is complete, employers must inform employees of the outcome in a final meeting and confirm this in writing. The outcome letter should include the reason for redundancy, the notice period, the end date of employment, details of redundancy and other payments, and information about the right to appeal or raise concerns. Employees should be given the opportunity to ask final questions and, where appropriate, appeal the decision. All communications and decisions should be documented and retained for legal compliance.
Pay, alternative employment, appeals, notice, support
Statutory redundancy payments
Statutory redundancy pay is a legal minimum payment owed to employees with at least two years’ continuous service who are dismissed due to redundancy. The amount is based on age, length of service (capped at 20 years), and weekly pay (capped at £719 per week for redundancies on or after 6 April 2025), with a maximum total statutory payment of £21,570. The calculation is:
0.5 week’s pay for each full year under age 22
1 week’s pay for each full year aged 22–40
1.5 weeks’ pay for each full year aged 41 and over
Statutory redundancy pay up to £30,000 is tax-free. Employers must provide a written statement explaining how the payment was calculated and pay promptly, usually with final pay or soon after termination. Employees not classed as ‘employees’ (e.g., workers, contractors) or those dismissed for misconduct are not eligible. If the employer is insolvent, employees can apply to the Redundancy Payments Service for payment from the National Insurance Fund.
Enhanced redundancy payments
Enhanced redundancy payments are additional sums paid above the statutory minimum, either as a contractual entitlement (set out in the employment contract or redundancy policy) or as a discretionary gesture, often to encourage voluntary redundancies or as part of a settlement agreement. Enhanced payments must not be less than the statutory minimum and should be applied consistently to avoid discrimination. The terms, eligibility, and calculation method for enhanced payments must be clear and communicated to employees. Enhanced redundancy pay is included in the £30,000 tax-free threshold for termination payments.
Pension implications of redundancy
Redundancy can affect pension arrangements, particularly if the employee is a member of a workplace pension scheme. During the notice period, both employer and employee pension contributions should continue as normal unless otherwise agreed. If an employee receives a lump-sum redundancy payment, this is not pensionable pay and does not attract further pension contributions. Employees close to retirement age should check if redundancy could trigger early retirement options or affect accrued benefits, and should seek guidance from their pension provider or scheme administrator. Employers should provide information on how redundancy affects pension rights as part of the support offered.
Calculating redundancy payments
To calculate statutory redundancy pay:
Confirm the employee’s continuous service (up to 20 years)
Identify the employee’s age during each year of service
Use the statutory formula:
0.5 week’s pay per year under 22
1 week’s pay per year aged 22–40
1.5 weeks’ pay per year aged 41+
Cap the weekly pay at £719 (2025/26 rate)
Cap the total at £21,570
Use the average weekly pay over the 12 weeks before notice if pay varies
Provide a written breakdown of the calculation to the employee
Employers can use the government redundancy pay calculator to ensure accuracy. Any enhanced or contractual redundancy pay must be calculated in line with the relevant policy or contract terms, and must not be less than the statutory minimum.
Offering alternative employment to redundant employees
Employers must make reasonable efforts to identify and offer suitable alternative employment to employees at risk of redundancy. Offers must be unconditional, in writing, and made before the original contract ends, with the new role starting within four weeks of the old role ending. The suitability of the alternative job depends on factors such as pay, status, location, hours, and the employee’s skills and circumstances. Employees accepting an alternative role are entitled to a four-week statutory trial period (extendable by agreement if training is needed). Special priority applies to employees on maternity, adoption, or shared parental leave, who must be offered suitable vacancies before others.
Employee refusing an offer of alternative employment
If an employee unreasonably refuses a suitable alternative job, they may lose their entitlement to statutory redundancy pay. The reasonableness of refusal is assessed on both objective grounds (job suitability) and subjective grounds (the employee’s personal circumstances). If the refusal is reasonable, redundancy pay remains due. If the employee accepts the role but leaves during the trial period, they may still claim redundancy pay if the job is unsuitable. Employers must document offers, responses, and reasons for any refusal to mitigate risk of disputes.
Appealing a redundancy decision
Employees should be given the right to appeal against their selection for redundancy or the process followed. The appeals process should be set out in the redundancy plan or communicated in the redundancy notice. Appeals should be considered promptly and impartially, with the outcome confirmed in writing. Failure to offer an appeal or to handle it fairly can increase the risk of unfair dismissal claims. Employees may also raise a formal grievance or pursue a claim at an employment tribunal if they believe the redundancy was unfair or discriminatory.
Redundancy protections, TUPE
Redundancy protection for pregnancy and new parents
Employees who are pregnant, on maternity leave, adoption leave, or shared parental leave benefit from enhanced redundancy protection. From 6 April 2024, the redundancy protected period starts when an employee notifies their employer of pregnancy and lasts until 18 months after the child’s birth (or adoption placement). During this period, if a redundancy situation arises, these employees must be offered any suitable alternative vacancy in priority to others, even if other employees are also suitable. Failure to comply may result in claims for automatic unfair dismissal and, in the case of pregnancy or maternity, discrimination under the Equality Act 2010. The employer must document the criteria used to select between protected employees if vacancies are limited and communicate decisions clearly in writing. These protections do not extend to paternity leave or to most agency or casual workers, but do cover employees on shared parental or adoption leave under the same extended period rules introduced in 2024–25.
Making redundancies before a TUPE transfer
Redundancies made before a TUPE transfer are prohibited if the reason is the transfer itself or a reason connected to it, unless there is a genuine ETO reason involving a change in the workforce. The outgoing employer cannot reduce headcount simply to make the business more attractive or at the request of the incoming employer. Any dismissals made for a transfer-related reason will be automatically unfair, exposing the employer to tribunal claims. Redundancies for reasons unconnected to the transfer (e.g. a genuine business closure unrelated to the transfer) may proceed, provided a fair redundancy process is followed. The outgoing employer is responsible for redundancy pay in such cases.
Making redundancies after a TUPE transfer
After a TUPE transfer, the incoming employer may only make redundancies if there is both a genuine redundancy situation and a valid ETO reason involving a change in the workforce (such as a restructure, closure, or change of location). The redundancy process must be fair and non-discriminatory, and transferred employees must be treated the same as existing staff. If 20 or more redundancies are proposed within 90 days at one establishment, collective consultation is required, starting at least 30 days before the first dismissal (45 days if 100+ employees). Individual consultation is always required. Redundancy pay is based on total continuous service, including time with the previous employer. Enhanced redundancy terms may apply if contractually agreed. If redundancies are made without a valid ETO reason, they will be automatically unfair.
Implications of failure to consult on redundancy
Failure to inform and consult appropriately—whether under TUPE or redundancy law—can result in significant liabilities. For TUPE, both outgoing and incoming employers may be jointly and severally liable for a protective award of up to 13 weeks’ uncapped gross pay per affected employee. For collective redundancy, failure to consult can result in a protective award of up to 90 days’ pay per affected employee. These awards are in addition to any compensation for unfair dismissal. Employers must ensure that consultation is genuine and meaningful, with sufficient time allowed for employee representatives to engage with proposals and for individual employees to provide feedback.