Managing Redundancy as an Employer

Redundancy under the Employment Rights Act 1996 occurs when a role is no longer needed — because the business is closing, a workplace is closing, or the requirement for employees to do work of a particular kind has ceased or diminished. You cannot make someone redundant simply because you want to replace them with someone cheaper or on a different contract — this would not be a genuine redundancy.

If employees bring an unfair dismissal claim, the tribunal will first ask whether the redundancy was genuine. If it was, it will then ask whether you used a fair procedure — including proper selection, consultation, and consideration of alternatives. Even a genuine redundancy can result in an unfair dismissal finding if the process is poor.

A fair redundancy process typically includes the following steps:

1. Define the pool for selection — which roles or employees are potentially at risk
2. Apply fair and objective selection criteria — skills, performance, attendance, and disciplinary record are common criteria; using protected characteristics (age, sex, etc.) to select is unlawful
3. Consult individually with each at-risk employee — at least one meeting to explain the situation and invite their views on alternatives
4. Consider alternatives to redundancy — reduced hours, redeployment to other roles, voluntary redundancy
5. Issue notice in line with the employee's contractual or statutory entitlement (whichever is greater)
6. Offer the right to appeal against the redundancy decision

Employees with two or more years' continuous employment are entitled to statutory redundancy pay, calculated as:

• 0.5 week's pay for each full year of service under age 22
• 1 week's pay for each full year of service aged 22–40
• 1.5 weeks' pay for each full year of service aged 41 and over

Weekly pay is capped at £751 and service is capped at 20 years. Many employers offer enhanced contractual redundancy pay above the statutory minimum. If you are making 20 or more redundancies within any 90-day period, collective consultation rules apply: you must consult with appropriate employee representatives, give a minimum of 30 days' consultation (45 days for 100 or more), and notify the Insolvency Service (HR1 form) before giving any notice. Failure to comply with collective consultation obligations can result in a protective award of up to 90 days' pay per employee.

When an employee brings an unfair dismissal claim following redundancy, the Employment Tribunal applies a test developed in British Home Stores v Burchell adapted to redundancy situations: was the dismissal within the range of reasonable responses open to a reasonable employer? The tribunal will not substitute its own view for yours — but it will look carefully at whether each step of the process was genuinely followed or merely paper-thin compliance.

Key findings that lead to successful claims include: the pool for selection being too narrow or manipulated to achieve a predetermined result; selection criteria being subjective (such as "attitude" or "fit") without supporting evidence; consultation meetings that were tick-box exercises with no genuine consideration of alternatives; and failure to offer suitable alternative vacancies. Tribunals also look at whether ACAS early conciliation was offered — if an employee attempts conciliation and you refuse to engage, this can increase any award against you by 25% under the ACAS Code, even though the formal ACAS Code on disciplinary and grievance does not technically apply to redundancy dismissals.

Redundancy dismissals during or shortly after family leave are automatically scrutinised for pregnancy and maternity discrimination. The burden is on the employer to show the selection was genuinely unrelated to the leave. Under regulations that came into force in April 2024, employees on maternity, adoption, or shared parental leave now have enhanced redundancy protection: their right to be offered suitable alternative vacancies has been extended to cover an 18-month period starting from the date of birth or adoption placement, meaning this protection now applies during the period after they return to work as well as during the leave itself.