What is Redundancy?
Redundancy in UK employment law refers to a specific situation where an employer needs to reduce their workforce. This usually happens because the business no longer requires certain roles, rather than due to any fault or misconduct by the employee. Under the Employment Rights Act 1996, redundancy can occur when:
The employer closes or intends to close the business altogether.
The location where the employee works is closing.
There is a reduced need for employees to carry out work of a particular kind.
Common reasons for redundancy include company restructuring, financial difficulties, business closure, or the introduction of new technology that automates certain jobs. For example, if a retail shop shuts down due to falling sales, or a manufacturing company introduces machinery that replaces manual roles, staff may be made redundant.
It’s important to understand how redundancy differs from other forms of dismissal. While dismissal often results from performance issues or misconduct, redundancy is about the role itself no longer being needed. This distinction affects the rights and entitlements of employees, including notice periods, consultation requirements, and redundancy pay.
UK law provides a clear legal framework to protect employees facing redundancy. Employers must follow a fair process, which generally includes:
Providing advance notice of potential redundancies.
Consulting with affected employees or their representatives.
Using fair and objective criteria for selecting which roles are redundant.
Offering suitable alternative employment where possible.
Paying statutory redundancy pay to eligible employees with at least two years’ service.
Failing to follow these rules can lead to claims of unfair dismissal or discrimination. Understanding your rights and the proper procedures can help ensure that redundancy is handled lawfully and fairly for everyone involved.
Employee Rights During Redundancy
When facing redundancy, employees in the UK are protected by several important legal rights. Understanding these rights can help you navigate the redundancy process and ensure you are treated fairly.
Employers must use a fair and objective method when deciding who will be made redundant. This typically involves applying clear criteria such as skills, experience, qualifications, attendance, or disciplinary record. The selection process should not discriminate on the basis of age, gender, disability, race, or other protected characteristics under the Equality Act 2010. If you feel the selection process was unfair or biased, you may have grounds to challenge the decision.
Before any final redundancy decisions are made, you are entitled to be consulted by your employer. This means your employer should explain why redundancies are necessary, discuss the selection criteria, and consider any alternatives to redundancy. If 20 or more employees are at risk, employers must follow collective consultation rules, which include consulting with employee representatives or trade unions. For fewer than 20 redundancies, individual consultation is still required. Not having a proper consultation could make the redundancy process unfair.
Employees made redundant are entitled to a notice period—this is the time between being told about your redundancy and your last working day. The statutory minimum notice periods are:
At least one week’s notice if you have been employed between one month and two years
One week’s notice for each year of employment between two and twelve years
A maximum of twelve weeks’ notice for twelve or more years of service
Your employment contract may provide for a longer notice period, but cannot offer less than the statutory minimum. During the notice period, you should receive your usual pay and benefits.
If you have worked for your employer for at least two continuous years, you are entitled to statutory redundancy pay. The amount depends on your age, length of service, and weekly pay (capped at a statutory maximum, which is reviewed annually). The calculation is as follows:
0.5 week’s pay for each full year worked under age 22
1 week’s pay for each full year worked between ages 22 and 40
1.5 week’s pay for each full year worked aged 41 or older
Your employer may offer more generous terms, but cannot pay less than the statutory amount. Redundancy pay is usually tax-free up to £30,000.
If you believe your redundancy was not genuine or the process was not followed correctly, you may be protected under unfair dismissal laws. For example, if your role still exists or you were chosen for redundancy due to discrimination or personal reasons unrelated to business needs, you may have grounds to challenge your dismissal at an employment tribunal.
Knowing your rights during redundancy is essential. If you are unsure about any aspect of the process or believe your rights have been breached, consider seeking advice from a trade union, Citizens Advice, or an employment law specialist.
The Redundancy Process
The redundancy process in the UK is governed by strict legal requirements designed to ensure that employees are treated fairly. Employers who fail to follow the correct procedures risk claims for unfair dismissal or redundancy pay disputes. Here’s a detailed look at each stage of the process, your rights as an employee, and what to do if things go wrong.
Employers must follow a fair and transparent process when considering redundancies. The main steps include:
Identifying the need for redundancy: Redundancy arises when an employer needs to reduce the workforce because a job or jobs are no longer needed. This could be due to business closure, workplace closure, or the need for fewer employees in a particular role.
Selecting employees for redundancy: Employers must use fair and objective criteria when deciding which roles are at risk. Common selection methods include skills, qualifications, experience, and attendance records. Discrimination based on age, gender, disability, or other protected characteristics is unlawful under the Equality Act 2010.
Consulting with affected employees: Consultation is a legal requirement. Employers must inform and discuss the redundancy situation with affected staff before making any final decisions.
Exploring alternatives to redundancy: Employers should consider measures to avoid or reduce redundancies, such as offering alternative roles, reducing overtime, or introducing job-sharing.
Giving proper notice: Employees must receive the correct notice period as set out in their contract or by statutory minimums, whichever is greater.
Providing redundancy pay: Eligible employees are entitled to statutory redundancy pay, calculated based on age, length of service, and weekly pay, as set out in the Employment Rights Act 1996.
If fewer than 20 employees are being made redundant at one establishment within a 90-day period, employers must consult individually. This involves meeting each affected employee to explain the reasons for redundancy, discuss selection criteria, and consider any suggestions or alternatives.
If 20 or more employees are at risk within a 90-day period, collective consultation rules apply under the Trade Union and Labour Relations (Consolidation) Act 1992. Employers must:
Consult with employee representatives or a trade union.
Start consultation at least 30 days before the first dismissal (or 45 days if 100 or more employees are affected).
Provide specific information in writing, including reasons for redundancy, numbers affected, and selection methods.
Failure to properly consult can lead to claims for a “protective award” of up to 90 days’ pay per affected employee.
Employers are expected to look for ways to avoid redundancies where possible. Alternatives can include:
Redeploying staff to other suitable roles within the organisation.
Offering voluntary redundancy or early retirement.
Reducing overtime or using flexible working arrangements.
Temporarily laying off staff or reducing hours (with agreement).
Employers should document any alternatives considered and explain their decisions during consultation.
Employees have the right to challenge redundancy decisions if they believe the process was unfair or discriminatory. Common grounds for challenge include:
Unfair selection criteria or procedures.
Lack of proper consultation.
Not being offered suitable alternative employment.
Redundancy being used as a cover for dismissal due to another reason (e.g., performance or misconduct).
If you feel your redundancy was not handled properly, you can raise a formal grievance with your employer. If unresolved, you may be able to bring a claim for unfair dismissal to an employment tribunal.
If an employer does not follow the correct redundancy process, affected employees may:
Claim unfair dismissal if they have at least two years’ continuous service.
Claim for a protective award if collective consultation rules were breached.
Seek compensation for failure to pay statutory redundancy pay or notice pay.
Tribunals will look at whether the employer acted reasonably and followed the correct procedures. If not, compensation or reinstatement may be ordered.
In summary: The redundancy process is designed to be fair and transparent, giving employees the chance to understand, respond to, and challenge decisions. Both employers and employees should be aware of their rights and responsibilities to ensure the process is handled lawfully and with respect.
Consultation Requirements
When an employer is considering making employees redundant in the UK, there are strict legal requirements around consultation. These rules are designed to ensure the process is fair and transparent, giving employees a chance to understand the reasons for redundancy and explore alternatives.
Consultation is a legal requirement in almost all redundancy situations. The law distinguishes between two types of consultation: individual and collective.
Individual Consultation: This is required whenever an employer is considering making any employee redundant, regardless of the number affected. Employers must consult each affected employee before making a final decision. Failing to do so can make the redundancy unfair and open to challenge at an employment tribunal.
Collective Consultation: If an employer proposes to make 20 or more employees redundant at one establishment within a 90-day period, they must follow collective consultation rules under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). This involves consulting with employee representatives (such as a recognised trade union or elected employee representatives).
The minimum consultation periods for collective redundancies are:
At least 30 days before the first dismissal if 20-99 employees are affected.
At least 45 days before the first dismissal if 100 or more employees are affected.
Consultation is more than just informing employees of the decision. It is a two-way process where employers must genuinely consider employees’ views and suggestions. The aim is to discuss:
The reasons for the proposed redundancies.
Ways to avoid or reduce the number of redundancies.
How to limit the impact, such as redeployment or retraining opportunities.
The process for selecting employees for redundancy and how dismissals will be carried out.
Employers should provide enough information for employees or their representatives to participate meaningfully in the consultation. This includes details about the business reasons, the numbers and roles at risk, and the selection criteria being used.
Consultation benefits employees by giving them a voice in the process, the chance to suggest alternatives, and time to prepare for potential changes. For employers, proper consultation reduces the risk of legal claims and helps maintain trust and morale.
Individual consultation is a direct discussion between the employer and each employee at risk of redundancy. It usually involves one or more meetings, where the employer explains the situation, listens to the employee’s feedback, and considers any alternatives. Employees can be accompanied by a colleague or trade union representative during these meetings.
Collective consultation is required when larger numbers of redundancies are proposed. Here, the employer must consult with representatives of the affected employees, not just the individuals themselves. The process covers the same issues as individual consultation, but on a broader scale. After or alongside collective consultation, individual meetings should still take place with each affected employee.
Example: If a company plans to close a department and 30 employees are at risk, it must start collective consultation with representatives at least 30 days before any redundancies take effect. Each of those 30 employees should also have individual meetings to discuss their own situation.
Employers should keep clear records of all consultation meetings and communications.
Employees should actively participate in consultations and raise any suggestions or concerns.
Even if an employer believes redundancy is unavoidable, consultation must be genuine and not just a formality.
Proper consultation is not only a legal requirement but also an important step in treating employees fairly during a difficult process. Failure to consult correctly can lead to claims for unfair dismissal and protective awards for affected employees.
Fair Selection Criteria
When an employer needs to make redundancies, it is crucial that the process for selecting which employees will be made redundant is fair, objective, and non-discriminatory. Using fair selection criteria is not only a best practice but also a legal requirement under the Employment Rights Act 1996 and the Equality Act 2010.
Fair selection criteria are clear, objective factors that employers use to decide which employees will be chosen for redundancy. Common examples include:
Skills, qualifications, and experience: Assessing employees based on the skills and qualifications needed for the remaining roles.
Performance and work record: Considering objective measures such as appraisal results or disciplinary records.
Attendance records: Factoring in attendance, but only where absences are not related to disability, pregnancy, or other protected reasons.
Length of service (last in, first out or LIFO): While not recommended as the sole criterion, length of service can be used as part of a wider set of criteria.
Employers should apply these criteria consistently and keep detailed records of how decisions are made.
Certain criteria are considered unfair and may expose employers to claims of unfair dismissal or discrimination. These include:
Age, gender, race, disability, religion, or sexual orientation: Selecting someone for redundancy based on any protected characteristic is unlawful under the Equality Act 2010.
Pregnancy or maternity leave: Employees must not be selected for redundancy due to pregnancy, maternity leave, or any family-related leave.
Part-time or fixed-term status: Treating part-time or fixed-term employees less favourably than full-time or permanent staff is not permitted.
Trade union activities: Participation in trade union activities or membership cannot be used as a redundancy criterion.
Whistleblowing or asserting statutory rights: Employees who have raised concerns about workplace practices or exercised legal rights are protected from unfair selection.
To avoid claims of unfair dismissal or discrimination, employers must ensure that the selection process is both non-discriminatory and transparent:
Use objective, measurable criteria: Avoid subjective judgments or personal opinions. Where possible, use quantifiable data such as performance scores.
Score employees consistently: Apply the same criteria to all employees within the selection pool and keep written records of the scoring process.
Consult with employees: Engage in meaningful consultation with affected employees and, where appropriate, with employee representatives or trade unions.
Allow for appeals: Give employees an opportunity to challenge their selection if they believe the criteria were applied unfairly.
By following these steps, employers can demonstrate that the redundancy process is fair and lawful, reducing the risk of legal claims and helping employees understand how decisions are made.
Redundancy Pay
Redundancy pay is a financial payment made to employees who lose their jobs because their role is no longer needed. In the UK, most employees are entitled to statutory redundancy pay if they meet certain qualifying criteria. Understanding who qualifies, how payments are calculated, and what limits apply can help both employees and employers navigate redundancy with clarity.
To be eligible for statutory redundancy pay, an employee must:
Have been continuously employed by their employer for at least two years.
Be classed as an employee (not a worker or self-employed).
Have lost their job due to redundancy, meaning their role has genuinely ceased to exist, or the business is closing or relocating.
Some employees are not entitled to statutory redundancy pay, including:
Employees with less than two years’ continuous service.
Employees dismissed for misconduct or who refuse a suitable alternative job without good reason.
Members of the armed forces, police, and certain public office holders.
Apprentices who are not employees at the end of their apprenticeship.
Statutory redundancy pay is calculated based on three factors: age, length of continuous service (capped at 20 years), and weekly pay (subject to a statutory maximum).
The calculation is as follows:
Half a week’s pay for each full year of service where the employee was aged under 22.
One week’s pay for each full year of service where the employee was aged 22 to 40.
One and a half week’s pay for each full year of service where the employee was aged 41 or over.
Example: If an employee is 45 years old and has worked for the same employer for 10 years, all after turning 41, their redundancy pay would be 10 years x 1.5 weeks’ pay = 15 weeks’ pay (subject to the weekly pay cap).
Weekly pay is usually based on the average gross pay over the 12 weeks before the redundancy notice was given. This includes regular overtime, bonuses, and commission if they are part of the employment contract.
There are legal limits to how much redundancy pay an employee can receive:
Length of service: Only up to 20 years of continuous service can be counted.
Weekly pay cap: For redundancies where the dismissal date is on or after 6 April 2024, the maximum weekly pay for redundancy calculations is £700 (this figure is reviewed annually).
Maximum statutory redundancy pay: As of April 2024, the maximum statutory redundancy payment is £21,000.
Any redundancy pay above these statutory limits is at the employer’s discretion.
Some employers offer enhanced (or contractual) redundancy packages that go beyond the statutory minimum. These may include:
Higher weekly pay rates.
Counting more than 20 years of service.
Additional lump-sum payments or benefits.
Enhanced redundancy terms are usually set out in employment contracts, collective agreements, or company redundancy policies. If you are offered an enhanced package, it’s important to check the details and understand whether you are being asked to sign any waiver or settlement agreement.
Is redundancy pay taxable? Statutory redundancy pay up to £30,000 is generally tax-free. Any amount above this may be subject to tax and National Insurance.
When should redundancy pay be received? Redundancy pay should be paid on or soon after your final working day, or by an agreed date.
What if my employer cannot pay? If your employer is insolvent and cannot pay, you may claim statutory redundancy pay from the Insolvency Service’s Redundancy Payments Service.
Understanding your entitlement to redundancy pay can help you plan your next steps if your job is at risk. If you are unsure about your rights or how your redundancy pay has been calculated, consider seeking professional advice.
Notice Periods in Redundancy
When an employee is made redundant in the UK, they are entitled to a notice period before their employment officially ends. This notice period gives employees time to prepare for the end of their job, look for new work, or organise their affairs. The rules around notice periods are set out in both employment contracts and UK law, so it’s important to understand what applies in your situation.
The law sets minimum notice periods for redundancy, known as statutory notice periods. Unless your employment contract gives you more, you are entitled to at least:
One week’s notice if you have worked for your employer between one month and two years.
One week’s notice for each full year of continuous employment if you have worked for your employer for more than two years, up to a maximum of 12 weeks.
For example, if you have worked for your employer for five years, you are entitled to five weeks’ notice.
Some employment contracts offer longer notice periods than the statutory minimum. This is called a contractual notice period. If your contract states a notice period that is longer than the statutory minimum, your employer must honour the longer period. If your contract offers less than the statutory minimum, the statutory period still applies.
Always check your contract to see what notice you are entitled to, and remember that you should receive whichever is longer—statutory or contractual.
Your employer must either let you work your notice period or pay you in lieu of notice (known as ‘PILON’). Payment in lieu means you receive the money you would have earned during your notice period, but your employment ends immediately. During your notice period, you are still entitled to your normal pay and benefits.
If you are off sick, on holiday, or on maternity leave during your notice period, you still retain your rights and must be treated fairly.
Notice periods apply in both redundancy and dismissal situations, but the reasons for ending employment are different. If you want to understand more about how notice periods work in other types of dismissal, see our guide on notice periods for dismissal.
Check your contract: Always review your employment contract to see if you are entitled to a longer notice period than the statutory minimum.
Ask about payment in lieu: If your employer wants you to leave immediately, clarify whether you’ll receive payment in lieu of notice.
Understand your rights: If your employer fails to give you the correct notice or pay, you may have grounds to challenge this.
Understanding your notice period rights can help you plan your next steps and ensure you receive everything you are entitled to when facing redundancy.
Related Topics and Further Information
If you’re dealing with redundancy, it’s helpful to understand how it fits into the wider landscape of dismissal at work. Redundancy is just one way employment can end, and it has its own specific rules and protections under UK law.
Related Dismissal Topics
Redundancy is different from unfair dismissal, where an employee is dismissed without a fair reason or proper process. If you believe your redundancy isn’t genuine or the process wasn’t fair, you may have grounds to challenge it as an unfair dismissal. Another important area to consider is notice periods for dismissal, which set out how much warning you should receive before your job ends, including in redundancy cases.
Where to Get Help and Advice
Facing redundancy can be stressful, but you don’t have to handle it alone. You can get free advice and support from organisations such as Acas (the Advisory, Conciliation and Arbitration Service), Citizens Advice, or your trade union. These services can help you understand your rights, check if your redundancy is fair, and advise you on what steps to take if you think your employer hasn’t followed the correct process.
Key Legal Protections and Practical Tips
Fair Selection and Consultation: Employers must use a fair process to select employees for redundancy and consult with you before making a final decision. If 20 or more employees are being made redundant, special collective consultation rules apply.
Statutory Redundancy Pay: If you’ve worked for your employer for at least two years, you’re usually entitled to statutory redundancy pay. The amount depends on your age, weekly pay (up to a legal limit), and years of service.
Notice Periods: You must be given proper notice before your employment ends. The minimum legal notice depends on how long you’ve worked for your employer.
Alternative Employment: Employers should consider offering you suitable alternative roles if available. Refusing a suitable role without good reason could affect your redundancy pay.
Right to Appeal: If you think the redundancy process was unfair, you can appeal the decision internally or make a claim to an employment tribunal.
Practical Tips:
Keep records of any meetings or correspondence about your redundancy.
Ask for written details of your redundancy package, including pay, notice, and any benefits.
If you’re unsure about your rights or the process, seek advice early to avoid missing deadlines (such as the three-month time limit for making a tribunal claim).
Understanding your rights and the process can help you make informed decisions and protect your interests during redundancy. For further information on your options and related issues, explore our pages on unfair dismissal and notice periods for dismissal, or return to the main dismissal overview.
