UK Redundancy: 6 Key Steps For Employers

What is Redundancy

Redundancy is a form of dismissal that stems from the employer's need to reduce the workforce or eliminate specific roles, not from an individual employee's performance or actions.

Typical Redundancy situations:

1. Business closure

2. Location closure

3. Restructuring or Downsizing

4. Reduced requirement for employees to perform specific work

It's crucial to understand that redundancy is distinct from being dismissing employees for misconduct or poor performance.

Must do

1) Use Fair Selection Process

• Employers must use fair and objective selection criteria

• Identify a pool of employees at risk

• Common criteria include:

  • Skills, qualifications, and aptitude

  • Standard of work and performance

  • Attendance record (excluding protected absences)

  • Disciplinary record

  • Length of service (when not sole criterion)

• Apply the selection criteria consistently to all employees in the pool to ensure fairness

The Selection Criteria should not disadvantage:

• Pregnant employees

• Those on maternity/parental leave

• Trade union representatives

• Employee representatives

2) Conduct Consultation

Individual Consultation

• Meaningful consultation with affected employees

• Discussion of alternatives to redundancy

• Consideration of suitable alternative employment

Collective Consultation

When proposing 20+ redundancies within 90 days in the same workplace location:

• 30 days minimum consultation if 20-99 redundancies

• 45 days minimum consultation if 100+ redundancies

• Must notify RPS (Redundancy Payment Service) by filling out HR1 form

• Must consult with recognised trade unions or elected employee representatives

3) Provide Notice

Statutory minimum notice periods:

• One month to two years' service: one week

• Two to twelve years' service: one week per year

• Twelve+ years' service: twelve weeks

4) Pay the Statutory Redundancy Amounts

Eligible employees (2+ years' service) receive:

• Half week's pay per year (under 22)

• One week's pay per year (22-40)

• One and half week's pay per year (41+)

• Length of service capped at 20 years

• Weekly pay capped at £700 (as of January 2025)

• Maximum statutory payment: £21,000 (as of January 2025)

• Redundancy pay is tax free (up to £30,000)

5) Consider Alternative Employment

• Employers must consider suitable alternative employment

• Trial periods of 4 weeks for alternative roles

• Employee maintains redundancy rights if trial unsuccessful

6) Provide Appeals Process

• Employers should provide right of appeal

• Clear appeal procedure

• Independent review where possible

• Written outcome of appeal

A path in the forest

Protection from Unfair Dismissal

Employees can claim unfair dismissal if:

• No genuine redundancy situation

• Unfair selection process

• Inadequate consultation

• Failure to consider alternative employment

• Discriminatory practices

  
  

If an employer doesn't follow the correct redundancy procedures or infringes on employee rights, they could face legal challenges. An employee may be awarded an unfair dismissal claim at an employment tribunal or receive compensation for lack of consultation.

Employer Best Practice

• Communicate clearly throughout the process

• Maintain records:

  • Selection criteria and scoring

  • Consultation minutes

  • Alternative role considerations

  • Redundancy payments calculations

  • All communication with affected employees

  • Written documentation of all decisions

• Support affected employees

• Assist with job search

• Provide time off for job interviews

• Consider outplacement services