Redundancy is a type of dismissal where an employee’s role is no longer needed. Redundancies can occur because of business closure, restructuring, or reduced need for a particular role. The law requires employers to follow a fair process. Failing to do so can result in a claim for unfair dismissal, even if the redundancy itself was genuine. This guide covers what makes a redundancy genuine, who should be consulted, how to select who to make redundant, and how to calculate statutory redundancy pay.
Is the redundancy genuine?
Redundancy is only a fair reason for dismissal if the role genuinely is no longer needed. Courts are sceptical of claims that a role has been eliminated if the same work is still being done by someone else. Before deciding to make anyone redundant, the employer should:
- identify which roles or functions are no longer needed
- consider whether existing staff can be redeployed into other roles
- consider whether fewer staff could do the work (for example, through more efficient processes, part-time work, or voluntary redundancy)
Making someone redundant when their role still needs to be done could be unfair dismissal disguised as redundancy.
Consultation and notice requirements
How much consultation is required depends on the number of employees being made redundant.
Fewer than 20 redundancies. If fewer than 20 people are being made redundant (or 20 people but not within a 90-day period), individual consultation is required. Each employee at risk should be told:
- why their role is at risk
- the reason for the redundancy
- the alternatives being considered (redeployment, for example)
- how the selection will be made
- the likely timescale
Give each employee a reasonable opportunity to discuss the situation and make representations. Reasonable notice might be 2-4 weeks, depending on the circumstances.
20 to 99 redundancies within 90 days. If 20 or more people are being made redundant within a 90-day period and they are in the same establishment, collective consultation must take place. The employer must consult with elected employee representatives or (if recognised) a trade union. Consultation must begin at least 30 days before the first dismissal takes effect.
100 or more redundancies within 90 days. Collective consultation must begin at least 45 days before the first dismissal takes effect.
During collective consultation, the employer must:
- explain the reasons for the redundancies
- discuss the numbers and descriptions of roles affected
- explain how selections will be made
- discuss alternatives to redundancy
The employer must also notify the Redundancy Payments Service (via an HR1 form) before any dismissal notices are issued.
Selection criteria
If the employer is deciding which employees to make redundant from a group, selection must be fair and non-discriminatory. Selection criteria might include:
- skills match with the remaining role
- performance history
- length of service
- attendance and disciplinary record
- capability to do other available work
Selection criteria should not include age, sex, race, religion, disability, pregnancy, sexual orientation, or gender reassignment, as this would be unlawful discrimination under the Equality Act 2010. Avoid criteria that have a disproportionate impact on any protected group (for example, “last in, first out” may have a disparate impact on women if they have lower tenure due to career breaks).
The selection process should be transparent and applied consistently.
Notice and payment
Once the selection has been made, the employee must be given notice of dismissal by redundancy. The notice period is either the period set out in the employment contract or the statutory minimum of one week for every year of service (up to a maximum of 12 weeks). During the notice period, the employee can use reasonable time off to look for another job.
At the end of the notice period, the employee is entitled to statutory redundancy pay (unless they resign during the notice period). Redundancy pay is calculated as follows:
For each complete year of service:
- aged 22 to 40: 0.5 weeks’ pay for each year
- aged 41 and above: 1 week’s pay for each year
- aged 18 to 20: 0.5 weeks’ pay for each year
Weekly pay is capped. For the 2025/26 tax year, the maximum weekly pay used in the calculation is £719. This cap means that an employee cannot receive more than £21,570 in statutory redundancy pay (based on 30 years’ service at the highest rate of 1 week per year for employees aged 41+; 20 × £719 × 1.5 for the maximum under the calculation formula).
Example: An employee aged 45 with 10 years’ service earns £900 per week. The statutory payment is calculated as:
- 10 years at 1 week per year (age 41+) = 10 weeks’ pay
- Weekly pay is capped at £719
- Redundancy pay = 10 × £719 = £7,190
If the same employee earned only £600 per week, the calculation would be 10 × £600 = £6,000 (because their actual pay is below the cap).
Statutory redundancy pay is tax-free up to £30,000. Any amount above £30,000 is subject to income tax.
Alternatives to redundancy
Before making people redundant, consider alternatives:
- Voluntary redundancy: Offer enhanced redundancy packages to employees who volunteer. This can reduce the need for compulsory redundancies and may be more acceptable to staff. However, do not select volunteers unfairly (for example, by accepting volunteers only from certain departments).
- Redeployment: Move employees into different roles within the business if there is suitable work available.
- Reduced hours: Reduce working hours across the business or for affected individuals.
- Unpaid leave: Offer sabbaticals or periods of unpaid leave.
- Early retirement: For older employees, offer early retirement with enhanced terms.
Considering and attempting alternatives shows the redundancy was necessary and strengthens the fairness of the process.
After redundancy: references and support
Once the redundancy has taken effect, provide the employee with a reference if requested. The reference should be factual and fair. Some employers offer outplacement support (such as CV writing or job search assistance) to departing employees, which can improve morale and reduce the risk of claims.
Keep records of the redundancy process: the business reason, the selection criteria applied, the consultation, and the calculations. These records are important if the fairness of the redundancy is later challenged.
Key points
- Ensure the redundancy is genuinely necessary; the role must not be needed.
- Consult individually with small numbers; consult collectively (30 days minimum) if 20-99 are affected within 90 days; consult 45 days ahead if 100+ are affected.
- Use fair, non-discriminatory selection criteria applied consistently.
- Statutory redundancy pay is calculated based on age, length of service, and weekly pay (capped at £719 for 2025/26).
- Consider alternatives to redundancy (voluntary redundancy, redeployment, reduced hours).
- Keep records of the process and the calculations.
Related: Find HR support near you