Making an employee redundant is never an easy choice for any employer. It involves careful consideration of your business needs, legal obligations, and the impact on your staff. Getting the process right is crucial—not just to stay compliant with UK employment law but to ensure fairness and transparency for everyone involved.
In this guide, we’ll walk you through the key steps and employer responsibilities when making someone redundant, so you can handle the process smoothly and confidently.
What is Redundancy?
Redundancy is the process by which an employee is dismissed by the employer for specific reasons, such as:
- Closing the business
- Changes in business operations
- Altering operational methods
- Relocating the business
One of the most challenging tasks for employers is proving that the employee is no longer required because the job role itself needs to be removed, and that the redundancy is genuine. It’s important to note that redundancy is not the same as termination, though the two are often confused.
Termination usually means an employee is dismissed due to performance issues or misconduct, and the role may still exist for someone else to fill. In contrast, redundancy means the employer is removing the role entirely.
Employers in the UK cannot claim redundancy as a reason for dismissing someone due to misconduct or poor performance. Doing so risks legal action and potential compensation claims. This is why it’s crucial for employers to understand the difference between termination and redundancy and demonstrate full compliance when making a redundancy decision.
Avoiding Redundancy: What can be done?
For employers, it’s always best to avoid redundancy where possible. How can this be done? Here are a few steps you can take to minimise the need for redundancies:
- Offer early retirement or voluntary redundancy to employees
- Provide flexible working options to existing staff
- Use contractual labour, freelancers, or temporary workers instead of permanent employees where possible.
- Limit new recruitment for the time being
- Reduce or stop overtime
- Reassign or promote existing employees to fill other vacancies within the business.
- Cut back on the use of casual labour.
By implementing these tactics, you can create a more effective workforce management system and reduce the likelihood of compulsory redundancies.
Voluntary Redundancy
Also known as non-compulsory redundancy, this occurs when employees either choose to leave voluntarily or are invited to do so. This approach allows employees who are open to redundancy to take the opportunity to leave, while protecting those who rely heavily on their jobs.
Early Retirement
Employees may also be offered the option of early retirement if they are not interested in voluntary redundancy. This option should be made available fairly to all employees, avoiding any discrimination based on age, gender, or health conditions. Importantly, early retirement must be a voluntary decision—employees cannot be forced into it.
Alternative Work
Employees at risk of redundancy can be offered alternative roles within the company. This offer must be made in writing, unconditionally, and before the current employment contract ends. It should clearly explain the differences between the new role and the existing one. The alternative role should begin with a trial period of four weeks before the previous job ends. If, after the trial, both parties agree that the new role or the employee’s suitability is not a good fit, the employer can proceed with redundancy and ensure the employee receives the appropriate redundancy pay.
Involuntary Redundancy
Also known as compulsory redundancy, this step is taken only after all possible measures to avoid redundancy have been exhausted. The selection process must be fair, reasonable, and free from discrimination to ensure employees are treated justly.
Compulsory Redundancy: Fair Selection Criteria
The process of selecting employees for compulsory redundancy must be handled with care and transparency. It’s essential that the selection criteria are fair, non-discriminatory, and clearly defined.
Here is the main criterion to consider when making your selection:
- Skills and Qualifications: Evaluate employees’ current skills and qualifications, as well as their ability to adapt and remain relevant to the company’s future needs.
- Performance: Assess the quality of their work, productivity, and ability to meet deadlines.
- Attendance: Consider the employee’s attendance record as part of the evaluation.
- Disciplinary History: Take into account any past disciplinary actions related to performance or misconduct.
- Length of Service: Generally, employees who were hired more recently may be considered first for redundancy.
Thoroughly assessing these criteria helps ensure the redundancy process is fair, transparent, and compliant with legal standards. It is important to document the entire process carefully, providing clear and valid reasons for decisions made under each criterion.
Compulsory Redundancy: Unfair Selection Criteria
Using certain reasons to select employees for redundancy can be deemed unfair and may expose the employer to legal risks. Employers must avoid making redundancy decisions based on the following:
- Maternity and Pregnancy: Employees cannot be selected for redundancy due to pregnancy or maternity-related reasons.
- Parental and Paternity Leave: Employees on parental leave, including natural birth, adoption, or leave taken for dependents, cannot be made redundant.
- Trade Union Activity: Being a trade union member or participating (or not participating) in trade union activities cannot be grounds for redundancy.
- Employment Type: Working part-time or on a fixed-term contract does not justify redundancy.
- Protected Characteristics: Redundancy cannot be based on any protected characteristics such as disability, age, marriage or civil partnership, gender reassignment, religion or belief, sex, race, or sexual orientation.
Employers must ensure these factors are not used in redundancy decisions to maintain fairness and comply with the law.
Compulsory Redundancy: Other Considerations for Redundancy
As an employer, you need to keep certain other considerations in mind during involuntary redundancy, including:
- Maintain open & transparent communication with employees throughout the process. Clearly explain the reasons and criteria for redundancy to those affected.
- Ensure regular consultation with employees and their representatives to keep the process fair and inclusive.
- Offer guidance and support to employees to help minimise the negative impact. This can include career counselling, placement services, additional training, and more.
- Keep written records of all communications and decisions to provide proof in case of any legal issues.
Following these guidelines helps ensure the redundancy process is transparent, fair, and legally compliant.
Must-Do Things During Redundancy
- Consultation
Consultation is an essential step in the redundancy process. Employers who fail to consult risk being deemed unfair and may face legal action. Beyond being a legal obligation, consultation ensures the process is fair, transparent, and shows respect to employees.
If 20 or more employees are to be made redundant within a 90-day period, employers must follow collective consultation rules. What does this involve?
- Notify the Redundancy Payments Service (RPS) before starting the consultation. This is legally required and essential for transparency. The RPS provides online tools to help you notify accurately and efficiently.
- Consult with trade union representatives and/or elected representatives of employees. If there are no representatives, consult employees directly. Provide clear information about the redundancy, its reasons, and the number of affected employees. Holding regular meetings helps build trust.
- Inform representatives or employees about the selection process, timelines, and available support resources.
- Maintain open communication by promptly responding to requests for further information. Many companies assign a dedicated HR contact to handle such queries.
Once consultation is complete, employers must issue formal redundancy notices to finalize the process. Ensure the notices are clear, concise, and cover all necessary details.
- Issuing Redundancy Notices
This statutory notice period depends on the employee’s service duration. You can look at the redundancy notice periods below.
| Service time period of the employee | Minimum Notice Period |
| 1 month – 2 years | 1 week |
| 2 years – 12 years | 1 week for every year of employment |
| 12 years or more | 12 weeks |
- Notice Pay
Redundant employees are entitled to notice pay based on their notice period and pay rate. Alternatively, you can choose to terminate their employment immediately by paying them in lieu of the notice period.
- Redundancy Pay
Employees may be eligible for statutory redundancy pay if they meet the following criteria:
- They have an employment contract with you.
- They have worked continuously for at least two years.
- The redundancy is due to lay-off, dismissal, or short-time working.
Note: Employees who retire early are not eligible for redundancy pay.
- Redundancy Pay Rates
The redundancy pay is calculated from the date of dismissal, taking into account the employee’s age and length of service.
| Age | Service Period | Redundancy Pay Rate |
| Till 22 years | Each full year of employment | Half-week pay |
| Between 22 and 41 years | Each full year of employment | One week pay |
| After 41 years | Each full year of employment | One and a half week’s pay |
Caps:
- £571 weekly pay
- 20 years for the service period
- £17,130 statutory redundancy pay
Making Fair Redundancy Decisions with Expert Accountants at Cangaf Ltd.
If you’re an employer considering redundancy, it’s crucial to approach the process carefully and lawfully. Consulting with professional experts like Cangaf Ltd. can make all the difference. We provide guidance to help you make informed decisions while ensuring your redundancy process meets all legal requirements, protecting both your business and your employees.
