Employee Redundancy: What UK Employers Need To Know

Redundancy is rarely an easy decision. For most businesses, it’s a last resort and something considered only when every other option has been exhausted. Yet even when it’s necessary, redundancy carries legal obligations, emotional weight, and real consequences for your people. That’s why it’s so important not just to follow the correct process, but to handle the entire situation with fairness, compassion and care.

This guide is designed to help UK employers understand their responsibilities when navigating redundancies. Whether you’re managing a small restructure or responding to major operational changes, knowing the law, and applying it the right way, can make all the difference.

If you, as an employer or leader, find yourself in a position where making an employee redundant is the only option, this guide will take you through the process. 

Join us as we talk through compliance as it relates to redundancies, common redundancy mistakes to avoid and how to lead with kindness through the redundancy process.

• What is redundancy?
• Alternatives to redundancy
• Hiring freeze announcement email templates
• The laws and regulations behind redundancy in the UK
• Redundancy the right way
• At risk of redundancy letter template
• Common redundancy mistakes to avoid

Disclaimer:The information in this article is current as of 27th June 2025, and has been prepared by Employment Hero UK Ltd and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. Some information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article

What is employee redundancy?

The UK Government defines redundancy as: “when you dismiss an employee because you no longer need anyone to do their job.”

Redundancy should never be considered an ‘easy way’ to cut down or reshuffle your workforce. It must have a legitimate justification which employers must be ready and able to prove the person’s position is no longer required. As stated, “For a redundancy to be genuine, you must demonstrate that the employee’s job will no longer exist.”

Under the Employment Rights Act 1996, an employee is considered redundant if their dismissal is due to:

• The business closing entirely; or
• The closure of a particular workplace; or
• A reduced need for employees to carry out work of a particular kind.

What’s important to understand is that redundancy relates to the role and not the person. That distinction is essential, both legally and ethically. If an employee is dismissed but the job continues unchanged, this may not be a genuine redundancy and you could risk an unfair dismissal claim.

Why do businesses make people redundant?

Employers often reach the point of redundancy for a range of reasons. Perhaps there’s been a downturn in trade, or the organisation is moving to a new operating model. In some cases, technology makes certain roles obsolete. And at other times, external shocks such as economic uncertainty or global events force sudden restructuring. Whatever the trigger, the redundancy must reflect a genuine operational need.

The UK government suggests several reasons for why your business might make someone redundant. It might be because your business is:

• Changing what it does
• Doing things in a different way
• Changing the types or number of roles needed to do certain work
• Changing location or closing down

If you are looking to dismiss an employee for other reasons, such as conduct or performance, this should be dealt with by following disciplinary procedures. Redundancy should not be used as a convenient way to dismiss an employee.

What are the alternatives to redundancy?

Making an employee redundant should be a last resort, and there are other options businesses can consider. 

Put a hiring freeze in place

A hiring freeze is when companies temporarily stop recruitment for a business.

For businesses concerned about staffing costs, or the need for particular roles, a hiring freeze is good options to consider. If there is uncertainty around the future needs of the business, it is recommended that you pause plans to grow the team further. Doing so can buy you some time to consider your future strategy.

Employee re-skilling

Reskilling refers to educating current staff members to either improve their current knowledge, or provide opportunities to move into other departments or roles. 

Moving your team around the business can have numerous benefits. Not only could it help them avoid being made redundant (the ultimate goal), but the person also gets to apply their existing knowledge of the business and your product or service to the new role.

It can help the person diversify their own experience and skill set, and give different areas of your business a fresh perspective. In this instance, employers could help employees find suitable alternative employment within the business, especially if their current role is becoming obsolete.

Examine work hours

Looking at working hours, or shifts is another way to prevent making an employee redundant. Making temporary changes can be an effective way of reducing costs enough to keep all members of staff. 

As with other suggestions in this list, be sure to be transparent with your employees about these requests, and consider their employment contracts closely.

Reduce engagement with freelance or temporary workers

If staffing costs are becoming a concern, reducing the use of freelance or temporary workers could be beneficial. 

While temporary workers are unlikely to have the right not to be unfairly dismissed, there may still be contractual provisions that you need to comply with, and they will still be protected from discrimination, so employers should still take care when reducing engagement with freelance or temporary workers.

Learn more about all of these alternatives to redundancy by downloading the redundancy guide.

Step-by-step redundancy process

Making redundancies is rarely straightforward. It’s a complex process that not only involves compliance with legal obligations but also requires careful planning, sensitivity, and clear internal communications. Employers must ensure that employees are treated fairly, kept informed throughout, and given genuine opportunities to be heard. Here’s a breakdown of how a fair and lawful redundancy process might be carried out:

Planning and building the business case

Before any formal action is taken, employers must first assess whether redundancy is the only viable option. This involves reviewing the business’s current challenges, such as declining revenue, restructuring needs, or technological change, and determining whether there are other alternatives (e.g. retraining or redeployment) that could avoid job losses.

This step should include documenting the reasons for the proposed changes. Employers must be able to establish fair reasons for redundancy and demonstrate that the decision is genuinely based on business needs, not personal preferences or discriminatory grounds. This foundation sets the tone for the rest of the process and will be essential if challenged later.

Redundancy consultation meetings

Engaging in meaningful consultation is not just good practice, it’s a legal requirement, and one many employers forget. Depending on the number of employees at risk, this may take the form of individual redundancy consultation meetings (for fewer than 20 redundancies) or collective consultation (for 20 or more). Either way, the focus should be on open, honest dialogue.

Consultations are your opportunity to explain why redundancies are being considered, how roles might be affected, and to listen to employees’ views or suggestions. These discussions should be two-way and, wherever possible, conducted in a face-to-face meeting, ideally with the support of HR professionals. Employees may raise concerns, suggest alternatives to redundancy, or express interest in other roles, and all of that must be taken seriously.

Documentation is key here. Employers should provide written summaries of each meeting and clearly set out next steps, timelines, and expectations. Failing to consult properly, or rushing the process, can result in claims of unfair dismissal.

Applying fair selection criteria

If you’re selecting some individuals for redundancy but retaining others in similar roles, you must use objective and transparent criteria to make that decision. This is a critical area where employers can go wrong.

Your selection criteria might include skills, qualifications, experience, performance, disciplinary records, or attendance, but it must be applied consistently and without bias. The process should be documented carefully, ideally in a structured scoring or redundancy matrix, and supported by evidence.

This is about more than just ticking legal boxes. Employees want to feel they have been treated fairly, and clearly communicated selection processes help to maintain trust even in difficult circumstances.

Considering suitable alternative employment

Before making someone redundant, employers must explore whether there are any suitable alternative roles available within the organisation. This step is often overlooked, but it’s legally and ethically important.

If a potentially suitable role exists, even in a different department or location, it should be offered to the at-risk employee before final redundancy is confirmed. The offer must be genuine, with enough information and time for the employee to consider it. Turning down a reasonable alternative could affect entitlement to statutory redundancy pay, so both sides should approach this stage carefully and openly.

Redundancy notice and termination

Once consultation has concluded and the final decision is made, formal redundancy notice must be issued. The notice should confirm the date of termination, the reason for the decision, and the employee’s rights, including redundancy pay, notice pay, and any accrued holiday entitlement.

Whether you’re dealing with statutory or contractual notice periods, communication at this stage should remain professional and compassionate. This is often a difficult moment for employees, and having a HR professional present during the termination meeting can help ensure the process remains respectful and compliant.

Final payments and post-redundancy support

When an employee is made redundant, they are usually entitled to:

• Statutory redundancy pay (if they’ve worked for 2 years or more),
• Notice pay (or pay in lieu of notice),
• Holiday pay, and
• Any contractual redundancy enhancements, if applicable.

Aside from final payslip, it’s good practice to provide post-redundancy support, such as career transition assistance, CV workshops, or Employee Assistance Programmes (EAPs) to support mental health.

What are your legal duties as an employer?

UK redundancy law is shaped mainly by the Employment Rights Act 1996, supported by case law and statutory codes. While a fair process isn’t just about compliance, and should look at other ethical factors, there are numerous legislative obligations to follow.

One of the most commonly misunderstood parts of the redundancy process is the requirement to consult. It exists to give employees a voice, to ensure procedural fairness, and, in some cases, to surface alternatives you may not have considered. Even when the outcome feels inevitable, consultation matters.

If you’re making fewer than 20 redundancies, you must have a redundancy consultation process with each affected individual. This includes explaining the reasons for the redundancy, discussing the selection process, and listening to any feedback or suggestions the employee may offer.

Where 20 or more employees are at risk within a 90-day period, you’re required to enter into collective consultation. That means engaging either with elected employee representatives or with a recognised trade union. The law also sets minimum consultation periods: at least 30 days for 20–99 redundancies, and 45 days for 100 or more. 

Fewer than 20 redundancies:

• You are not required by statute to engage in collective consultation.
• However, you must still consult individually with each affected employee.
  This includes:
  • Explaining the reason for the proposed redundancy;
  • Discussing the selection process;
  • Exploring alternatives (e.g., suitable alternative roles);
  • Giving the employee an opportunity to provide feedback.

20 or more redundancies at one establishment within a 90-day period:

• You are legally required to carry out collective consultation under the Trade Union and Labour Relations (Consolidation) Act 1992.
• This must be done with:
  • Either recognised trade union(s), or
  • Elected employee representatives (where no union is recognised).
• Minimum consultation periods:
  • 30 days before the first dismissal (if 20–99 redundancies);
  • 45 days before the first dismissal (if 100+ redundancies).
• You must also notify the Secretary of State about the proposed redundancies. 

Are UK employees entitled to statutory redundancy pay?

Redundancy pay may be applicable in addition to notice pay. This is called a ‘statutory redundancy payment’.

There are requirements for eligibility. An employee must;

• Be working under a contract of employment
• Have had at least 2 continuous years of service
• Have been dismissed, laid off or put on short-time working (those who opted for early retirement do not qualify)

Pay rates are dependent on an employee’s age and length of service.

What are the rules around notice periods and redundancy pay?

Once you’ve completed consultation and confirmed redundancy as the outcome, employees are entitled to a period of notice. This may be set out in their contract, but must at least meet statutory minimums:

• One week’s notice if employed between one month and two years;
• One week for each year of service between two and 12 years;
• A maximum of 12 weeks for employees with 12 or more years of service.

In many cases, you may choose to pay in lieu of notice, but be clear about this in the final communication and ensure calculations are accurate.

As mentioned, employees with at least two years of continuous service may also be entitled to statutory redundancy pay. This is calculated based on age, length of service (up to a 20-year cap), and weekly pay subject to an upper limit set by the government. While some employers offer enhanced redundancy packages, this isn’t legally required unless stated in the contract or collective agreement.

It’s good practice, and often appreciated, to provide a breakdown of how these payments are calculated and what the employee can expect to receive.

What are the different types of redundancy pay?

In the UK, redundancy pay typically falls into two main categories: statutory redundancy pay and contractual (or enhanced) redundancy pay.

1. Statutory redundancy pay

This is the minimum legal amount that eligible employees must be paid when made redundant.

Eligibility:

• Must be an employee (not a worker or contractor).
• Must have at least 2 years’ continuous service with the employer.
• Must be made redundant, not dismissed for misconduct or other reasons.

How it’s calculated:

Statutory redundancy pay is based on:

• Age
• Length of service (up to 20 years)
• Weekly gross pay (capped at a statutory limit)

Employees get:

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

2. Contractual redundancy pay

Some employers offer more generous redundancy packages than the statutory minimum, either:

• As part of a contract of employment,
• Set out in a collective agreement with a union, or
• Based on customary company practice (which could create a contractual entitlement if consistent over time).

Key points:

• Enhanced redundancy terms can include:
  • A higher multiplier (e.g., 2 weeks’ pay per year of service)
  • No cap on weekly pay
  • Additional lump sums or ex gratia payments
• If contractual, these enhanced terms are enforceable by law.
• If discretionary, employers should clearly state this to avoid setting a precedent.

3. Notice

Although not technically “redundancy pay,” employees are also entitled to a notice period or a payment in lieu of their notice period. Under statute This is:

• One week’s notice if employed between one month and two years;
• One week for each year of service between two and 12 years;
• A maximum of 12 weeks for employees with 12 or more years of service.

Employment contracts can provide for more generous notice periods.

4. Holiday pay and final earnings

Upon redundancy, employees are also entitled to:

• Payment for any accrued but unused annual leave
• Final wages/salary
• Any bonuses or commission earned up to termination, if contractually due

What is voluntary redundancy?

Voluntary redundancy is when an employer asks employees to volunteer to be made redundant, usually as part of a wider workforce reduction or restructuring effort.

Rather than selecting individuals for compulsory redundancy, the employer offers a financial incentive to those who come forward voluntarily. The idea is to reduce staff numbers in a less disruptive, more consensual way. Typically, we might see this play out as follows:

1. Employers invite volunteers for redundancy. This could be company-wide or limited to specific teams.
2. Employees consider the offer, often with time to review financial terms or seek advice.
3. The employer decides whether to accept the volunteer’s application, it’s not automatic. They can decline if the individual has critical skills or business needs.
4. Redundancy is agreed, and the employee exits on agreed terms.

What are the benefits of offering voluntary redundancy?

• It can be seen as more thoughtful, and gives employees some control, which may reduce tension in the workplace by avoiding forced dismissals.
• If done correctly, and handled in a way as to not concern current employees, it can improve morale, as staff have more choice and the business is transparent.
• Often includes enhanced pay to encourage take-up.
• Gives employees an opportunity for a planned exit — useful for those already considering a career change, early retirement, or sabbatical.

It’s important to remember that voluntary redundancy is still legally a redundancy — not a resignation — so employees retain eligibility for:

• Statutory redundancy pay
• Notice pay
• Holiday pay

If accepting voluntary redundancy, employees may be asked to sign a settlement agreement, waiving their right to bring future claims.

How can employers ensure a fair and transparent redundancy process?

Employers often ask: what does a ‘fair’ redundancy process actually look like in practice?

It starts well before you speak to the employee. The planning phase is critical, you need to clearly establish the business rationale and ensure redundancy is the only viable option. That might involve considering redeployment, reduced hours, or changes to shift patterns. If those don’t solve the problem, you then move into a formal process.

Consultation comes next. This must be genuine. It’s not about informing someone of a decision already made, it’s about discussing a proposal. Employees must be given time to process the information, ask questions, and put forward alternatives. This stage is often where employers fall down, either by rushing it or treating it as a formality. But engaging openly can change outcomes: in some cases, employees have suggested viable alternatives, such as switching to part-time hours or transferring to a different department.

When selecting employees for redundancy, fairness is key. You need objective and non-discriminatory criteria. For instance, experience, qualifications, performance, disciplinary record, and attendance. A redundancy matrix can help you score and compare employees consistently. What’s critical here is documentation. Being able to explain how you reached your decision, and showing that the same process was applied to all, can protect you if a decision is challenged.

You must also consider whether there are any suitable alternative roles within the business or group. If there is a role that closely matches the employee’s skills and experience, it should be offered. If the employee unreasonably refuses a suitable alternative, they may lose the right to redundancy pay, but be cautious: ‘suitable’ is open to interpretation, and state laws often look at whether the employee’s refusal was reasonable in the circumstances.

Once the decision is confirmed, issue a written notice confirming the redundancy, setting out final pay, entitlements, and any next steps. Offer the right to appeal, even if it won’t change the outcome, it reflects procedural fairness and gives the employee a sense of closure.

Supporting employees through the process

One thing that often gets overlooked in redundancy is the emotional impact. For many people, their job is tied to their identity and stability, so being told their role is at risk can be deeply unsettling. As an employer, you have a responsibility not just to comply with the law, but to support your people through the change.

Consider offering:

• Employee Assistance Programmes (EAPs) to provide mental health and financial wellbeing support.
• Career transition services, such as CV workshops, interview coaching, or access to retraining opportunities.
• References or recommendations to help them secure future employment.

And just as importantly, make sure your remaining team understands the changes, and has space to process what’s happened. Communication with the broader workforce should be honest, respectful, and timely. If misinformation starts spreading, especially in smaller teams, it can create confusion and anxiety. Aim to stay ahead of that with calm, clear messaging.

In difficult times, how a business supports its people speaks volumes. If you’re currently exploring redundancies for your business, Employment Hero’s EAP can help during the redundancy process to deliver real, meaningful support.

Common questions from employers

How long does the redundancy process take?

This varies depending on the number of employees affected and the complexity of the restructure. For small-scale individual redundancies, the process may take a few weeks. For larger-scale or collective redundancies, you’ll need to factor in mandatory consultation periods of 30 or 45 days, plus planning and notice.

Can employees challenge redundancy decisions?

Yes — and they often do if the process feels rushed or unfair. Employees can raise formal grievances or bring claims for unfair dismissal if they believe the redundancy wasn’t genuine or that the selection process was flawed. Proper documentation and fair procedures are your best defence.

What happens if I don’t follow the correct process?

You risk claims of unfair dismissal, breach of contract, or even protective awards (in collective redundancies where consultation duties are not met). Financial penalties aside, mishandling a redundancy process can seriously impact morale and damage trust across the organisation.

Need more help?

We get it, making an employee redundant is challenging, and a last resort for any business. But remaining compliant when laying off staff is essential. If you’re still unsure about your obligations, speak to one of our HR Advisory specialists. 

If you’re looking for more support for your business, Employment Hero can help! Our Employment Operating System takes the traditional isolated aspects of employment and integrates them into a seamless, human and AI-powered solution that empowers employers, employees and job seekers alike. 

Offering everything your business needs, from finding and hiring top talent using SmartMatch, seamlessly onboarding new hires, automating complex payroll, and driving employee engagement and morale, all backed by UK-based expert support.

Learn more and speak to one of our specialists today.