Redundancy is one of the most challenging aspects of workforce management. It’s not just a legal process; it’s a human one. Done correctly, redundancy can protect your business from costly claims and maintain trust with your remaining team. Done poorly, it can lead to tribunal claims, reputational damage, and a demoralised workforce.

This guide sets out the legal requirements and best practices for managing redundancy, helping employers navigate this complex area with confidence.

What Is Redundancy?

Under UK employment law, redundancy occurs when:

  • Your business closes (fully or partially).

  • A workplace closes or relocates.

  • There is a reduced need for employees to do work of a particular kind.

It is not a tool for managing poor performance or conduct. Using redundancy as a shortcut for disciplinary issues is unlawful and can lead to unfair dismissal claims.

Legal Obligations for Employers

Employers must comply with strict statutory requirements under the Employment Rights Act 1996 and related legislation. Key obligations include:

    1. Genuine Business Reason
      Redundancy must be based on a legitimate business need, such as restructuring, technological changes, or loss of contracts. Document your business case thoroughly.

    2. Consultation
      Individual consultation is required for all redundancies.Collective consultation applies if 20 or more employees are affected within 90 days at one establishment. This involves consulting employee representatives and notifying the Secretary of State via an HR1 form. Failure to consult can result in protective awards of up to 90 days’ pay per employee.

    3. Fair Selection Process
      Use objective, non-discriminatory criteria such as:
      – Skills, qualifications, and experience
      -Performance and attendance records
      Avoid criteria that could lead to discrimination (e.g., age, gender, disability, pregnancy). A redundancy matrix can help ensure consistency.

    4. Consider Alternatives
      Before confirming redundancies, explore options like redeployment, reduced hours, job-sharing, or voluntary redundancy.

    5. Statutory Redundancy Pay
      Employees with two or more years’ continuous service are entitled to redundancy pay, calculated based on age, length of service, and weekly pay (subject to a statutory cap).

Best Practice Tips

  • Plan Carefully: Define the scope, selection pools, and timelines. Keep detailed records of decisions and consultations.

  • Communicate Transparently: Explain the business rationale clearly and keep employees informed throughout.

  • Show Compassion: Offer support such as outplacement services or career counselling. This helps maintain morale and protects your employer brand.

  • Train Managers: Ensure managers understand the process and can handle conversations sensitively.

Common Pitfalls to Avoid

  • Using redundancy to address performance issues.

  • Failing to consult properly.

  • Applying discriminatory selection criteria.

  • Overlooking suitable alternative employment opportunities.

Legal Support for Employers

Redundancy is never easy but following a fair and lawful process is essential. It protects your business from legal risk and demonstrates respect for your employees during a difficult time.

If you’re considering redundancies, seek professional advice early. Employment law is complex, and mistakes can be costly. Our employment law specialists at Farleys can assist you in the redundancy process, ensuring your business remains compliant with relevant legislation and protecting you from claims.

To discuss your requirements with one of our employment law solicitors, please call 01254 606008 or complete our online enquiry form and a member of the team will get in touch with you.