Redundancy is never easy. For employers, it’s one of the most difficult decisions you will face. Whether driven by financial pressure, restructuring, or technological change, redundancies impact not only the individuals affected but also morale, productivity, and your company’s reputation.

Handled properly, redundancies can be managed fairly, legally, and with dignity. Handled poorly, they can result in tribunal claims, damaged staff relationships, and costly compensation.

This guide gives employers a step-by-step understanding of redundancy law in the UK, practical strategies for compliance, and advice on avoiding common mistakes.

A redundancy situation exists when:

1. Business closure – The company (or part of it) ceases to trade.

2. Workplace closure – The specific site or location closes.

3. Reduced need for employees – Fewer staff are needed to carry out work of a particular kind.

If the dismissal does not fit these categories, it is unlikely to be considered a genuine redundancy.

Redundancy is a form of dismissal, and therefore must be both substantively fair (genuine reason) and procedurally fair (correct process). The legal framework requires:

• Fair selection criteria

• Proper consultation (individual and, if necessary, collective)

• Consideration of alternatives

• Redundancy pay (if applicable)

Failure to meet these obligations can lead to unfair dismissal claims.

Employers must use objective, measurable, and non-discriminatory criteria when selecting employees for redundancy. Common examples include:

• Length of service (last in, first out – though risky if used alone)

• Disciplinary record

• Skills, qualifications, and experience

• Performance and productivity

Avoid criteria that could indirectly discriminate, such as age or flexible working arrangements. For example, selecting employees for redundancy because they work part-time could result in a discrimination claim.

Individual Consultation

All affected employees must be consulted. This includes explaining:

• Why redundancies are necessary

• The process being followed

• Alternatives considered

• Selection criteria

Consultation should be genuine, not a tick-box exercise.

Collective Consultation

If 20 or more employees are at risk within 90 days, collective consultation is required. Employers must:

• Consult with trade unions or elected representatives

• Begin consultation at least:

  • 30 days before the first dismissal (20–99 employees)

  • 45 days before the first dismissal (100+ employees)

• Notify the Redundancy Payments Service (RPS)

Failing to comply can lead to protective awards of up to 90 days’ pay per employee.

Employers must consider alternatives before confirming redundancy. These may include:

• Redeployment into other roles

• Reduced hours or flexible working

• Voluntary redundancies

• Temporary lay-offs or short-time working

Showing that alternatives were explored strengthens your legal defence and demonstrates fairness.

Employees with two years’ continuous service are entitled to statutory redundancy pay, calculated based on:

• Age

• Length of service

• Weekly pay (capped at the statutory maximum, reviewed annually)

Some employers offer enhanced redundancy packages, either contractually or as goodwill. If you do, apply them consistently.

Employees selected for redundancy are entitled to statutory or contractual notice, whichever is greater:

• 1 week for each year of service (up to 12 weeks)

• Or contractual notice if longer

Payment in lieu of notice (PILON) may be an option, but must be clearly provided for in the contract.

1. Unfair dismissal claims – If redundancy is not genuine or procedure is flawed.

2. Discrimination claims – If selection criteria disadvantage protected groups.

3. Protective awards – If collective consultation obligations are ignored.

4. Reputational damage – Poorly managed redundancies can harm your employer brand and future recruitment.

A manufacturing company made 50 employees redundant without proper consultation. They failed to notify the RPS and did not engage with elected employee representatives. The Employment Tribunal ordered the company to pay protective awards equivalent to 90 days’ gross pay per employee — a multi-million pound liability that could have been avoided with proper legal guidance.

• Plan carefully – Document business reasons and alternatives considered.

• Communicate openly – Keep employees informed at every stage.

• Apply fair criteria – Base decisions on objective measures.

• Document everything – Records are essential evidence if challenged.

• Seek legal advice early – Prevention is far cheaper than defence.

Redundancy is sometimes unavoidable, but it doesn’t have to end in legal disputes. By following the correct procedures and treating employees fairly, you protect both your business and your reputation.

At Manak, we guide employers through redundancy processes step by step — from planning and consultation to defending claims if they arise. Our approach ensures compliance, minimises risk, and helps you manage change with confidence.

Contact our employment law team today for expert redundancy advice.