Redundancy in the UK: Process, Pay, and Employer Duties (2026 Update)

Redundancy is one of those business moments you never really "look forward" to - but if you employ staff in the UK, it's something you may have to deal with at some point.

Whether you're downsizing, restructuring, closing a site, or just realising a particular role no longer fits the direction of your business, redundancy can be a lawful way to reduce headcount. The key is doing it fairly, lawfully, and with the right documentation and process from day one.

This guide walks you through what redundancy actually means in UK law, when it applies, the steps you should take, and the common pitfalls that lead to claims (even for well-intentioned employers).

What Is Redundancy (And When Does It Apply)?

In the UK, redundancy isn't just a general term for "letting someone go". It's a specific legal concept under the Employment Rights Act 1996.

Broadly, a redundancy situation arises when your business no longer needs employees to do work of a particular kind, or when the business is closing (or closing a particular workplace).

Common examples include:

• Business closure (you're shutting down entirely).
• Workplace closure (you're closing a site or location where an employee works).
• Reduced need for a role (less demand, automation, outsourcing, loss of a big contract).
• Restructure (roles change, teams merge, you remove a layer of management).

One thing that often surprises employers: redundancy is about the role being reduced/removed - not the person. If the underlying reason is really performance, misconduct, or personality clashes, redundancy is usually the wrong route and can increase your legal risk.

If you're weighing up your options, it helps to be clear on the difference between redundancy and termination early, because the process and legal tests aren't the same.

Does Redundancy Mean The Employee Has Done Something Wrong?

No. Redundancy is a no-fault dismissal. In a properly run redundancy, the employee isn't being blamed - the business circumstances are driving the change.

That said, even "no-fault" dismissals can still be unfair if the process isn't handled correctly.

When Can You Make Roles Redundant (And When Should You Pause)?

As a business owner, you generally can restructure your workforce - but you need a genuine redundancy situation and a fair process.

Before you kick off a redundancy process, it's worth doing a quick "sanity check" on two things:

1) Is This A Genuine Redundancy Situation?

Ask yourself:

• Are we reducing headcount because the work has reduced or changed?
• Are we removing or changing the role (not just wanting to remove a specific employee)?
• Are we closing the business or a workplace?

If your honest answer is "we just need to move on from this employee", take legal advice first. Trying to "dress up" a dismissal as redundancy is one of the fastest ways to end up defending an Employment Tribunal claim.

2) Are There Protected Risks You Need To Handle Carefully?

Redundancy processes often overlap with legally sensitive issues, including:

• Pregnancy and maternity (including pregnancy-related absence).
• Disability (including long-term health issues).
• Age (e.g. "last in, first out" can create age discrimination risk).
• Part-time/flexible working arrangements.
• Union activity or whistleblowing (these are high-risk dismissal areas).

Even if your reason is genuine, your selection criteria and consultation approach must avoid discrimination under the Equality Act 2010.

What Is A Fair Redundancy Process In The UK?

A fair redundancy is usually less about one magic document and more about showing you took reasonable, structured steps. Tribunals look at whether the employer acted reasonably in all the circumstances.

While every business is different, a "safe" redundancy process typically includes:

Step 1: Plan The Redundancy Properly (Before You Announce Anything)

Before you tell employees, get clear on:

• What change you're making and why (the business rationale).
• Which roles are affected (and how many).
• Whether you need a selection pool (more on this below).
• Selection criteria that are fair, objective, and evidence-based.
• Whether there are alternatives (retraining, redeployment, reduced hours, hiring freeze).

This is also the point where you should check contracts and policies (notice clauses, enhanced redundancy terms, consultation commitments, etc.). If you don't already have robust documents in place, it's a good reminder that having a clear Employment Contract and workplace policies can make change processes much smoother.

Step 2: Identify The "Selection Pool" (If Needed)

If you're removing a specific role and only one person performs it, there may be no real "pool".

But if multiple employees do similar work, you'll usually need to identify a selection pool - meaning a group of employees who could reasonably be selected for redundancy.

Examples:

• If you have 5 admins and need 3, your pool might be all 5 admins.
• If you have salespeople across two regions doing similar work, your pool might include both groups (depending on how interchangeable they are).

Getting the pool wrong is a common legal tripwire - especially if it looks like you designed the pool to target one person.

Step 3: Consult Meaningfully (Not As A Tick-Box Exercise)

Consultation is where many redundancy processes fall down. In simple terms, you need to talk to affected employees while the decision is still "live", listen to feedback, and consider alternatives.

Consultation usually includes:

• Explaining the business reasons and proposed structure.
• Sharing the proposed selection pool and criteria (if relevant).
• Discussing ways to avoid redundancies (redeployment, reduced hours, voluntary redundancy).
• Answering questions and allowing the employee to respond.

If you're unsure about timing expectations, the rules vary depending on whether it's an individual or collective situation - and the consultation periods can catch businesses out if you don't plan ahead.

Step 4: Use Fair, Defensible Selection Criteria

If you have a pool, you'll usually need selection criteria. These should be as objective as possible and backed by evidence.

Common criteria (when done carefully) might include:

• Skills and qualifications relevant to the future role.
• Performance history (using documented reviews, not vague opinions).
• Disciplinary record (again, based on records).
• Attendance record (but be very cautious - disability and pregnancy-related absence can't be treated the same as ordinary absence).

Avoid criteria that are overly subjective ("attitude", "team fit") unless you can anchor them to specific, documented behaviours.

Step 5: Hold Redundancy Meetings And Follow Up In Writing

Employees should have meetings to discuss the situation and their selection (if applicable). In many cases there will be more than one meeting.

For example, many employers treat the second consultation meeting as the point where scoring, alternatives, and proposed outcomes are discussed in more detail (and where employees can challenge assumptions before any final decision).

Make sure you keep written records of:

• What was discussed.
• Any alternatives proposed by the employee (and whether they were accepted or rejected).
• Any vacancy/redeployment discussions.
• Any scoring matrix used and supporting evidence.

Step 6: Consider Suitable Alternative Employment

Redundancy shouldn't be the end of the conversation if there are other roles available.

If there are vacancies (even if different), you should consider whether they're suitable for the employee, and whether training could bridge the gap. A failure to consider redeployment is a common reason redundancies end up being challenged as unfair.

Step 7: Confirm The Outcome, Notice, Pay, And Appeal

If redundancy is confirmed, you'll typically provide:

• A written outcome letter.
• The employee's notice details (or PILON if applicable).
• Redundancy pay details (if eligible).
• Holiday pay details.
• Information about any appeal process.

What About Collective Redundancies?

If you're proposing to dismiss 20 or more employees at one establishment within 90 days, special collective consultation rules apply under the Trade Union and Labour Relations (Consolidation) Act 1992. This can involve consulting employee representatives and meeting minimum consultation timelines.

Because the penalties for getting collective redundancies wrong can be significant, this is one of those areas where it's worth getting advice early (before you announce anything).

Redundancy Pay, Notice, And The Real Cost Of Redundancy

Budgeting for redundancy is about more than statutory redundancy pay. You'll usually need to calculate several payments and entitlements.

Statutory Redundancy Pay (Who Gets It?)

Employees generally need at least 2 years? continuous service to qualify for statutory redundancy pay.

Statutory redundancy pay is calculated based on age, weekly pay (subject to a statutory cap), and length of service (also capped). The government updates the relevant limits from time to time, so the exact numbers can change year to year.

Some businesses offer more generous packages too. If you do, make sure you understand when enhanced redundancy pay might apply - for example, due to contract terms, established custom and practice, or negotiated exits.

Notice Periods And Notice Pay

In redundancy, employees are usually entitled to notice. This might be:

• Statutory notice (minimum legal notice based on service), and/or
• Contractual notice (if the contract provides a longer period).

It's important not to mix up "how much notice" with "how much notice pay". The rules on statutory notice pay can get technical, especially if employees have variable hours, commission, or are off sick during notice.

If you're working out the timing, you'll also want to be clear on redundancy notice periods - including when notice "starts" and how it interacts with consultation and final outcome letters.

Holiday Pay And Other Final Payments

Don't forget:

• Accrued but untaken holiday must be paid on termination.
• Any contractual benefits that continue during notice (unless lawfully ended).
• Commission/bonus entitlements (depending on the scheme rules and timing).

These are the kinds of details that are easy to overlook in a fast-moving restructure - but they're often the exact issues that become disputes later.

Common Redundancy Mistakes That Trigger Claims (And How To Avoid Them)

Most redundancy disputes don't happen because an employer wanted to do the wrong thing. They happen because the business moved quickly, didn't document steps, or treated consultation like a formality.

Here are common risk areas to watch out for.

Deciding The Outcome Before Consultation

If you tell an employee "your role is redundant and your last day is X" before any meaningful consultation, you're effectively saying the decision is final. That's one of the classic markers of an unfair redundancy process.

Instead, frame early conversations as a proposal - and make sure you actually remain open to alternatives.

Using Unfair Or Discriminatory Selection Criteria

Criteria like "flexibility" or "attendance" can indirectly disadvantage certain groups (for example, disabled employees, those with caring responsibilities, or those on maternity-related absence).

If you need to use attendance as a criterion, you should usually adjust the data to avoid counting protected absences in a way that creates discrimination risk.

Not Considering Redeployment

Even if you think another role "isn't ideal", you should still consider whether it could be suitable (or made suitable with training). If there are vacancies and you don't discuss them, you're leaving a gap an employee can challenge.

Getting The Pool Wrong

If the pool looks designed to exclude comparable employees (or target one person), that can undermine the fairness of the whole process.

Poor Record Keeping

In practice, redundancy processes are often assessed later with the benefit of hindsight - sometimes by a Tribunal, sometimes by ACAS in early conciliation, sometimes by lawyers negotiating an exit.

If you can't show what you did and why, it becomes much harder to defend your decision.

Moving Too Fast In Larger Redundancy Exercises

Where multiple redundancies are proposed, timing rules can apply and planning becomes essential. Even where you're under the "collective" threshold, employees still need a fair chance to engage with the process.

If you're planning redundancies and want the process set up properly from the start, Redundancy Advice can save you a lot of headaches later - especially when you're juggling business pressures alongside legal obligations.

Key Takeaways

• Redundancy is a specific legal concept in the UK - it's about the role no longer being needed, not the person "underperforming".
• A fair redundancy process usually involves planning, identifying the right selection pool, using objective criteria, and holding meaningful consultation before making a final decision.
• If 20+ redundancies are proposed within 90 days at one establishment, collective consultation rules may apply and you'll need to plan carefully.
• Redundancy costs often include statutory redundancy pay (if eligible), notice pay, holiday pay, and potentially enhanced contractual entitlements.
• Common legal risks include pre-determined outcomes, discriminatory selection criteria, failing to consider redeployment, and weak documentation.
• Getting advice early can help you move quickly while still being fair and legally protected from day one.

If you'd like help planning or running a redundancy process, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.