Redundancy is a complex, often emotional process that requires careful planning and adherence to UK employment law.
Employers must follow a structured, fair process to ensure compliance and minimise disputes.
This guide covers everything from identifying redundancy needs to providing aftercare, with key examples and case law insights to help navigate each step.
What is Redundancy?
Redundancy occurs when an employer needs to reduce the workforce because certain roles are no longer needed.
This could be due to financial pressures, changes in business structure, or advancements in technology.
It’s critical to remember that redundancy targets roles, not individuals.
Definition and Legal Basis
Redundancy is a form of dismissal outlined under the Employment Rights Act 1996.
The role itself must become redundant, not the individual.
This distinction ensures that redundancies are fair and lawful, rather than targeting specific employees.
Legal Requirements for Redundancy
Key Points:
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Primary Legislation: Employment Rights Act 1996.
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Collective Redundancy Law: Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).
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Discrimination Protection: Equality Act 2010.
Employers must ensure their redundancy process adheres to the requirements of the above laws.
Non-compliance can lead to tribunal claims, including unfair dismissal and discrimination.
Using objective, non-discriminatory criteria is essential to avoid legal disputes.
Step 1: Identifying the Need for Redundancy
Checklist:
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Confirm a genuine need for redundancy (e.g., business closure, role duplication).
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Document reasons to evidence the need for redundancies.
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Explore ways to reduce redundancy numbers, such as redeployment or job-sharing.
Employers must clearly justify the decision to make roles redundant.
For example, if a department closes, affected roles may be considered redundant.
Having documented evidence, such as financial statements or organisational changes, can help defend against any claims.
Case Insight:
In Williams v Compair Maxam Ltd (1982), the court emphasised the importance of showing a genuine need for redundancy and considering all possible alternatives before finalising redundancies.
Downloadable At Risk Of Redundancy Letter
To help you navigate the redundancy process, we've created a downloadable At Risk Of Redundancy Letter Template. This template provides a clear, compliant starting point for notifying employees of potential redundancy, ensuring transparency and setting the tone for open communication.
Step 2: Exploring Alternatives to Redundancy
Key Alternatives:
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Redeployment to another department.
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Offering reduced hours or temporary lay-offs.
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Exploring voluntary redundancies.
Employers are encouraged to explore every possible alternative before proceeding with redundancies.
For instance, offering redeployment or reduced hours could help avoid job losses altogether.
Failure to consider alternatives could impact the fairness of the redundancy, as demonstrated in the Williams case.
Step 3: Consultation Process
Types of Consultation:
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Individual Consultation – For fewer than 20 redundancies.
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Collective Consultation – Required for 20 or more redundancies within 90 days.
Checklist for Consultation:
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Schedule individual or collective consultation meetings.
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Provide clear communication and allow for employee feedback.
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If applicable, notify the Redundancy Payments Service (RPS) 30 or 45 days in advance.
Consultation must be genuine and allow affected employees to provide input.
For collective redundancies, TULRCA requires a consultation period of at least 30 days (for 20-99 redundancies) or 45 days (for 100+ redundancies).
Employers that fail to meet these requirements could face protective awards and tribunal claims.
Step 4: Selecting Employees for Redundancy
Fair Selection Criteria:
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Skills, qualifications, and performance.
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Attendance record (if applied fairly and without discrimination).
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Avoid any discriminatory criteria based on protected characteristics.
Selecting employees for redundancy must be done fairly and objectively.
For example, using qualifications as a criterion is often deemed fair, while targeting older employees would likely be seen as discriminatory.
Case Insight:
In Johnston v Nottinghamshire Police Authority (2004), the court examined selection criteria, reinforcing the need for fairness and objectivity.
Step 5: Notice Periods and Redundancy Payments
Statutory Notice Periods:
- 1 week for each year of service, up to a maximum of 12 weeks.
Statutory Redundancy Pay Calculation:
- Based on age, length of service, and weekly pay (capped at £643 per week as of 2024).
Employees are entitled to a notice period as stipulated by the Employment Rights Act 1996.
Employers should ensure redundancy pay calculations are transparent and provided on time.
Clear written communication on final payments and any accrued holiday pay is essential to maintain transparency.
Step 6: The Right to Appeal
Checklist for Appeals:
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Offer an appeal option to employees facing redundancy.
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Ensure the appeal is handled impartially.
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Document the process and outcome to maintain procedural transparency.
Allowing employees to appeal the redundancy decision is a critical part of procedural fairness.
An impartial party should handle the appeal, ideally someone uninvolved in the original redundancy decision.
This step can resolve disputes and demonstrate the employer’s commitment to fair treatment.
Case Insight:
In Polkey v AE Dayton Services Ltd (1987), procedural fairness was highlighted, showing that lack of an appeal process can lead to claims of unfair dismissal.
Examples of Common Redundancy Scenarios
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Business Closure: If an entire business closes, all employees may be at risk of redundancy.
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Department Restructuring: When merging roles to reduce costs, some positions may be redundant.
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Introduction of Automation: New technology replacing manual roles could justify redundancy.
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Relocation of Business: If a company relocates, roles at the original site may be redundant if employees are unable to move.
Case Law Highlights
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Williams v Compair Maxam Ltd (1982) – Importance of genuine redundancy and fair process.
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Polkey v AE Dayton Services Ltd (1987) – Emphasised procedural fairness in redundancy.
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Johnston v Nottinghamshire Police Authority (2004) – Selection criteria and non-discriminatory processes.
Conclusion
Redundancy is a complex but manageable process when handled with care and adherence to UK employment law.
Each stage, from identifying redundancies to aftercare, requires a structured and legally compliant approach.
By following these steps and using objective, fair criteria, employers can reduce legal risks and make the process fairer for all parties.
