Redundancy Planning & Process What Every Employer Needs to Know

What Counts as a Genuine Redundancy

Redundancy is a dismissal — and like any dismissal, it can be fair or unfair depending on whether you've followed the right process. But before you even get to process, you need to be confident you have a genuine redundancy situation in the first place. If you don't, you're exposed to an unfair dismissal claim regardless of how carefully you run the rest of the exercise. The legal definition comes from section 139 of the Employment Rights Act 1996. It sets out three scenarios that qualify as redundancy:

• Business closure — the employer ceases, or intends to cease, to carry on the business for the
purposes of which the employee was employed.
• Workplace closure — the employer ceases, or intends to cease, to carry on that business at the place where the employee was employed.
• Diminished need for work — the requirements of the business for employees to carry out work of a particular kind have ceased or diminished, or are expected to do so.

The third category is by far the most common, and also the most frequently misused. The test is not whether the employee's role has disappeared — it's whether the need for that type of work has reduced.
Restructuring someone's duties, moving tasks between employees, or hiring a contractor to do similar work while making an employee redundant can all undermine the genuineness of the redundancy.

The 'place of work' question can catch employers out too. If an employee has a contractual mobility clause requiring them to work at different locations, closing one site may not constitute a redundancy situation for those employees. Employment tribunals look at the contract alongside the reality of where the employee actually worked.

WATCH OUT: The 'Sham' Redundancy

• A redundancy is not genuine if the real reason for dismissal is something else — performance, conduct, or a personality clash with management.
• Tribunals are alert to cases where the 'redundancy' coincides suspiciously with a disciplinary issue or a personality clash, or where the role is quietly re-filled shortly afterwards.
• If the need for the work hasn't actually diminished, you don't have a redundancy. You have an unfair dismissal waiting to happen.

Fair Process for Redundancy - The Framework

Having a genuine redundancy situation gives you the right reason for dismissal. But employment tribunals look at two things: reason and procedure. Get the reason right and the procedure wrong, and you can still lose. Under section 98(4) of the Employment Rights Act 1996, a dismissal is fair only if the employer acted reasonably in treating redundancy as a sufficient reason for dismissal.

The Core Elements of a Fair Redundancy

There's no single prescribed checklist in statute — but case law has established a clear framework that tribunals apply when assessing fairness. The key elements are:

• A genuine redundancy situation — as covered above.
• A fair selection pool — you must identify who is at risk and why, and ensure the pool is reasonable.
• Objective selection criteria — applied consistently to everyone in the pool.
• Meaningful consultation — with each at-risk employee, individually.
• Consideration of alternatives — including suitable alternative employment within the business.

None of these elements is optional. Tribunals treat the consultation requirement with particular seriousness — more on that in section 5.

Why 'Reasonableness' Matters

The band of reasonable responses test — established in Iceland Frozen Foods v Jones [1983] — means that a tribunal won't simply ask whether it would have made the same decision as you. It asks whether your decision fell within the range of decisions a reasonable employer could have made. That gives you some latitude, but it doesn't excuse a fundamentally flawed process.

PRACTICAL TIP: Document Everything

Keep contemporaneous records of every step — the business case for redundancy, how you
identified the pool, how you scored employees, what alternatives you considered, and what was discussed in each consultation meeting. If a claim reaches tribunal, those documents are your defence.

Individual vs Collective Redundancy

The rules change significantly when you're making 20 or more employees redundant within a 90-day period. At that point, you move from individual redundancy into collective consultation territory, governed by section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

When Do Collective Redundancy Obligations Apply?

The trigger is proposed redundancies — not actual ones. If you're proposing to dismiss 20 or more employees at one establishment in any 90-day period, you must:

• Notify the Secretary of State using form HR1 (at least 45 days before the first dismissal takes effect for 100+ redundancies, or 30 days for 20–99).
• Begin collective consultation with appropriate employee representatives (trade union representatives where there is a recognised union, or elected employee representatives where there is not) at least 45 days before the first dismissal for 100+ redundancies, or 30 days for 20–99.

The consultation must be in good time — before any decisions are made. Informing employees that they are being made redundant and then consulting them is not collective consultation. The point of consultation is to explore ways of avoiding or reducing the redundancies.

What Counts as 'One Establishment' in Redundancy Situations?

This question has been the subject of significant litigation, most notably the Woolworths cases following the CJEU ruling in USDAW v Ethel Austin. The current position in UK law (post-Brexit) is that the 20-employee threshold applies at the level of a single establishment — not across the business as a whole. So if you have ten sites each making 15 redundancies, you won't trigger collective consultation obligations, even though 150 jobs are being lost in total.

The Protective Award in Redundancies

Failure to comply with collective consultation obligations is serious. The remedy is a protective award — a penalty payable to each affected employee for the period in which consultation should have taken place. Employment tribunals can award up to 90 days' gross pay per employee.

CRITICAL UPDATE: Protective Award Increasing to 180 Days — April 2026

• The Employment Rights Bill will increase the maximum protective award from 90 days to 180 days' gross pay per affected employee, with effect from April 2026.
• For a business making 50 employees redundant, a maximum protective award could run to well over £1.8 million in additional liability — on top of redundancy pay and notice. There is no cap linked to the week's pay limit.
• Ensure collective consultation is started at the right time and conducted properly. This is not an area where you can afford to cut corners.

Selection Criteria in Redundancy

Once you've defined the pool, you need to decide who within it is selected for redundancy. Selection criteria must be objective, consistently applied, and capable of being independently verified. This is where many employers run into trouble.

Objective vs Subjective Criteria in Redundancy

Good selection criteria are measurable. Performance appraisal scores, attendance records, disciplinary records, qualifications, skills, and length of service all work well as part of a balanced matrix. What you want to avoid is criteria that rely entirely on managerial assessment — 'attitude', 'team fit', or 'overall impression' are almost impossible to defend at tribunal because they're inherently subjective and prone to unconscious bias.

Last-in, first-out (LIFO) — selecting by length of service — used to be standard. It's simple and objective, but it can have an indirect discriminatory effect (younger workers are disproportionately affected), so using LIFO alone is risky. It can form part of a wider matrix but should rarely be the sole criterion.

The Scoring Matrix n Redundancy Situations

A scoring matrix sets out the criteria, their relative weighting, and the score given to each employee at risk. A typical matrix might look something like this:

The employee with the lowest total score would be provisionally selected for redundancy. The scores should be recorded, and where possible validated by more than one manager to reduce the risk of individual bias influencing the outcome.

Discrimination Risks

Before you apply your criteria, check them for potential discriminatory impact under the Equality Act 2010. Attendance scoring can indirectly disadvantage disabled employees (whose absences may be disability-related) or those who've taken maternity or family leave. You should exclude protected absences from any attendance scoring. Similarly, part-time workers have additional protections under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000.

WATCH OUT: Automatic Unfairness

• Selection for redundancy is automatically unfair if the reason, or principal reason, relates to a  protected characteristic, trade union membership or activity, whistleblowing, asserting a statutory  right, or pregnancy and maternity.
• Automatically unfair dismissals carry no qualifying period — an employee can bring a claim from day one of employment.

Consultation in Redundancy

Individual consultation is required in every redundancy — even where collective consultation is also happening. The two processes run in parallel; one doesn't replace the other.

What 'Meaningful' Means Regarding Consultation

A consultation letter and a single meeting does not, as a rule, constitute meaningful consultation. The leading case — Mugford v Midland Bank [1997] — established that consultation must be genuine, take place when the proposals are at a formative stage, and allow the employee a real opportunity to influence the outcome. In short: the decision cannot already be made.

In practice, this means holding an at-risk meeting at which you explain the business case and the provisional selection, then giving the employee time to consider their position before a formal consultation meeting. At the consultation meeting, you should discuss the selection scoring (sharing the scores and criteria with them), consider any representations they make, and genuinely review whether alternative employment exists. A follow-up meeting — or at minimum a right of appeal — is good practice.

What to Share With the Employee in  Redundancy Situation

There's no exhaustive statutory list for individual consultation, but at minimum the employee should receive:

• The reasons why redundancies are being proposed and the business case behind them
• How the pool was identified and who is in it
• The selection criteria and weightings being used
• The employee's own provisional scores (and, in some circumstances, anonymised comparator scores)
• Details of any suitable alternative vacancies
• The proposed timeline and next steps

TIMING: How Early Is 'In Good Time'?

There's no fixed minimum period for individual consultation - courts assess it case by case. As a rule of thumb, allow at least two or three meetings spread over a couple of weeks for straightforward individual redundancies. For complex restructures or senior employees, longer is safer. The key test is whether the employee had a genuine opportunity to put forward alternatives before the decision was finalised.

Suitable Alternative Employment

Before making anyone redundant, you must look at whether suitable alternative employment exists — and if it does, you must offer it. This obligation applies even if the alternative role is at a lower grade or different location, provided the overall package is broadly comparable.

Whether a role is 'suitable' is assessed objectively, considering the nature of the work, the terms and conditions, the hours, the location, and the status of the role. A significant pay cut or demotion may mean the alternative is not suitable — but that is a matter of degree. A modest reduction is less likely to render a role unsuitable than a dramatic one.

Trial Periods in Suitable Alternative Employment 

Where you offer a suitable alternative and the employee isn't sure whether to accept, they're entitled to  a statutory four-week trial period. During the trial period, both parties can assess whether the role works.
If the employee leaves or is dismissed during the trial period for a reason connected to the new role, they retain their right to a statutory redundancy payment as if they had been made redundant from the original role.

Unreasonable Refusal

If an employee unreasonably refuses a suitable alternative offer, they forfeit their entitlement to a statutory redundancy payment. 'Unreasonably' is the operative word — tribunals look at the circumstances from the employee's perspective. Personal factors such as childcare responsibilities, health, or a significantly longer commute can all make a refusal reasonable even if it looks stubborn from the outside.

PRACTICAL NOTE

Always put alternative vacancy offers in writing, and give the employee adequate time to consider  the offer. A verbal mention in passing will not satisfy your obligation. Keep records of every role advertised internally during the consultation period — a tribunal may ask to see what was available.

Redundancy Pay

Employees with two or more years' continuous employment are entitled to a statutory redundancy payment (SRP). The entitlement is calculated using a formula based on age, length of service, and a week's pay — subject to a statutory cap.

The Statutory Redundancy Pay Formula

The formula is: years of service × week's pay × age multiplier. Service is capped at 20 years, and the week's pay is capped at £700 (2026 figure). The age multipliers are:

• Under 22: half a week's pay per year of service
• 22 to 40: one week's pay per year of service
• 41 and over: one and a half weeks' pay per year of service

The maximum statutory redundancy payment in 2026 is therefore £21,000 (20 years × £700 × 1.5). The following table illustrates how the formula works in practice:

Note that where an employee has service spanning different age bands, the calculation is done in segments — the portion of service under age 22 at the lower multiplier, the portion between 22 and 40 at the standard rate, and so on. The GOV.UK redundancy pay calculator handles this automatically.

What Counts as a 'Week's Pay'?

For employees with normal working hours and fixed pay, a week's pay is straightforward — it's their gross weekly wage. For employees whose pay varies (commission earners, shift workers with variable hours, or those on variable bonus arrangements), the calculation is more complex, typically averaging pay over the 12 weeks preceding the calculation date. Getting this wrong can lead to underpayment claims.

Enhanced Redundancy Packages

Nothing prevents you from paying more than the statutory minimum — and in practice, many employers do. An enhanced redundancy scheme can be based on actual weekly pay (removing the £700 cap), a higher multiplier, a longer service calculation, or a combination of all three.

If you operate an enhanced scheme, make sure it's properly documented — either in contracts, a staff handbook, or a collective agreement. Consistency matters: applying enhanced terms to some employees and statutory minimum to others in the same exercise creates discrimination and resentment, and can generate legal risk if the differential tracks a protected characteristic.

TAX TREATMENT on Statutory Redundancy Payments

Statutory redundancy payments and compensatory ex-gratia payments up to £30,000 are generally free from income tax and National Insurance. Amounts above £30,000 are subject to income tax (though not employee NICs). Payments in lieu of notice (PILONs) are taxable in full if the contract contains a PILON clause, or if payment in lieu of notice is the employer's normal practice. Take advice on the tax treatment before finalising any package.

Common Mistakes with the Redundancy Process and How to Avoid Them

Most redundancy tribunal claims don't arise from employers who set out to do something wrong. They arise from employers who underestimated the process, cut corners under commercial pressure, or assumed that paying a good settlement would compensate for a flawed exercise. Here are the mistakes we see most often.

The 'Sham' Redundancy

Dressing up a performance dismissal or a personality-driven decision as a redundancy is both legally and commercially dangerous. Employment tribunals have seen every variation of this — the employee who was put into a redundancy pool of one, the role that was 'made redundant' only to reappear under a different job title six months later, or the restructure that only ever had one possible outcome because the decision was already made.

If performance is the issue, use a performance management process. If conduct is the issue, use a disciplinary process. Using redundancy as a shortcut exposes you to an unfair dismissal claim with no procedural defence — because the reason was never genuine to begin with.

Failing to Consult Properly During Redundancy Process

The most common procedural failing by a significant margin. Announcing redundancies and then going through a tokenistic consultation exercise does not meet the legal standard. Consultation must happen at a stage when the employee can actually influence the outcome — that means before final decisions are made on selection, before notice is given, and certainly before any announcement to the wider business.

Poor Selection During Redundancy Process

Selecting on the basis of criteria that weren't agreed in advance, failing to apply the matrix consistently, or allowing a line manager to 'score' employees without any independent oversight are all classic pitfalls.
The scoring should be done carefully, documented thoroughly, and ideally sense-checked by HR or a second manager before it's disclosed to employees.

'Bumping' (Redundancy)

Bumping refers to a situation where the employee whose role is redundant is moved into a different role, and the person currently in that role is dismissed instead. Tribunals have held that in some circumstances an employer should at least consider bumping as an alternative to dismissal — particularly where the redundant employee has long service or specialist skills that fit the alternative role better. Failing to consider it won't always render a dismissal unfair, but in the right circumstances it can.

Forgetting the Right of Appeal in Redundancy

An appeal stage isn't legally mandatory in redundancy, but Acas guidance recommends it and tribunals take note of whether one was offered. An appeal gives the employee a genuine chance to challenge the selection scores, query the pool definition, or raise concerns about the process — and it gives you one last opportunity to correct any procedural errors before they become tribunal claims.

HIGH RISK: Making Redundancies During Protected Periods

• Making an employee redundant while they are on maternity leave (or shared parental, adoption, or paternity leave) is particularly high-risk. Employees on maternity leave have additional priority rights to be offered any suitable alternative vacancy before other employees in the redundancy pool — regardless of selection scores.
• Failure to comply with this priority right is automatically unfair dismissal. There is no qualifying period and no cap on the compensatory award in discrimination-related claims.

Quick Reference Summary

If you need advice on Redundancies our team are on hand to help:

Next Steps

If disputes arise, understand employment tribunal risks

If negotiating exit terms, consider settlement agreements

If roles are transferring, review TUPE regulations

Watch our webinar below on the 2026 changes regarding Redundancy