What Is Redundancy?
Redundancy occurs when a role is no longer needed. Learn the legal requirements, the correct process, and how to handle it fairly and compliantly.
Key Takeaways
- Redundancy is a fair reason for dismissal — but only if the role genuinely ceases to exist
- Employees with 2+ years' service are entitled to statutory redundancy pay
- The selection process must be fair and transparent — using objective criteria
- Collective redundancy (20+ redundancies within 90 days) requires a minimum 30-day consultation period
What redundancy is
Redundancy occurs when an employer needs to reduce headcount because a role or roles are no longer needed — due to business closure, a reduction in the need for work of a particular kind, or the closure of a workplace location. It is one of the five potentially fair reasons for dismissal in UK law. The key legal test is that the role is genuinely redundant — redundancy cannot be used as a mechanism to dismiss an employee for performance or conduct reasons without following the correct dismissal process for those grounds.
Statutory redundancy pay
Employees with 2 or more years of continuous service are entitled to statutory redundancy pay, calculated based on: age, length of service, and weekly pay (capped at £643 per week for 2024-25). The formula is: 0.5 weeks' pay per year of service under age 22; 1 week's pay per year of service aged 22-40; 1.5 weeks' pay per year aged 41 or over. Service is capped at 20 years. A 45-year-old employee with 10 years' service would receive 10 × 1.5 × (their weekly pay up to the cap) = 15 weeks' pay. Many employers enhance this — contractual redundancy pay is a legitimate employee benefit.
The redundancy process
A fair redundancy process requires: genuinely considering alternatives to redundancy (reduced hours, redeployment, voluntary redundancy, recruitment freeze); if redundancies are necessary, defining a fair pool of employees at risk; applying fair, objective, and consistently applied selection criteria (skills assessment, performance, disciplinary record, attendance — not protected characteristics); individually consulting with at-risk employees to explain the situation, seek alternatives, and allow them to challenge the selection; offering suitable alternative employment where it exists; and following the correct notice period and paying any outstanding entitlements.
Collective redundancy
When an employer proposes to make 20 or more employees redundant within a 90-day period, collective redundancy consultation obligations apply. These require: notifying the Insolvency Service (form HR1) at least 30 days before the first dismissal takes effect (45 days if 100 or more redundancies are proposed); electing employee representatives and consulting with them collectively; and providing specific information in writing to the representatives including the reasons for the proposals, the numbers and descriptions affected, the selection method, and the redundancy pay calculation. Failure to comply with collective consultation obligations results in a Protective Award of up to 90 days' gross pay per affected employee.
Common redundancy mistakes
Using redundancy as a convenient way to dismiss an underperformer without following a performance management process — this is automatically unfair dismissal and is widely recognised by employment tribunals. Applying selection criteria inconsistently or failing to document how the criteria were applied — leaving the employer unable to defend the selection decision. Failing to genuinely consider redeployment — a role in another department or a reduced-hours option must be offered if it exists. Carrying out a selection process without individual consultation — consultation is a legal requirement, not an optional courtesy.