The ultimate HR guide to redundancy

Between May and July 2025, redundancies affected around 3.5 per 1,000 UK employees—according to data from the Office for National Statistics—reflecting the challenges that companies currently face in uncertain market conditions.

Redundancy is one of the toughest decisions a business can face. For employers, it means navigating complex legal and financial processes. For employees, it often means stress, uncertainty, and difficult life changes.

Redundancy is never an easy call, but when managed with empathy and fairness, you can protect an employee’s dignity and trust. Keep reading for an overview of how to handle redundancy at your organisation, helping you balance legal compliance with compassion.

What is redundancy?

Redundancy occurs when an employer needs to reduce their workforce because a role is no longer required. This might happen due to restructuring, cost-cutting, automation, relocation, or a decline in demand for certain products or services.

Unlike dismissal for performance reasons, redundancy is not about the individual’s ability, but about the role itself becoming unnecessary. While difficult, redundancy measures may be necessary for a business to survive economic pressures or preserve resources. When managed properly, redundancy can help organisations adapt while giving affected employees fair treatment and the financial protection they need to move forward, in the form of redundancy pay.

How can businesses avoid redundancies?

Before moving toward compulsory redundancies, it’s a good idea for your business to explore less disruptive alternatives first. These steps can help reduce costs and give your organisation time to adapt without losing valued talent:

• Invite staff to apply for voluntary redundancy or early retirement.
• Encourage flexible working arrangements among existing employees.
• Reduce reliance on contractors and freelancers.
• Limit or pause the use of casual labour.
• Restrict recruitment to slow workforce growth.
• Reduce or suspend overtime opportunities.
• Reallocate existing employees into vacant roles across the business.
• Introduce short-term working or temporary layoffs if necessary.

Types of redundancy

Redundancy can take different forms depending on your business needs and options available for employees. Recognising the different types of redundancy ensures there’s dignity and transparency throughout the entire process.

Non-compulsory redundancy

Non-compulsory redundancy includes voluntary redundancy and early retirement. Employees may choose to leave, but a fair and transparent selection process must still be applied. Early retirement is another option, provided you can offer incentives to retire, but it must be voluntary and offered fairly across the workforce.

Compulsory redundancy

Compulsory redundancy requires employers to identify roles to cut and apply fair selection criteria. Acceptable factors include skills, qualifications, performance, attendance, and conduct. Length of service, or “Last in, first out” may be considered only with justification, as it may be viewed as discriminatory.

Unfair criteria for redundancy can include pregnancy, family leave, trade union activity, contract type, age, disability, race, religion, gender identity, sexual orientation, or pay rights. Using such reasons is unlawful.

Do employers have to have a consultation process?

Consulting with employees about redundancy is both a legal and ethical requirement. Any redundancies made without consultation are highly likely to be ruled unfair at a tribunal. If 20 or more redundancies are planned within 90 days at a single workplace, employers must carry out collective consultation with unions or elected representatives. This process should explain the reasons for the cuts, explore possible alternatives, and explain how selection will work.

For smaller redundancies, there is no strict legal process. However, engaging openly with individuals and teams remains best practice. Skipping this step can risk claims of unfair dismissal and can damage an organisation’s reputation.

Consultations do not have to end in agreement, but they must be genuine and focus on finding solutions. Often, discussions can lead to creative alternatives that reduce the impact of redundancies and protect employee morale.

How does redundancy pay work?

Employees selected for redundancy may be entitled to a financial cushion known as a statutory redundancy payment. This legal entitlement recognises their service and provides vital support during a difficult transition.

What makes an employee eligible for redundancy pay?

An employee is entitled to statutory redundancy pay if they meet the following criteria:

• They are employed under a valid contract of employment.
• They have completed at least two years of continuous service.
• They have been dismissed, laid off, or placed on short time working (early retirement does not qualify).

Employers are expected to:

• Pay redundancy promptly, ideally at the point of dismissal.
• Give employees a written statement showing the payment amount and explaining how it was calculated.

What is the statutory redundancy pay rate?

The amount of redundancy pay an employee receives depends on their age, years of service, and weekly pay at the time of dismissal.

Employees are entitled to:

• 1.5 weeks’ pay for each full year of service after their 41st birthday.
• 1 week’s pay for each full year of service between their 22nd and 41st birthdays.
• 0.5 week’s pay for each full year of service up to their 22nd birthday.

Key rules:

• Maximum length of service counted: 20 years.
• Weekly pay is based on the average over the 12 weeks before the redundancy notice.
• Weekly pay is capped at £719, with a maximum statutory payment of £21,570.

Statutory redundancy pay rates may be different in Northern Ireland. Employers may choose to pay more, or reduce the qualifying period for redundancy pay to less than two years.

What happens if I don’t give my employees redundancy pay?

If redundancy pay is not provided, or the amount appears incorrect, employees have the right to seek redress through a tribunal.

• Employees should file a claim within three months of their employment ending.
• If this window is missed, a tribunal may still consider the claim up to six months later.

Clear communication, prompt payment, and transparency in how redundancy is calculated can prevent disputes from reaching this stage. For employees, knowing these rights ensures they receive the support to which they are legally entitled.

How to create a redundancy plan

Redundancy is stressful for everyone, which is why having a clear redundancy plan is crucial. For employees, it shows that the business is handling the process with fairness and empathy. For HR and managers, it serves as a roadmap, ensuring all steps are followed consistently and legally.

A redundancy plan should cover the following:

• Alternatives considered before redundancies were proposed, such as flexible working or reduced overtime
• The number of roles at risk and how this was determined
• Commitments to communication, making sure employees are kept updated and supported
• Consultation with all affected employees, including those on leave, so no one is excluded
• A clear timeline, leaving enough time for meaningful consultation and consideration of alternatives
• Fair and transparent selection criteria, explained in plain language
• Notice periods and redundancy pay arrangements, so employees know what to expect
• An appeals process, allowing staff to challenge unfair treatment.

10 steps to select employees for redundancy fairly

1. Confirm redundancy is necessary.

Before making any decisions, review whether redundancies are unavoidable. Explore alternatives such as reduced hours, redeployment, or voluntary exits.

2. Follow the correct legal process.

Ensure your approach complies with employment law, including collective consultation requirements where applicable.

3. Communicate with employees early.

Be transparent about the reasons for redundancy, timelines, and what employees can expect.

4. Hold meaningful consultations.

Engage with affected employees and their representatives. Discuss alternatives and allow time for feedback.

5. Apply fair selection criteria.

Base decisions on objective factors such as skills, qualifications, performance, and attendance. Avoid any discriminatory practices.

6. Calculate redundancy pay.

Accurately determine statutory or enhanced redundancy payments, providing employees with a clear written breakdown.

7. Issue proper notice.

Give employees the correct statutory or contractual notice period, in line with legal requirements.

8. Offer suitable alternative roles.

Where possible, provide employees with opportunities for redeployment within the organisation.

9. Provide an appeals process.

Allow employees to challenge decisions if they believe the process or selection was unfair.

10. Support employees throughout.

Offer emotional support, practical guidance, and career resources to help employees navigate the transition.

How long is the redundancy process?

While there is no maximum length for redundancy consultations, the law sets minimum timeframes. Employers must begin consultation early enough to give staff a genuine opportunity to respond.

• 20–99 redundancies: Consultation must begin at least 30 days before any dismissals take effect.
• 100 or more redundancies: Consultation must begin at least 45 days before dismissals take effect.

These minimums are designed to ensure fair process, give employees time to raise concerns, and allow employers to explore alternatives. Starting consultation earlier is always good practice.

Redundancy FAQs

Are employees on maternity leave or pregnant protected from redundancy?

Employees selected for redundancy have enhanced protection when on certain types of family leave. Employers must offer a suitable alternative job, if one exists, in the following cases:

• Maternity leave
• Adoption leave
• During at least 6 continuous weeks of Shared Parental Leave or Neonatal Care Leave

This right takes priority over other colleagues, even if they may appear more suitable for the role. The protection lasts for 18 months from the date of the child’s birth or adoption. It also applies after the employee returns to work. For example, if an employee comes back from maternity leave 12 months after the birth, they retain this right for another six months.

This safeguard ensures parents are not unfairly disadvantaged during redundancy processes

How do you calculate redundancy pay?

Statutory redundancy pay is calculated based on factors such as your age, weekly pay, and number of years in the job. You can visit the official government website estimate how much redundancy pay you may be entitled to.

When are you not entitled to redundancy pay?

Not every redundancy situation results in a statutory redundancy payment. Employees lose entitlement if:

• The employer offers to keep them on
• The employer offers suitable alternative work, which is refused without good reason
• They are dismissed for misconduct (this does not count as redundancy).

Certain categories of workers are also excluded:

• Former registered dock workers and share fishermen
• Crown servants, armed forces members, and police officers
• Apprentices who are not employees once training ends
• Domestic servants who are part of the employer’s immediate family.

Do employees have to pay tax on statutory redundancy pay?

If you are made redundant, you may receive a termination payment. This package can include several elements, such as:

• Statutory redundancy pay
• Holiday pay for any untaken leave
• Unpaid wages up to the last working day
• Company benefits, such as bonuses or incentives.

Statutory redundancy pay of up to £30,000 is tax-free, helping you keep more of this financial support. Other parts of the termination package, like holiday pay or bonuses, are classed as normal income and will have tax and National Insurance deducted.

How to support employees going through redundancy

The redundancy process is highly stressful, and employees may struggle without proper support. Employers who fail to provide it risk low morale, disengagement, and reputational damage. To minimise this, managers should check in frequently with their employees and offer personal reassurance and clarity.

HR should organise Q&A sessions to address concerns, while structured group discussions create transparency. Providing access to counselling, career transition services, or external support networks reduces the impact further. By taking these proactive steps, organisations can protect employee wellbeing, maintain trust, and safeguard their reputation during a challenging period.