A step by step guide to the redundancy process
Making the decision to reduce your workforce is never easy. Whether your business is closing, restructuring, introducing new technology or experiencing a reduced need for certain roles, redundancy is one of the most challenging employment processes an employer can face.
Handled correctly, a fair redundancy process protects both your employees and your business. Handled poorly, it can result in costly unfair dismissal claims, discrimination claims and damage to employee morale.
With employment law continuing to evolve, it is more important than ever that employers follow a fair and legally compliant redundancy process.
Below is our step-by-step guide to managing redundancies in the UK.
Initial Planning
Before beginning any redundancy process, carefully consider whether redundancies are genuinely necessary and whether there are any alternatives.
Potential alternatives include:
- Redeploying employees into other roles
- Retraining or upskilling staff
- Reducing overtime
- Implementing a recruitment freeze
- Offering voluntary redundancy
- Reducing agency or temporary workers
- Considering flexible working arrangements
You should clearly identify the business rationale for the proposed redundancies and document the reasons. Common redundancy situations include:
- Business closure
- Workplace closure
- Reduced requirement for employees to carry out work of a particular kind
- Business reorganisation or restructuring
- Introduction of new technology or automation
A well-documented business case will help demonstrate that the redundancy is genuine should your decision later be challenged.
Identify the Redundancy Pool
One of the most important stages is identifying the correct redundancy pool.
The pool should include employees who carry out the same or similar work. Employers should carefully consider who should be included and ensure the decision is reasonable.
Getting the redundancy pool wrong is one of the most common reasons redundancy dismissals are found to be unfair.
Collective Consultation (Where Required)
If you are proposing to make 20 or more employees redundant at one establishment within a 90-day period, collective consultation rules apply.
Minimum consultation periods are:
- 20–99 proposed redundancies: consultation must begin at least 30 days before the first dismissal.
- 100 or more proposed redundancies: consultation must begin at least 45 days before the first dismissal.
You must consult with recognised trade unions or elected employee representatives and submit form HR1 to the Secretary of State before consultation begins.
Failure to comply can result in a Protective Award of up to 180 days’ gross pay per affected employee.
Even where collective consultation is not legally required, consulting employees remains an important part of demonstrating a fair process.
Select Employees Fairly
Where only some employees within a redundancy pool are at risk, you must use objective and non-discriminatory selection criteria.
Examples include:
- Skills and qualifications
- Performance records
- Relevant experience
- Attendance records (adjusted appropriately for disability, pregnancy or other protected reasons)
- Disciplinary record
Avoid using subjective criteria without supporting evidence.
You may also invite employees to express an interest in voluntary redundancy, although employers are not obliged to accept applications.
Individual Consultation
Regardless of the number of redundancies, every employee at risk should be individually consulted before any final decision is made.
This usually involves several consultation meetings rather than a single discussion.
Employees should be:
- informed they are at risk of redundancy;
- given the reasons for the proposal;
- provided with their selection scores (where applicable);
- given an opportunity to challenge the selection;
- invited to suggest alternatives to redundancy; and
- allowed to be accompanied at formal consultation meetings by a trade union representative or work colleague.
Remote consultation is now widely accepted where appropriate, provided meaningful consultation can still take place.
Following consultation, if redundancy remains the outcome, you should confirm your decision in writing, explaining:
- the reason for dismissal;
- notice arrangements;
- redundancy pay;
- any outstanding holiday pay;
- the right of appeal.
Consider Suitable Alternative Employment
Throughout the consultation process and notice period, employers should actively consider whether suitable alternative employment exists.
Employees who have at least two years’ service and are under notice of redundancy are entitled to reasonable paid time off to look for work or arrange training.
Certain employees also have enhanced protection.
Priority for Employees on Family Leave
Eligible employees now receive priority for suitable alternative vacancies and have extended protection:
- during pregnancy (once the employer has been notified);
- throughout maternity leave;
- throughout adoption leave;
- throughout shared parental leave (in qualifying circumstances); and
- for a protected period after returning to work.
This means employers must offer suitable alternative vacancies ahead of other employees at risk if one exists.
Failure to do so may result in claims for automatic unfair dismissal and discrimination.
Give Notice
Employees made redundant remain entitled to their contractual or statutory notice, whichever is greater.
Notice can either be:
- worked;
- paid in lieu (where the contract allows); or
- placed on garden leave if appropriate.
Calculate Redundancy Pay
Employees with at least two years’ continuous service remain entitled to statutory redundancy pay unless enhanced contractual redundancy terms apply.
Statutory redundancy pay is calculated using:
- age;
- length of service (maximum 20 years); and
- the statutory weekly pay cap applicable at the time of dismissal.
Employees should also receive:
- notice pay;
- payment for accrued but untaken annual leave;
- any enhanced contractual redundancy payment if applicable.
Be Aware of Employment Rights Act Reforms
The Employment Rights Act 2025 introduces significant reforms to employment law. While many redundancy rules remain unchanged, employers should be aware of the wider changes that may affect workforce restructures over the coming years.
In particular:
- the reduction in the qualifying period for ordinary unfair dismissal means more employees will have unfair dismissal protection much earlier in their employment;
- employers should ensure redundancy processes are fully documented and procedurally fair;
- robust consultation, objective selection and thorough record keeping will become increasingly important in defending employment tribunal claims.
Although redundancy remains a potentially fair reason for dismissal, employers will need to demonstrate that a fair process has been followed in every case.
Supporting Remaining Employees
Once the redundancy process has concluded, don’t overlook the employees who remain.
Redundancies can significantly affect morale, engagement and wellbeing.
Consider:
- communicating openly about the future;
- providing reassurance where possible;
- supporting managers;
- reviewing workloads;
- offering wellbeing support;
- rebuilding employee engagement.
Helping your remaining workforce adjust will improve retention and productivity following organisational change.
Need Additional HR Support?
A genuine redundancy is only one part of a fair dismissal. Employers must also ensure they have:
- identified the correct redundancy pool;
- used fair and objective selection criteria;
- carried out meaningful consultation;
- considered suitable alternative employment;
- complied with collective consultation rules where required; and
- accurately calculated notice and redundancy payments.
As employment law continues to evolve, particularly following the Employment Rights Act 2025, ensuring your redundancy processes are robust has never been more important.
If you require support with redundancy, please don’t hesitate to get in touch to learn more about our strategic HR consultancy services and how it can support your organisation.
Please note: This guide provides general information only and should not be treated as legal advice. Every redundancy situation is different, and employers should seek professional HR or legal advice before commencing a redundancy exercise.
