Redundancy Rules for Employers: A Plain English Guide

Making someone redundant is one of the most consequential decisions you will take as an employer. Get the process right and it is a legitimate, legally sound business decision. Get it wrong and you are exposed to an unfair dismissal claim - even if the redundancy itself was genuinely necessary.

Most guidance on redundancy is written for HR professionals who already know the framework. This guide is written for you - a small business owner navigating redundancy for the first time, who needs to know exactly what to do, in what order, and what it will cost.

What Counts as Redundancy Under UK Law

Redundancy has a specific legal definition under the Employment Rights Act 1996. It is not simply a way to end employment - it applies when a role ceases to exist or the need for employees to do particular work reduces or disappears.

There are three situations that qualify as redundancy in UK law:

• The business is closing entirely, or a specific workplace or site is closing

• The need for employees to carry out a particular kind of work has reduced or stopped

• The business is restructuring and fewer employees are needed to do the same work

What does not qualify as redundancy: performance issues, misconduct, or a simple desire to replace one employee with another. Using redundancy as a cover for dismissal is one of the most direct routes to an employment tribunal.

The Redundancy Process: The Steps You Must Follow in Order

Redundancy is a process, not a single event. Following the steps in order is what makes the outcome legally defensible.

The Consultation Requirement: What It Means for Small Employers

Consultation is not a courtesy - it is a legal requirement. Skipping it, or treating it as a box-ticking exercise, is one of the most common reasons a procedurally fair redundancy becomes an unfair dismissal claim at tribunal.

For small employers making fewer than 20 redundancies, the law requires individual consultation - a genuine two-way conversation with each affected employee before any decision is final.

Meaningful consultation means three things in practice:

• The employee is told why their role is at risk before a decision is made

• They are given a genuine opportunity to propose alternatives - including different working arrangements, reduced hours, or taking on a different role

• You consider what they say before making a final decision

There is no fixed minimum number of consultation meetings for individual redundancies. ACAS guidance recommends that employers meet each affected employee in private at least once, with the overall consultation being meaningful and giving the employee a genuine opportunity to ask questions and propose alternatives.

How to Select Fairly for Redundancy: The Criteria That Must Be Objective

When your redundancy pool contains more than one employee, you cannot simply choose who to keep. Selection must be based on objective, measurable criteria applied consistently across all employees in the pool.

Acceptable objective criteria typically include:

• Skills, qualifications, and competencies relevant to the remaining work

• Performance record, based on documented evidence - not impressions

• Attendance record (excluding any absence related to disability, pregnancy, or maternity leave)

• Length of service, where used alongside other criteria - not as the sole factor

• Disciplinary record

Subjective criteria - "attitude", "cultural fit", or "team player" - are not acceptable as selection criteria on their own. They cannot be measured consistently, and a tribunal will treat them with scepticism.

Notice Periods and Gardening Leave: Your Obligations

Once you have confirmed the redundancy, the employee is entitled to notice. The notice period is the longer of: the statutory minimum, or the contractual notice period in their employment contract.

Statutory minimum notice under UK law is:

• One week's notice for employees with between one month and two years' service

• One week per year of service for employees with two to twelve years' service

• Twelve weeks' notice for employees with twelve or more years' service

You can ask an employee to work their notice period, or you can pay them in lieu of notice (PILON) if their contract permits it or you agree to it. Gardening leave - where the employee remains employed and on full pay during their notice period but does not come to work - is another option, typically used where you want to protect business relationships or confidential information.

Statutory Redundancy Pay: How to Calculate What You Owe

Employees with two or more years of continuous employment are entitled to statutory redundancy pay. This two-year qualifying period is unchanged by the Employment Rights Act 2025, which affects unfair dismissal qualifying periods only.

The calculation is based on three factors: the employee's age, their length of service (up to a maximum of 20 years), and their weekly pay (capped at a statutory weekly pay limit set by the government each April).

The formula is:

• Half a week's pay for each full year of service under the age of 22

• One week's pay for each full year of service between ages 22 and 40

• One and a half week's pay for each full year of service aged 41 or over

The government's official redundancy pay calculator at gov.uk is the easiest way to produce a correct figure - enter the employee's date of birth, employment start date, and weekly pay. The statutory weekly pay cap changes each April. From 6 April 2026, the cap is £751 per week, giving a maximum statutory redundancy payment of £22,530. Always verify the current figure on GOV.UK before calculating.

What Can Go Wrong: The Mistakes That Lead to Unfair Dismissal Claims

Most redundancy-related employment tribunal claims do not arise because the redundancy was wrong in principle - they arise because the process was flawed. These are the most common employer mistakes:

• Telling the employee their role is redundant before any consultation has taken place - treating the outcome as decided before the process begins

• Defining the redundancy pool too narrowly to avoid including employees you want to keep

• Using subjective or undocumented selection criteria that cannot be evidenced at tribunal

• Failing to consider suitable alternative employment within the business before confirming redundancy

• Not offering the employee the right to be accompanied at consultation meetings

• Omitting the right of appeal from the dismissal letter

Employees with two or more years of continuous service can currently bring an unfair dismissal claim. The burden on the employer is to show both that the redundancy was genuine and that the process followed was fair and reasonable. Both elements matter - a genuine redundancy carried out without a fair process can still result in an unfair dismissal finding.

Important: under the Employment Rights Act 2025, this qualifying period will reduce from two years to six months for dismissals on or after 1 January 2027. On the same date, the statutory cap on unfair dismissal compensation will be removed entirely - meaning tribunal awards will become uncapped, as they already are for discrimination claims.

When You Need More Than This Guide: Complex Redundancy Situations

This guide covers the core redundancy process for small employers making individual or small-scale redundancies. There are situations where the stakes are higher and the process more complex - and where you should take qualified employment law advice before proceeding.

Consider seeking specialist advice if:

• You are making 20 or more redundancies within a 90-day period - collective consultation rules and RPS notification obligations apply

• The employee being made redundant is pregnant, on maternity leave, or has recently raised a grievance

• The redundancy involves TUPE - a business transfer or change of service provider where employment rights transfer to a new employer

• An employee disputes the selection criteria or outcome and threatens legal action before the process is complete

• You are unsure whether the situation genuinely qualifies as redundancy or whether it is better handled as a restructure with role changes

ACAS offers free guidance and a mandatory early conciliation service. Before bringing most employment tribunal claims, an employee must notify ACAS to allow the parties the opportunity to resolve the dispute.

Since 1 December 2025, the early conciliation period lasts up to 12 weeks. If no agreement is reached, ACAS issues a certificate enabling the claimant to proceed to tribunal.For anything complex, an employment lawyer will cost a fraction of what a successful tribunal claim against you could.

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