Skip to main content

Insight article

September 13, 2024

Redundancy facts and fictions

What every employer and employee should know!

women reviewing a redundancy list

When faced with the challenging prospect of redundancy, it’s crucial to understand the legal requirements and common misconceptions surrounding the process. Whether you’re an employer trying to navigate redundancy laws or an employee facing potential redundancy, this guide will clarify the facts and debunk the myths.

Understanding redundancy: The facts

What is redundancy?

Redundancy occurs when a job or position within a business is no longer required. This can happen for several reasons, such as introducing new technology, changing working methods, restructuring, or even closing a branch or the entire business.

Employer obligations in redundancy situations

Employers have specific legal obligations when making redundancies. These include:

  • Providing clear information about why redundancies are necessary.
  • Outlining how many employees will be affected.
  • Explaining the procedures and timelines involved.
  • Clarifying how redundancy payments will be calculated.
  • Detailing the criteria used for selecting employees for redundancy.

The selection pool for redundancy

Selection for redundancy must be based on clear, objective criteria. Skills, experience, performance standards, disciplinary records, attendance, and timekeeping are all factors that can be considered. However, these criteria must be applied fairly and consistently to all employees at risk of redundancy. Employers must also be careful to avoid any form of discrimination in the selection process.

The importance of consultation

Once employees are notified of potential redundancy, employers are required to consult with them. If 20 or more employees are affected, the law mandates at least 90 days’ notice and collective consultation with trade unions or elected employee representatives. Additionally, the employer must inform the Secretary of State of the impending redundancies.

Individual consultations are required for smaller redundancies affecting fewer than 20 employees. During these consultations, employees have the right to be accompanied by a colleague or trade union representative. The consultation process should explore alternatives to redundancy, such as reassignment to different roles or relocation.

Understanding redundancy pay

Employees with at least two years of continuous service are entitled to statutory redundancy pay. The amount varies based on age, length of service, and weekly earnings:

  • Ages 17-21: Half a week’s pay for each full year worked.
  • Ages 22-40: One week’s pay for each year worked from age 22 and half a week’s pay for each full year before that.
  • Ages 41 and above: One and a half weeks# pay for each full year worked from age 41, one week’s pay for each full year worked between 22-40, and half a week’s pay for each year between 17-21.

Additionally, employees will either be required to work through their notice period or receive payment in lieu of notice. The length of this notice period is determined by an employee’s employment contract and the duration of their service with the company. They will also receive payment for any accrued but unused holiday unless asked to take this leave during their notice period.

The first £30,000 of redundancy pay is tax-free. Additionally, employers may offer enhanced redundancy packages to avoid a full redundancy process, often through a settlement agreement.

Common myths about redundancy:
The fiction

MYTHSFACTS
Redundancy equals unfair dismissal.Redundancy is a lawful form of dismissal. If carried out correctly, it is considered a fair dismissal.
Employees can be made redundant immediately.Employers must adhere to legal requirements for consultation and notice periods. Failure to do so could result in an employee filing a claim with an Employment Tribunal.
Employees cannot challenge a redundancy.Employees have the right to challenge various aspects of the redundancy process, from the justification for redundancies to the selection criteria used.
Redundancy can be used to dismiss underperforming employees.Using redundancy as a cover for performance-related dismissals is not lawful and can lead to unfair dismissal claims.
All redundant employees are entitled to redundancy pay.Only employees with two or more years of continuous service are entitled to statutory redundancy pay. It’s essential to review the employment contract to determine specific entitlements.
Redundancy only affects the newest employees.Redundancy selection should not be based solely on the “last in, first out” principle. Such an approach may expose the business to claims of unfair selection for redundancy.

Conclusion

Whether you’re an employer or an employee, navigating a redundancy situation requires careful consideration and adherence to legal requirements. Missteps can lead to costly legal challenges, so seeking professional advice is crucial to ensure the process is handled correctly.

Contact us today for expert guidance on redundancy procedures and employee rights and to answer any questions you may have.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Pay transparency in recruitment: Is your business ready to disclose salaries?
    Employers may eventually have to provide salary information much earlier in the recruitment process under proposals being considered by the Government.


    Read more
  • Pension inheritance tax changes will increase executors’ responsibilities from April 2027
    From 6 April 2027, most unused pension funds and pension death benefits will be included within the scope of Inheritance Tax. We explain what the changes mean for executors, why estate administration may become more complex and how careful planning c


    Read more
  • What is company record keeping and why is it important?
    Accurate company record keeping is essential for meeting legal obligations, protecting directors and shareholders, supporting business decisions and reducing risk. This guide explains which records companies should maintain, why they matter and the c


    Read more
  • Buying a commercial unit: what you need to know
    Buying a commercial unit can be a valuable step for your business, but it comes with legal, tax, planning and property risks. Brinda Granthrai explains what buyers should consider before committing.


    Read more
  • Pension and inheritance tax changes from April 2027: why now is the time to review your will and estate plan
    From 6 April 2027, most unused pension funds and pension death benefits are expected to be included in a person’s estate for inheritance tax purposes. This article explains what the changes could mean for families, pension nominations, wills, chari


    Read more

What they say...

  • Client, July 2026
    Constructive and empathetic “I contacted Pippa Marshall at RIAA Barker Gillette through a recommendation regarding a family law matter. Pippa was always clear, efficient, empathetic and helpful, offering constructive insights on my situation. I

  • Dino, July 2026
    A lucky professional meeting! “We had an excellent professional experience to recommend to all those who need legal help in the UK.”

  • Client, July 2026
    10-star service from Patrice Lawrence “I cannot encompass in words how brilliant a service and support I have received since working with Patrice. Effective efficiency, exceptional excellence. All this and more. I am grateful that Patrice manag

  • Dino, July 2026
    Unexpected and very valid professional experience “Law firm to be recommended also to non-residents in the UK”

  • Client, July 2026
    Seamless experience “My recent experience with RIAA Barker Gillette was exceptional. They provided considered care, attention to detail, and I felt supported every step of the journey. This was my first time working with a solicitor, and I was

Read more
Send this to a friend