Managers guide to redundancy

UK employment law and best practice

According to the Employment Rights Act 1996, a redundancy situation occurs when an employer’s requirement for employees to carry out work has reduced or ceased. This may happen where the employer:

• Stops carrying on the business in which the employee was employed.
• Stops carrying on the business at the location where the employee was employed.
• Closes a particular part of the business, such as a department or function.
• No longer requires employees to carry out work of a particular kind.
• Requires fewer employees to carry out a particular type of work due to a reduction in workload, restructuring or organisational change.

In other words, redundancy may arise where:

• You shut down the business completely.
• You close a particular part of the business, for example a team, department or function.
• You close or relocate a workplace.
• You need fewer employees to perform a particular role or type of work.

Provided the correct process is followed, redundancy is one of the five potentially fair reasons for terminating an employee’s employment.

A redundancy dismissal is more likely to be fair where:

• There is a genuine redundancy situation.
• The employer has followed a fair and meaningful consultation process with affected employees.
• Fair and objective selection criteria have been applied where a selection process is required.
• Suitable alternative employment has been considered and offered where available.
• The employer has explored reasonable alternatives to avoid or reduce redundancies wherever possible.

Where concerns relate to an employee’s performance, conduct or capability, these should be managed through the appropriate disciplinary or capability process rather than a redundancy process.

Collective Redundancy Consultation

Where an employer proposes to dismiss 20 or more employees as redundant within a period of 90 days or less, collective redundancy consultation obligations apply.

Currently, the legal threshold applies where the proposed redundancies are at one establishment. Employers should be aware that the Employment Rights Act 2025 introduces changes intended to move towards an employer-wide approach when determining whether collective redundancy consultation obligations are triggered. The detailed threshold and implementation date for this change are expected to be confirmed through further regulations.

Where collective consultation is required, employers must:

• Consult with appropriate employee representatives or recognised trade unions.
• Begin consultation in good time and before any dismissals take effect.
• Consult with a view to reaching agreement on ways to avoid redundancies, reduce the number of dismissals and mitigate the impact on affected employees.
• Provide relevant information to employee representatives to enable meaningful consultation.

Employers must also notify the Secretary of State of their intention to make 20 or more employees redundant within a 90-day period by submitting Form HR1 within the required timeframe.

Failure to submit an HR1 notification is a criminal offence and may result in an unlimited fine. Individual directors or officers may also be held personally liable where an offence has been committed with their consent, connivance or as a result of their neglect. 

From 6 April 2026, the maximum protective award for failing to properly consult collectively increased from 90 days’ pay to 180 days’ pay per affected employee. This reinforces the importance of employers following the correct consultation process and meeting their statutory obligations.