Redundancies: Key Considerations for Employers

As we head towards Spring, 2025 has already seen a number of announcements from large employers about the need to make redundancies, with most blaming the challenging cost environment they’re operating in. Supermarkets such as Sainsbury’s, Morrisons, and Tesco, retailers including River Island and Next, and Universities such as Cardiff and Durham are amongst them, as well as employers in sectors such as banking and finance, journalism and policing. For the most part, these employers will be making collective redundancies (i.e. 20 or more), meaning that collective redundancy rules will be triggered. However, rising costs and decreased investor confidence also affects smaller employers. Their employees tend not to be members of Trade Unions and, because the number of redundancies being contemplated is usually fewer than 20, the collective redundancy rules are not triggered, meaning less protection for employees.

However, all employers, regardless of size or the number of redundancies they’re contemplating, are obliged to act reasonably and follow a fair process. While employees at risk of redundancy are likely to feel stressed and worried, employers can do their best to ensure the process is no more difficult than it has to be. So, what can employers do?

1. Understand the Legal Framework

Before initiating a redundancy process, employers must understand their legal obligations under employment law. The key legislation governing redundancies in the UK includes:

• Employment Rights Act 1996 – Defines redundancy and employee rights.
• Trade Union and Labour Relations (Consolidation) Act 1992 – Covers collective consultation obligations.
• Equality Act 2010 – Aims to ensure redundancy decisions do not discriminate against employees with protected characteristics (e.g. pregnancy and maternity, disability and age).

For the most part, employees with less than two years’ service can be made redundant without much in the way of legal risk for employers because they do not have the right to make claims of unfair dismissal at the Employment Tribunal. However, employers should be aware of other legal risks such as discrimination and whistleblowing, which require no minimum qualifying service.

2. Identifying Genuine Redundancy Situations

Redundancies must be based on genuine business needs, such as:

• Closure of the business or a specific workplace.
• Reduction in work or changes in business processes.
• Introduction of technology that reduces the need for human labour.

Employers should document the rationale behind the redundancy decision to justify their actions if challenged.

3. Planning and Consultation

A structured redundancy process ensures fairness and transparency:

a. Individual vs. Collective Redundancy

• If fewer than 20 employees are affected within a 90-day period, individual consultation is required.
• If 20 or more employees are affected, collective consultation rules apply, including notifying the Redundancy Payments Service (RPS). Collective consultation requires allowing employees to elect representatives, and prescribed minimum consultation periods – it needs careful thought and planning.

b. Consultation Process

• Hold meaningful consultations with affected employees.
• Explain the reasons for redundancy and explore alternatives (e.g., redeployment, part-time working).
• Allow employees to ask questions and provide feedback.

Failing to conduct proper consultation can lead to unfair dismissal claims and other legal risks.

4. Selecting Employees Fairly

If an employer is looking to reduce the number of employees carrying out the same role, it must apply a fair selection process. Selection criteria must be objective, transparent, and non-discriminatory. Employers should use fair criteria such as:

• Skills, qualifications, and experience.
• Performance records.
• Attendance (excluding disability- or maternity-related absences).
• Disciplinary history.

Avoid using discriminatory factors such as age, gender, or disability.

5. Considering Alternative Employment

Employers must make reasonable efforts to offer suitable alternative employment within the organisation. If an employee unreasonably refuses a suitable alternative role, they may lose their right to redundancy pay.

6. Providing Redundancy Pay and Notice Periods

Employees with at least two years’ continuous service are entitled to statutory redundancy pay Calculate your statutory redundancy pay - GOV.UK, calculated based on:

• Age.
• Length of service.
• Weekly earnings (capped at the statutory limit).

Employers may enhance the redundancy pay if they wish, or if their redundancy policy requires this.

Employers must also provide the correct notice period, either statutory or as specified in the employment contract. Alternatively, in some circumstances employers can pay employees in lieu of their notice period. Accrued but untaken holidays must also be paid out if there are outstanding holidays at the termination date.

Employers offering enhanced redundancy payments may offer employees settlement agreements under which the employees waive their employment rights in exchange for higher redundancy payments. This option affords the employer peace of mind that the employee will not make a claim against them.

7. Supporting Affected Employees

Employers should support employees by:

• Ensuring the redundancy process is fair and transparent and updating employees on progress.
• Providing career coaching or CV-writing workshops.
• Offering counselling or emotional support.
• Allowing reasonable time off to seek new employment or training.

8. Ensuring Compliance and Minimising Legal Risks

Employers should document every stage of the redundancy process and seek legal advice where necessary to avoid unfair dismissal and other employment claims. Keeping communication open and transparent can also help mitigate disputes.

Conclusion

Handling redundancies with sensitivity, fairness, and compliance is essential for maintaining business reputation and employee morale. By following a structured process, consulting properly, and supporting affected employees, employers can manage redundancies in a way that achieves the business’ aims whilst reducing legal risk and maintaining healthy employee relations.