Understanding redundancy processes as an employer

Even the smallest murmurs of redundancy can set an entire workplace on edge. Regardless of what the driving force is, restructuring can be an unavoidable part of managing and growing a modern business.

A recent data collection report has shown just how widespread automated technologies and cost-of-living pressures have become for UK businesses. In the first two months of 2026, 736 employers have already filed for proposed redundancies, putting over 56,000 jobs at risk of redundancy. This showcases a 9% increase from 2025.

Handled with clarity and care, redundancy can successfully pivot your business while preserving staff trust. Handled poorly, you risk severe brand damage, low workforce morale, and expensive Employment Tribunal claims for unfair dismissal. 

In this guide, we break down what a genuine redundancy process looks like under UK employment law, taking you step-by-step through planning, consultation, fair selection, and aftercare so you can protect both your business and your people. 

What is redundancy under UK law? 

A dismissal legally becomes a redundancy under the Employment Rights Act 1996 if it is wholly or predominantly driven by one of two specific reasons. 

 If a business completely closes, or is closing down a specific department or location, all employees that are dismissed as a result of this are referred to as being made redundant. 

If a business is no longer in need of a particular team or type of work, the dismissal of the employees is a case of redundancy.

Common reasons redundancy takes place

Redundancy can occur for a multitude of reasons:  

1. If a business closes down due to financial reasons or a reduction in demand
2. The implementation of a restructure across the entire workforce 
3. When a business wants to save money and cut costs on employee wages 
4. When an area of work ceases or diminishes and can either be completed by another team or removed entirely 

Redundancy is a type of dismissal that does not occur because of the employee, and the underlying reason cannot be personal performance, capability, or conduct. It happens because there either needs to be fewer employees in that specific role, or the position is set to no longer exist. 

Treating redundancy as a disciplinary outcome or an easy way to dismiss an unwanted employee is regarded as automatically unfair in an Employment Tribunal.

Step-by-step guide to the redundancy process

When planning to implement redundancy in your workplace, it is crucial that each step is carried out correctly. Unplanned or mishandled, redundancy can leave employers with Employment Tribunal and wrongful dismissal claims. Here are the steps that cannot be missed for employers looking to implement a smooth redundancy process:

Planning

Before anything, employers should formally document their rationale regarding the implementation of redundancy in their organisation. This should include operational and financial reasoning, for example, a major drop in revenue or the restructuring of a certain department. 

Now is the time to define selection pools and scoring systems, draft up a timeline and dates for announcements, and prepare notification letters. Because redundancy can create feelings of uncertainty across the entire workforce, it’s crucial to make sure you and your team are completely prepared to answer any queries and support your employees.

Employee consultation

Next, notification letters should be released to affected employees and emphasise that no final decision has been made. Allocate time dedicated to holding one-to-one meetings for discussing reasons and gathering feedback. 

Keep track of rules regarding collective consultations. Companies dismissing 20 – 99 employees must consult employee representatives (such as trade unions) at least 30 days before the first dismissal. For those dismissing 100+ employees, this must happen 45 days in advance.

Fair selection criteria

Apply the scoring system created in step one to assess employees’ skills, qualifications, work standards and attendance records, ensuring selection decisions are objective, fair and evidence-based. Make sure that the system being used doesn’t:

• Discriminate against younger employees with a “last in, first out” criteria
• Target part-time or flexible workers, roles that women are statistically more likely to hold
• Evaluate unstructured measurables like enthusiasm or how well an employee fits into the workplace culture, as this can inadvertently penalise neurodivergent or older employees
• Have arbitrary criteria on academic qualifications or English fluency when these things aren’t related to the performance of a role, as this can lead to race or ethnicity discrimination

Provide employees score cards and never share an individual’s score with another employee. This provides members of staff the opportunity to understand more about the process and keeps communication open.

Explore alternatives

Redundancy should be regarded as a last resort. Employers must look for suitable alternatives for each employee before issuing redundancy notices, even if that involves redundancy bumping, a decision that takes careful planning. Suitability comes down to:

1. How close the salary is to an employee’s current role
2. How the potential new location could affect travel time or disruption to family life 
3. Whether the new role would unfairly demote an employee without agreement 
4. Whether an employee can reasonably upskill and train to bridge any knowledge gaps before entering the new role

If either the employer or employee determines an alternative role is not suitable, the employee retains their right to statutory redundancy pay. If an employer finds and offers a new, suitable role, but the employee rejects this for no specific reason, they may forfeit their right to redundancy payment. Keep official documents of all meetings and discussions to ensure that employment law is being abided by and all employees receive the necessary compensation. 

Notice, payments, and appeals

Once a final decision has been made that an employee or several employees will be made redundant, a formal written notice should be issued to each member of the team affected. It is also important to have your numbers correct before issuing these notices. 

Statutory Redundancy Pay (SRP) is applicable for employees with two or more years of service and should be calculated by age and weekly pay capped by statutory limits. 

If enhanced redundancy pay is contractual, determine how it is calculated and whether it is conditional upon signing a Settlement Agreement.

Employees must receive either statutory or contractual notice period payment depending on which period is longer. In this case, payment may take place as Pay in Lieu of Notice (PILON), Garden Leave, or asking the employee to work their notice period.

Common mistakes employers should avoid

Managed incorrectly, redundancy can quickly put a large strain on relationships between management and teams and decrease employee motivation for weeks, even months. Here is what employers should look to absolutely avoid in order to keep their processes as smooth as possible: 

1. Don’t enter consultation periods having already made a decision. Employment Tribunals will view this as a procedural failure.
2. Don’t use redundancy as a way to dismiss underperforming staff instead of following capability procedures. 
3. Don’t forget to include remote, hybrid, or fixed-term workers in the consultation process.
4. Don’t fail to document a clear search for alternative employment opportunities.
5. Don’t fail to confirm that selection pools are completely unbiased. 

Supporting remaining staff and preserving business culture 

Finally, it’s critical for employers to remember that remaining employees will likely have feelings of anxiety or guilt once the redundancy period has come to an end. They may even feel angry or confused, despite an employer’s best efforts in making the redundancy process as open and easy as possible.

Regardless of how your team feels, employers would be wise to commit to giving open and honest communication. Providing wellbeing and mental health support and re-engaging with staff members is the best way to build back any trust lost over the recent dismissals and can set teams back to feeling comfortable and valued at work.

Partnering with Sapphire HR

Redundancy is a balancing act of empathy and compliance, constantly at risk of toppling over. Even after the process is over, teams are likely to feel the effects during the following weeks or months. 

Outsourcing your HR provides you with an unbiased and organised partner who can guide you through every statutory requirement, protect your business from costly tribunal claims, and help maintain trust and morale across your remaining workforce. 

At Sapphire HR, we support employers with drafting selection criteria and supporting their line managers through organisational change. We also guide formal meetings between staff and management and maintain trust and morale throughout your entire workplace. 

Employees deserve complete transparency when their employment status is on the line. Get in touch with our helpful team today to make sure you’re as organised as can be for one of the most complicated dismissal processes.