The Ultimate Redundancy Handbook for 2025: Rules & Laws Explained

Redundancy is a common process in the workplace that affects both employers and employees. It can result from changes such as company reorganisation, business closure, or shifts in market demand.

Understanding a typical redundancy scenario can help clarify what the process looks like in practice. 

In this article, you will see an example of how redundancy might be managed within an organisation.

What Is Redundancy?

Redundancy is a type of dismissal that occurs when an employer needs to reduce their workforce. This typically occurs when a particular role is no longer necessary due to changes in the business, the introduction of new technology, or a decline in demand.

It is important to note that redundancy is about the job role being unnecessary, not about an employee's performance or conduct.

Redundancy can also occur if the workplace closes altogether or if the business relocates.

Typical reasons for redundancy include:

• Business closure
• Workplace closure
• Reduced need for certain work or roles
• Implementation of new systems or technology

When redundancy is being considered, UK law requires employers to follow a fair process. This involves proper consultation with affected employees and applying fair selection criteria.

The distinction between redundancy and other forms of dismissal is crucial, as it impacts the rights and obligations of both parties.

The first £30,000 of any redundancy payment is tax-free, covering both cash and certain non-cash benefits.

The Process for Redundancy

The redundancy process in the UK follows a series of legal steps to ensure fairness and compliance with employment law. Each stage is crucial for both employers and employees, involving clear communication and proper documentation.

Step 1: Identifying the Need for Redundancy

Employers must begin by clearly establishing a genuine and lawful reason for considering redundancy.

Common reasons include:

• Closure of the business or a specific location
• A need to cut costs
• A reduced requirement for certain types of work or roles

It’s essential to document this rationale thoroughly.

This helps ensure transparency and demonstrates that the decision is business-related rather than personal.

Step 2: Initial Communication and 'At Risk' Notification

Employees who may be affected should receive an “at risk of redundancy” letter.

This redundancy at risk letter:

• Informs the employee that their role is under review
• Explains the reasons for potential redundancy
• Outlines the process to follow, including timelines and consultation

The goal is to provide employees with early and clear information, enabling them to prepare for the next steps.

Step 3: Consultation Process

Consultation is a mandatory legal requirement and must be carried out before any final decision is made.

• For fewer than 20 redundancies, employers are required to hold individual consultations with each affected employee.
• For 20 or more redundancies within 90 days, a collective consultation with employee representatives or unions is legally required.

Consultations should cover:

• Possible alternatives to redundancy (e.g., redeployment or reduced hours)
• The selection process and criteria
• Timeframes and expected outcomes

It’s a two-way conversation; employees should have the opportunity to ask questions and suggest alternatives.

Step 4: Selection for Redundancy

Once consultation is complete, employers must select individuals for redundancy using fair, transparent, and objective criteria.

Examples of criteria include:

• Performance or relevant skills
• Length of service
• Disciplinary records
• Attendance

Employees must be informed of the criteria used and given the chance to respond during the consultation.

Discrimination must be strictly avoided.

Step 5: Issuing the Redundancy Notice Letter

After final decisions are made, selected employees receive a formal redundancy notice letter.

This notice for redundancy includes:

• Confirmation of selection
• Notice period and final working day
• Information on redundancy pay, outstanding holiday pay, and benefits
• Instructions on returning company property and accessing support

This notice of redundancy letter formally ends the employment relationship and provides all relevant logistical details.

Step 6: Providing Support and Final Steps

In the final stage, employers must:

• Allow employees to work their notice period or provide payment in lieu of notice (PILON)
• Handle any appeals or disputes fairly and promptly
• Issue a redundancy confirmation letter outlining the final arrangements

Where possible, employers should also offer support with:

• Job search assistance
• Outplacement services
• Training or reskilling opportunities

This step helps employees transition more smoothly and demonstrates the employer’s duty of care.

Practical Tips for Redundancy

It’s crucial that employees are clear about the redundancy process, including their rights and where to seek support from. 

Understand Your Rights

Individuals facing redundancy should begin by reviewing their employment contract and understanding their rights under UK employment law.

If you've been employed for at least two years, you are generally entitled to statutory redundancy pay.
This is calculated based on your age, length of service, and weekly wage, up to a government-set maximum.

Knowing what you're entitled to can help you respond confidently throughout the process.

Request Clear Communication

Employees have the right to request regular updates and clear, detailed explanations throughout the redundancy process from their employer.

You should expect transparency around:

• The reasons for redundancy
• The selection criteria being used
• The timeline for decisions
• Any available support, such as training or redeployment

Please don't hesitate to request written summaries or clarification if anything is unclear.

Seek Alternative Roles Internally

Before finalising a redundancy, employers are required to consider suitable alternative employment within the organisation.

As an employee, you should:

• Proactively express interest in internal vacancies
• Ask about retraining opportunities or adjustments that might make you eligible for another role

Accepting a reasonable offer of alternative work may also preserve your right to redundancy pay if the role proves unsuitable.

Prepare Financially

Redundancy can have a direct impact on your finances, so planning ahead is crucial.

Key steps include:

• Creating a realistic budget based on your current savings and expected income
• Calculating your redundancy pay and any other final payments
• Seeking financial advice from an independent advisor, especially if you have debt or major expenses coming up

Being financially prepared can reduce stress and give you more control over the next steps.

Utilise Support Services

Many employers, especially larger ones, offer outplacement services or other forms of employee support.

This can include:

• Career counselling
• CV and interview workshops
• Access to job boards, recruitment partners, or internal HR advisors

Engage with these resources as soon as possible to maximise their benefits during your transition period.

Know the Notice Period

Understanding your notice period is crucial, as it impacts both your final paycheck and your timeline for finding new employment.

Employers must provide either:

• The statutory notice period (at least one week after one month of employment, increasing with service), or
• A contractual notice period, if this is longer than the statutory minimum

Clarify whether you’ll be expected to work your notice, take garden leave, or receive pay in lieu of notice (PILON).

Keep Records

Maintain a comprehensive record of all redundancy-related communication.

This includes:

• Letters and emails from your employer
• Notes from consultation meetings
• Redundancy pay calculations
• Any forms or appeals you submit

Having everything on file ensures you're protected if disputes arise or if you need to consult a legal advisor.

Appeal If Necessary

If you believe that the selection process was unfair, biased, or discriminatory, you have the right to raise a formal grievance or submit an appeal.

You can also seek support from advisory services like:

• ACAS (Advisory, Conciliation and Arbitration Service)
• Citizens Advice
• An employment solicitor

Legal guidance can help you understand whether you have grounds for a claim and what steps to take next.

Help With Redundancy - Scotland Only

People in Scotland facing redundancy can access specific support services designed for their needs.

The Scottish Government and various partner organisations offer tailored advice and practical help.

Partnership Action for Continuing Employment (PACE) is the main initiative in Scotland.

PACE brings together partners such as Skills Development Scotland, Jobcentre Plus, and Citizens Advice Scotland.

Their focus is to help individuals manage the redundancy process and consider their next steps.

Support available through PACE includes:

• Career advice and guidance
• Help with CV writing and job applications
• Access to skills training and courses
• Information about benefits and financial support
• Emotional support and signposting to mental health resources

PACE events and workshops are regularly held across Scotland, and online support tools are also offered.

People are encouraged to reach out early to maximise the benefits from the available resources and support.

Key Takeaways

Redundancy happens when a role is no longer needed due to structural or economic changes, not because of an employee’s performance.

Employees facing redundancy have specific rights, including fair selection, consultation, and, if eligible, statutory redundancy pay.

Employers must follow a lawful and transparent process, including considering alternative roles within the organisation.

Exploring options like reduced hours or voluntary redundancy can help avoid compulsory dismissals and ensure fairness.