Employer Obligations in Redundancy: Legal Requirements and Best Practices

By Team SalaryCalculate · 11/3/2025

When making employees redundant, employers must navigate a complex framework of legal obligations. UK employment law sets out clear requirements for consultation, selection, notice, and payment that employers must follow to avoid unfair dismissal claims and legal penalties. Understanding these obligations protects both your business and your employees.

This guide outlines your legal obligations as an employer during redundancy, from initial consultation through to final payments. We'll cover statutory requirements, best practices, and common pitfalls to help you conduct redundancy processes fairly and legally.

The Obligation to Consult

Consultation is not optional. It's a fundamental legal requirement that gives employees a meaningful opportunity to influence the redundancy process. Failure to consult properly can make redundancies automatically unfair, even if the business need for redundancy is genuine.

Individual Consultation Requirements

For individual redundancies, you must:

• Meet with each affected employee individually before making a final decision

• Explain clearly why redundancy is necessary and the business reasons behind it

• Disclose the selection criteria and how it will be applied

• Give employees a genuine opportunity to ask questions and make suggestions

• Consider any alternatives to redundancy the employee suggests

The consultation must be meaningful. Simply informing an employee they're being made redundant isn't consultation. You need to allow time for discussion, consideration, and genuine engagement with the process. For detailed guidance on consultation procedures, see our article on the redundancy consultation process.

Collective Consultation Requirements

When making 20 or more employees redundant at one establishment within 90 days, you must follow collective consultation procedures. This involves:

• Notifying the Redundancy Payments Service (RPS) using form HR1 before consultation begins

• Consulting with appropriate representatives (trade union representatives or elected employee representatives)

• Providing written information including reasons for redundancies, numbers affected, selection criteria, and proposed timeframes

• Allowing minimum consultation periods: 30 days for 20-99 redundancies, 45 days for 100 or more

Failure to comply with collective consultation requirements can result in protective awards of up to 90 days' pay per affected employee.

Fair Selection Criteria

You must use fair, objective, and non-discriminatory criteria when selecting employees for redundancy. The criteria must be applied consistently across all employees in the selection pool.

Acceptable Selection Criteria

Fair selection criteria typically include:

• Skills, qualifications, and experience relevant to business needs

• Performance appraisals based on objective evidence

• Attendance records (excluding protected absences such as maternity leave or disability-related absence)

• Disciplinary records (only unexpired warnings)

Document your selection process carefully. Keep records of how criteria were applied, scoring systems used, and the reasons for each selection decision. This documentation is crucial if you face an unfair dismissal claim.

Prohibited Selection Criteria

You cannot use certain criteria as they amount to unlawful discrimination:

• Age (unless objectively justified)

• Pregnancy or maternity leave

• Trade union membership or activities

• Part-time or fixed-term status (unless genuinely relevant)

• Disability

Using prohibited criteria can result in automatic unfair dismissal and discrimination claims, with unlimited compensation available for discrimination cases.

Obligation to Pay Redundancy Pay

If an employee has been continuously employed for at least two years, you must pay statutory redundancy pay. This is a legal entitlement that cannot be waived or refused.

Calculation Requirements

Statutory redundancy pay is calculated as:

• Half a week's pay for each full year under 22

• One week's pay for each full year aged 22 to 40

• One and a half weeks' pay for each full year aged 41 or over

There's a maximum weekly pay cap of £719 (as of April 2025), and the maximum total statutory redundancy pay is £21,570. Use the redundancy pay calculator to ensure accurate calculations for each employee.

Payment Timing

Redundancy pay should be paid on or before the employee's final day of employment, or within a reasonable time afterward. Delays in payment can result in claims to employment tribunals and potential penalties.

Notice Period Obligations

You must give proper notice of redundancy. The notice period depends on the employee's length of service and what their contract provides.

Statutory Notice Periods

Minimum statutory notice periods are:

• One week if employed between one month and two years

• One week for each full year of service if employed two years or more (maximum 12 weeks)

If the contract provides for longer notice, you must give the contractual notice. During the notice period, employees are entitled to their normal pay and benefits, unless they're on garden leave.

Obligation to Consider Alternative Employment

You must actively consider whether suitable alternative employment exists within your organisation before making employees redundant. This is a legal obligation, not optional.

What Constitutes Suitable Alternative Employment?

Alternative employment is generally suitable if it:

• Matches the employee's skills and experience reasonably closely

• Has terms and conditions (pay, hours, location) similar to their current role

• Starts within four weeks of the redundancy date

You should document your search for alternative employment and make all suitable vacancies available to redundant employees. If an employee unreasonably refuses suitable alternative employment, they may lose their right to redundancy pay.

Special Obligations for Protected Groups

Certain employees have enhanced protection against redundancy, creating additional obligations for employers.

Pregnant Employees and Maternity Leave

You cannot make an employee redundant because they are pregnant or on maternity leave. If you make a pregnant employee or someone on maternity leave redundant, you must prove the redundancy is entirely unrelated to their pregnancy or maternity. The burden of proof is on you as the employer.

If a redundancy situation genuinely exists, you must offer suitable alternative employment to employees on maternity leave. They have priority over other employees for any available suitable positions.

Trade Union Representatives

Trade union representatives and health and safety representatives have special protection against selection for redundancy. Any selection related to their representative status would be automatically unfair.

Best Practices for Employers

Beyond meeting legal obligations, following best practices helps ensure redundancies are handled fairly, maintains employee morale, and protects your business reputation.

Early Communication

Communicate openly with employees about the business situation that may lead to redundancies. While you shouldn't make promises you can't keep, transparency helps employees understand the context and prepare appropriately.

Offer Enhanced Packages

Consider offering enhanced redundancy packages above the statutory minimum. This demonstrates goodwill, may reduce disputes, and can help attract voluntary redundancies. Use the redundancy settlement calculator to model different enhanced package scenarios.

Outplacement Support

Providing outplacement services, career coaching, or CV writing support helps redundant employees transition to new roles. While not legally required, it's good practice and helps maintain positive relationships.

Document Everything

Keep comprehensive records of:

• Consultation meetings and outcomes

• Selection criteria and how they were applied

• Alternatives considered and offered

• Business reasons for redundancy

This documentation is essential if you face a tribunal claim and demonstrates that you've followed proper procedures.

Common Employer Mistakes

Legal Consequences of Non-Compliance

Failing to meet your obligations can result in serious consequences:

• Unfair dismissal claims with compensation up to the statutory cap (£115,115 as of April 2025) or a year's salary, whichever is lower

• Discrimination claims with unlimited compensation

• Protective awards for failure to consult collectively (up to 90 days' pay per employee)

• Legal costs and management time defending claims

• Damage to business reputation and employee morale

Getting Professional Help

Redundancy processes are complex and getting them wrong can be costly. Consider seeking professional advice from:

• Employment lawyers: For complex situations, high-value redundancies, or when you need representation

• HR consultants: For guidance on processes, documentation, and best practices

• ACAS: For free advice on employment law and early conciliation if disputes arise

Frequently Asked Questions

Can we avoid consultation if we're closing down?

In very limited circumstances, such as a genuine emergency closure, there may be exceptions. However, these are extremely rare. In most cases, even when closing down, you must still consult. Seek legal advice before assuming consultation isn't required.

Do we have to pay redundancy pay if the employee has only worked for 18 months?

No. Statutory redundancy pay is only payable to employees with at least two years' continuous service. However, you may choose to pay redundancy pay anyway, or you may have contractual obligations to do so.

What if an employee refuses suitable alternative employment?

If an employee unreasonably refuses suitable alternative employment, they lose their right to redundancy pay. However, the alternative must genuinely be suitable. If the employee can show the alternative is unsuitable (e.g., significant pay reduction, different location they can't commute to), their refusal may be reasonable.

Can we use 'last in, first out' (LIFO) as selection criteria?

LIFO can be used as part of selection criteria, but it can be problematic. If LIFO disproportionately affects certain groups (e.g., younger workers, women returning from maternity leave), it may amount to indirect discrimination. It's better to use a combination of criteria rather than relying solely on length of service.

What happens if we discover we made a mistake in the selection process?

If you realise you've made a procedural error before the redundancy takes effect, you should correct it. This might involve restarting consultation or reconsidering selections. Once redundancies are implemented, correcting mistakes becomes more complex and may require offering reinstatement or compensation.

Conclusion

Meeting your legal obligations during redundancy is essential for protecting your business and treating employees fairly. From meaningful consultation to fair selection and proper payment, each requirement serves an important purpose in ensuring redundancies are conducted lawfully.

Following best practices, documenting your processes, and seeking professional advice when needed helps ensure you navigate redundancy situations successfully. Remember that the cost of getting it wrong can far exceed the investment in doing it right.

By understanding and fulfilling your obligations as an employer, you protect your business from costly tribunal claims while ensuring employees receive fair treatment during what is inevitably a difficult time for everyone involved.