The UK Redundancy Process: A Guide for Employers

Redundancy can be a difficult time for everyone involved. While it isn’t always possible to avoid redundancies, it’s important to handle the process carefully – both to meet your UK legal requirements and to support your employees through what can be a very challenging period.

At Goodwille, we’re here to support you throughout the redundancy process. With more than 25 years of experience, we’ve helped over 2,000 companies to operate in the UK from overseas and stay compliant with employment law.

In this guide, we’ll take you through what redundancy means, what the process looks like and the requirements you need to consider, including looking at alternatives before making redundancies.

What is Redundancy?

Redundancy is when your business no longer needs a particular role, or needs fewer people to do the work. It’s a type of dismissal, but the reason is the business need for the role, rather than the employee’s performance or conduct.

Redundancy applies to people with the legal status of employee, so you shouldn’t assume that everyone working for your business has the same rights. Someone is not usually classed as an employee if they’re an agency worker, casual worker, or working on a zero-hours contract.

Defining Redundancy Under UK Employment Law

Under the Employment Rights Act 1996, redundancy is defined as:

For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a)the fact that his employer has ceased or intends to cease—

(i)to carry on the business for the purposes of which the employee was employed by him, or

(ii)to carry on that business in the place where the employee was so employed, or

(b)the fact that the requirements of that business—

(i)for employees to carry out work of a particular kind, or

(ii)for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

Genuine Reasons for Redundancy

The definition above means that, for a redundancy to be genuine, there needs to be a real change in the business that affects the need for the role.

For example, the business might be closing, the work could be outsourced, the business could be moving location, or there may simply be less work and fewer people are needed.

Situations That Do Not Constitute Redundancy

Sometimes, employers make the mistake of dismissing an employee under redundancy when the situation doesn’t constitute for it. It’s important to avoid this, as if you don’t follow the correct processes, employees can claim unfair dismissal.

Situations that don’t constitute redundancy include:

• Performance or conduct issues: If the problem is an employee’s performance or conduct, you should normally follow a disciplinary procedure rather than treating the situation as redundancy.
• Covering someone’s absence: If you bring in a temporary member of staff to cover someone who is on leave, this does not make the original role redundant. The role still exists and the employee is expected to return.
• Replacing someone in the same role: If you intend to replace the person with someone else because you still need the role, this is not a genuine redundancy situation. There is an exception to consider here: bumping. In some circumstances, an employee whose own role is genuinely at risk of redundancy may be moved into another employee’s role, with the other employee then becoming redundant. This usually happens when a company wants to keep a more senior member of staff.
• A TUPE transfer: A business transfer under TUPE does not, by itself, make an employee redundant. If you are considering redundancy around a TUPE transfer, you still need a genuine redundancy reason and must follow the appropriate process.

Alternatives to Redundancy

If your business needs to reduce costs or change how work is done, there may be alternatives to making employees redundant. Let’s look at some of the options you could consider.

Redeployment Opportunities

Could an employee move into another role instead? Look at the skills and experience you already have in your team and whether there are vacant or new roles where those skills could be used.

For example, if you need fewer people in administration but have vacancies in customer service, an employee with the right skills may be able to move across rather than being made redundant.

Reduced Working Hours

Changing working arrangements could also help reduce costs. You might consider:

• Fewer working hours
• Different working patterns
• Job shares
• Homeworking, where suitable

You should talk to employees and try to reach agreement before making changes to their working arrangements, and follow the correct process if you’re considering changing their employment contract in any way.

You may also be able to use lay-offs or short-time working in certain circumstances. These are temporary arrangements where employees either stop working for a period or work fewer hours. They can only be used where the appropriate contractual terms are in place.

Voluntary Redundancy

You can also ask whether employees would like to volunteer for redundancy.

This can help reduce the number of compulsory redundancies, but you do not have to accept every volunteer. If you offer voluntary redundancy, make the opportunity available fairly and avoid putting pressure on particular employees. For example, offering it only to older employees could create a risk of age discrimination.

Recruitment Freezes and Cost Reduction Measures

Finally, look at whether there are other costs you could reduce.

You might decide to pause recruitment, reduce overtime or avoid filling vacancies that are not essential. These measures may not remove the need for redundancy altogether, but they could help reduce the number of roles affected.

When Can Employers Make Roles Redundant?

There are several situations where a genuine business change can mean you no longer need a role, or need fewer people to do the work. Here’s what that can look like.

Business Closures

You run a UK retail company and decide to close the business completely. As there is no longer a business for your employees to work in, their roles become redundant.

Workplace Relocations

Your company currently operates from an office in Manchester but decides to close it and move the operation to Bristol. If an employee cannot move with the business and their role is no longer required at the Manchester location, they may be at risk of redundancy.

Reduced Demand for Work

A UK manufacturer sees a significant fall in orders and needs only three production workers instead of five. The business may need to consider making two roles redundant.

Organisational Restructuring

You have two separate HR teams that are being combined into one. After the restructure, you only need three HR advisers rather than five, meaning some roles may be at risk of redundancy.

Economic and Commercial Pressures

Your operating costs have increased significantly while revenue has fallen. To keep the business financially sustainable, you decide that you need a smaller workforce. This may create a genuine redundancy situation.

Understanding the UK Redundancy Process

In this section, we’ll take you through the key stages of the UK redundancy process, from establishing whether redundancy is genuinely needed through to consultation, selecting roles and