Redundancy Process UK: Step-by-Step Employer Guide for 2026

Making employees redundant is one of the most difficult and legally sensitive processes any UK employer faces. Get the process wrong and you risk unfair dismissal claims, protective awards for failure to consult, and discrimination claims that can result in uncapped compensation. The good news is that following the correct process protects your business and ensures fair treatment of affected employees.

This guide takes you through each stage of the redundancy process, from establishing a genuine redundancy situation through to making final payments.

What counts as a genuine redundancy

Redundancy is one of the five potentially fair reasons for dismissal under the Employment Rights Act 1996. A genuine redundancy exists when:

• The business is closing entirely, or closing at a particular location
• The requirement for employees to do a particular kind of work has ceased or diminished, or is expected to
• The business needs fewer employees to carry out work of a particular kind

The redundancy must be genuine. If you are really dismissing someone for performance or conduct but dressing it up as redundancy, a tribunal will see through it. Similarly, if you make someone redundant and then hire a replacement shortly afterwards, the redundancy is unlikely to be genuine.

The redundancy process: step by step

Step 1: Establish the business case

Before beginning any consultation, document the business reasons for the redundancy. This might include:

• Reduction in orders or revenue
• Changes in technology or business processes
• Reorganisation or restructuring
• Relocation of the business
• Closure of a department or function

Keep written records of the business rationale. You will need to demonstrate this if challenged.

Step 2: Identify the selection pool

The selection pool is the group of employees from which those to be made redundant will be selected. Defining the pool correctly is critical — an unfairly defined pool will undermine the entire process.

The pool should include all employees doing the same or similar work that is being reduced. Limiting the pool to a single individual is only appropriate if no one else does comparable work.

Step 3: Determine fair selection criteria

Selection criteria must be objective and measurable. Commonly used criteria include:

Step 4: Consult with affected employees

Individual consultation

Every employee at risk of redundancy is entitled to individual consultation, regardless of numbers. This is not just a formality — you must genuinely consult, which means:

• Informing the employee of the situation and the reasons for redundancy
• Explaining the selection process and criteria
• Discussing the employee's individual scores if a scoring matrix is used
• Considering alternatives to redundancy (redeployment, reduced hours, voluntary redundancy)
• Genuinely listening to and considering the employee's representations

Collective consultation

If you are proposing to make 20 or more employees redundant at one establishment within 90 days, collective consultation obligations apply under the Trade Union and Labour Relations (Consolidation) Act 1992:

Collective consultation must be with appropriate representatives — recognised trade unions or elected employee representatives. Failure to collectively consult can result in a protective award of up to 90 days' pay per affected employee.

Step 5: Apply selection criteria and score employees

Apply your selection criteria to all employees in the pool. Use a scoring matrix and document the scores carefully. Two or more managers should ideally be involved in scoring to reduce the risk of bias.

Share individual scores with affected employees during consultation and allow them to challenge their scores. If an employee provides information that should change their score, update it.

Step 6: Consider alternatives

You have a duty to consider alternatives to redundancy for each affected employee. This includes:

• Suitable alternative employment elsewhere in the organisation
• Retraining for a different role
• Reduced hours or job-sharing
• Voluntary redundancy
• Early retirement (offered, not imposed)

If suitable alternative employment is available and the employee unreasonably refuses it, they may lose their right to a statutory redundancy payment. Where a TUPE transfer is involved, additional protections apply to affected employees.

Step 7: Give notice

Employees selected for redundancy are entitled to their contractual notice period or the statutory minimum, whichever is longer:

You can require the employee to work their notice, place them on garden leave, or make a payment in lieu of notice (PILON). Check the employment contract — PILON is only permitted if the contract provides for it. Review our employment contracts guide for more on notice provisions.

Step 8: Calculate and make redundancy payments

Employees with at least 2 years' continuous service are entitled to a statutory redundancy payment, which should be processed through your payroll alongside any final holiday pay owed. The calculation is:

• 0.5 week's pay for each full year of service where the employee was under 22
• 1 week's pay for each full year of service where the employee was 22-40
• 1.5 weeks' pay for each full year of service where the employee was 41 or over

A maximum of 20 years' service counts, and weekly pay is capped at £700 for 2025/26. The maximum statutory redundancy payment is therefore £21,000.

Step 9: Offer the right of appeal

Every employee dismissed for redundancy should be offered the right to appeal. This is part of the basic principles of fairness. The appeal should be heard by someone senior to the original decision-maker where possible.

Settling agreements

Many employers offer a settlement agreement (formerly compromise agreement) in connection with redundancy. A settlement agreement is a legally binding contract in which the employee waives their right to bring tribunal claims in exchange for a financial package — typically an enhanced redundancy payment.

For a settlement agreement to be valid, the employee must receive independent legal advice, usually from a solicitor. It is standard practice for the employer to contribute towards the employee's legal fees (typically £350-£500 plus VAT).

Settlement agreements can be an effective way to achieve a clean break, but should be handled carefully and ideally with legal advice for both sides.

Time off to look for work

Employees under notice of redundancy who have at least 2 years' continuous service are entitled to reasonable time off during working hours to look for new employment or arrange training. This right is set out in section 52 of the Employment Rights Act 1996. Pay for this time off is capped at two-fifths of a week's pay.

Frequently asked questions

Next steps

Key takeaways

A fair redundancy process requires a genuine business reason, a fair selection pool and criteria, meaningful consultation, consideration of alternatives, and correct payment calculations. Document every step — the quality of your records is often the deciding factor in tribunal claims.

If you are making 20 or more employees redundant, collective consultation is mandatory and carries severe penalties for non-compliance. When in doubt, take professional advice before starting the process. Review our disciplinary process guide for the broader framework of fair dismissal procedures.