Redundancy is when you dismiss an employee because you no
carry out the business for which they are employed
carry out the business in the place where they are employed
require them to carry out work of a particular kind
For a redundancy to be genuine, you must demonstrate that the
employee's job will no longer exist.
Redundancy Selection - Non Compulsory
Non-compulsory redundancy covers voluntary redundancy and early
You could ask employees if they would like to volunteer for
redundancy and then select those to be made redundant.
It is less demoralising and disruptive than compulsory
redundancy and helps identify employees who are willing to
It could work out to be more expensive - you may need to offer
enhanced redundancy payments to attract people to leave.
There is also the risk that employees not granted their
voluntary redundancy request may react negatively, and you could
also end up with an imbalance of skills and experience.
You can offer incentives to employees to retire early.
Giving incentives for early retirement is often an acceptable
alternative to redundancy for employees and trade unions and may
be less harmful to employee morale than compulsory redundancy.
Redundancy Selection - Compulsory
If you decide to make compulsory redundancies you will need to:
The criteria that can be used to select employees for redundancy
skills, qualifications and aptitude
standard of work performance
Be consistent with your selection criteria to avoid the
possibility of unlawful discrimination.
Automatically Unfair Selection Criteria
Some criteria will make any subsequent redundancy dismissal
automatically unfair. You should not select an employee for
redundancy because of issues related to:
trade union membership
legal industrial action lasting up to 12 weeks
being an employee representative
actions taken on specified health and safety grounds
pregnancy, maternity, paternity, adoption and parental leave
regulations on part-time workers
Rights of Redundant Employees
Redundant employees have a number of rights and are entitled to
receive a statutory redundancy payment (SRP).
The Right to Receive a
To receive a
statutory redundancy payment,
an individual must:
be an employee working under a contract of employment
have at least two years' continuous service
have been dismissed, laid off or put on short-term working-
those who opted for early retirement do not qualify
A redundant employee also has the right to receive a written
statement setting out the amount of any redundancy payment and
how you worked it out.
You must make the payment when or soon after you dismiss the
How is a SRP Calculated?
statutory redundancy payment,
is based on an employee's age and length of employment and is
counted back from the date of dismissal. Employees receive:
1.5 weeks' pay for a year of employment after their 41st
one week's pay for a year of employment after their 22nd
half a week's pay for a year of employment up to their 22nd
Their length of service is capped at 20 years. Weekly pay is
subject to the statutory limit which is £430. The maximum
statutory redundancy payment,
payable is £12,900.
Taxation of SRPs
is not taxable, as it's not more than £30,000. Any redundancy
payment you make in addition to SRP is subject to tax and
National Insurance (NI).
Other termination payments made to the employee at the same time
- like a payment in lieu of holiday - must have tax and NI
Failure to make a SRP
If an employee disagrees with the amount, or you fail to pay SRP,
the employee has six months from the date their employment ended
to make a claim for payment to an employment tribunal.
If they fail to make the claim in time, a tribunal still has the
power for a further six months to decide whether or not the
employee should receive a
statutory redundancy payment
If you cannot pay, the employee can apply to the Department for
Business, Innovation & Skills for a direct payment from the NI
However, they must have applied in writing to you for a payment
within six months of their employment ending, or applied
successfully to an employment tribunal within the six months
Other Redundancy Rights
Employees under notice of redundancy also have the right to:
be offered suitable alternative employment
have a trial period in the alternative employment without
losing their right to an SRP
reasonable time off to look for a job or to arrange training
not be unfairly selected for redundancy
Potential problems following redundancy
An employee can claim unfair dismissal if they feel you:
have unfairly selected them for redundancy or incorrectly
applied the selection criteria
failed to offer suitable alternative work where it was
didn't follow the proper consultation process
Employees may also be able to claim a protective award if you
fail to properly consult with their representatives, ie trade
union or elected employee representatives in collective
The Department for Business, Innovation & Skill (BIS) may
prosecute you for failure to notify the proposed redundancies in
Failure to Properly Consult
If you fail to properly carry out collective redundancy
consultation, a complaint may be made to an employment tribunal
The tribunal may award up to 90 days' pay to each affected
BIS may also prosecute you for failure to notify the proposed
redundancies in advance.
If your business would become insolvent as a result of making
the statutory redundancy payments, the Insolvency Service's
Redundancy Payments Office (RPO) may be able to help, but you
will be expected to repay the debt as quickly as possible. They
can also help if you become formally insolvent and fail to pay
the employer's contributions into an occupational or personal
pension scheme or owe pay in arrears.
We would recommend
that you consult a employment solicitor before making any
employee redundant. For further information on Redundancy please
complete the enquiry for at the top of this page or search for a
solicitor using the drop down menu.