Part 1: Getting the basics right

Two months into 2024 and stories of redundancies abound in the media, from the John Lewis Partnership and Deutsche Bank to Deloitte and English National Opera. Redundancies are a regrettable fact of life for companies of all sizes. It is important to get the process right and key to this is employers keeping abreast of regulation, both to ensure they remain compliant and that they treat all employees with fairness and respect.

In this two-part series, Arbor Law’s Fiona Morgan will look at the basic approach to making individuals redundant and (in part two) what employers must consider when considering collective redundancies.

When can I make employees redundant?

There are three situations when a business can consider making employees redundant. They are:

  1. When you are closing a business
  2. When you are closing a site where employees work
  3. When you no longer need the same number of employees to carry out a certain type of work (such as new technology reducing the requirement for employees, or a reorganisation producing a more efficient way of working).

Businesses should avoid using redundancy as a cloak for dismissals for another reason (such as poor performance or misconduct) – or else risk successful unfair dismissal claims on grounds that the redundancy was not genuine.

What process should I follow to make people redundant?

To reduce the risk of successful tribunal claims it is critical to take certain steps when preparing to carry out any redundancies – especially when employees have (or will have) accrued 2 years’ service and have the right not to be unfairly dismissed. These include:

  • Ensuring the method for selecting employees for redundancy is objective and fair.
  • Consulting with employees before the decision is made to carry out redundancies.
  • Following a fair procedure.
  • Considering whether there are any suitable alternative vacancies.
How do I select people for redundancy?


For site closures and where a business no longer requires the same number of employees to carry out work of a certain kind, the establishment of a “pool” of employees from whom you will choose those to be made redundant is key to ensuring a fair basis for selection. The pool should include all employees carrying out the same work, but consideration should also be given to whether it may be appropriate to widen the pool to include employees whose work is similar to, or interchangeable with, those employees. Where redundancies are to be made across multiple sites, consideration should also be given to whether pools should be identified on a site-by-site basis, or across sites according to job category.

Always identify an appropriate pool first – unless the employee carries out a truly unique role, or the business is to close completely, and all roles made redundant.

Selection criteria

Employers should then use objective criteria when selecting employees for redundancy from the pool.  These criteria should be as objective and as measurable as possible. Examples of selection criteria include:

  • Skills, qualifications and training
  • Greater experience in certain tasks and/or projects
  • Standard of work and job performance
  • Disciplinary record
  • Attendance (taking care to discount any disability-related or pregnancy/maternity-related absence)
  • Length of service (taking care in respect of female employees who have had career breaks to have children or employees who are younger as this may lead to indirect sex or age discrimination claims).

The safest method is to use a combination of criteria applied equally to each employee being considered. By far the best criteria are skills, knowledge, experience in particular tasks/projects, and performance. This is because these criteria can be based on objective metrics such as past performance appraisals, past experience in specified areas, and professional qualifications, and are less likely to be found to be discriminatory. For instance, evaluating employees based on their ability to work longer or more flexible hours could inadvertently discriminate against those who rely on childcare arrangements to facilitate their work commitments.

Every precaution must be taken to ensure that the selection criteria are objectively evaluated and consistently applied with fairness. Assessment should ideally be conducted by individuals possessing direct familiarity with employees’ performance and duties, and thorough records of the process should be maintained, including using standardised scoresheets.

You do not need any selection criteria if the employee carries out a unique role and is therefore the only employee logically who is at risk of redundancy.

How do I run a redundancy consultation process?

If there are less than 20 redundancies to be made, then a fair individual redundancy consultation process is likely to require:

  • An initial group consultation meeting with all affected employees
  • Individual consultation meetings (at which it is recommended that employees be given the opportunity to be accompanied by a colleague or trade union representative)
  • Confirming the decision in writing and giving a right of appeal
  • Holding an appeal hearing.

These steps are a summary and there are other factors that must be addressed at each stage. Additional meetings or steps may be required depending on the circumstances.

The key to running a fair consultation process is to ensure it takes place whilst the proposals are at a formative stage. The employees must be given a genuine opportunity to influence the outcome. In practice, this means that they must be able to challenge the need for redundancies, challenge the pools for selection and selection criteria, and challenge their selection for redundancy.

The consultation must also consider potential ways that redundancies might be avoided, and the employee should be encouraged to make suggestions for avoiding redundancies, such as job sharing or working reduced hours, which you must reasonably consider.

What are my obligations around offering alternative employment?

Before proceeding with any redundancies, you must consider whether there are other suitable jobs available. This includes considering alternative employment in any associated companies, and roles with both higher or lower status or pay. You do not need to create alternative employment where no vacancies exist, but you must have considered the possibility of alternative employment. If a role is genuinely not suitable for a particular employee, then you are under no obligation to offer it. However, if the role is one that the employee could do if they received a reasonable amount of further training and support, then it is likely to be considered suitable.

If there are more employees are selected for redundancy than there are available vacancies, it is permitted to hold competitive interviews to select the successful candidate. It is important to remember that employees on maternity leave have special protection, which includes giving them priority for suitable alternative vacancies without the need for an interview, and we recommend seeking specialist legal advice in such circumstances. To help with this, ACAS, in collaboration with the Equality and Human Rights Commission, has released guidance titled ‘Managing Redundancy for Pregnant Employees or Those on Maternity Leave.’

When alternative employment is available, you must offer employees a 4-week trial period in the new job, which can be extended by agreement (for example, to allow any job-related training to take place). If the employee decides the new role is not for them, their employment will terminate on grounds of redundancy. If an employee unreasonably refuses an offer of suitable alternative employment they will lose their right to a statutory redundancy payment. 

What should I do about voluntary redundancy?

Offering voluntary redundancy can help to reduce the number of disaffected employees and therefore the risk of claims. It can also save time and resources by reducing the number of employees with whom you will need to conduct a full consultation process.

As an incentive to encourage volunteers, you should offer an enhanced redundancy package over and above what they would get if they were to be made compulsorily redundant (i.e. more than their statutory redundancy payment (or enhanced redundancy payment if they are contractually entitled to one) and notice pay).

You should not put any pressure on employees to take voluntary redundancy. You should also make clear that not all applications for voluntary redundancy will be accepted, because there may be strategic reasons for not wanting to lose particular people.

How much tax do people pay on redundancy packages?

Up to £30,000 of any statutory redundancy payment, or enhanced redundancy payment (inclusive of statutory redundancy pay) may usually be paid tax free. Please note – you cannot include notice pay in an enhanced redundancy payment to avoid paying tax on the notice pay.

Similarly, payments in respect of holiday pay, unpaid wages and any company benefits like commission and bonuses will be subject to tax and national insurance in the usual way.

In some cases, it may be advisable for a voluntary redundancy package to be formalised under a settlement agreement between the employee and the company. A voluntary redundancy still amounts to a dismissal in law and employees taking voluntary redundancy can still bring an employment tribunal claim if they later become disaffected. A settlement agreement will prevent such claims.

What are the risks?

If you fail to pay an employee’s statutory redundancy payment where they are entitled to one, they may present a claim to the employment tribunal.

If you fail to follow a fair redundancy procedure, or the redundancy is otherwise unfair, the employee may also claim unfair dismissal if they have over two years’ service.

If their selection for redundancy is discriminatory (e.g. because they were on maternity leave or they were selected for a poor attendance record, but their absences were related to a disability), they may also bring a claim for discrimination.

Outside of legal risks, if you have failed to pay attention to the details, such as the timing of announcements, communications with those at risk and so on, negative PR could adversely impact your business and its external profile.

Further help

This article provides a snapshot of the issues to consider when contemplating making employees redundant. For advice and support on implementing redundancies in your particular business, you can contact me to discuss how we can assist further.

Fiona Morgan is a senior employment lawyer with over 17 years’ experience in advising a diverse range of corporate clients on employment law issues.