Last updated: 20th May 2021
Authoritative guidance on your redundancy rights and 18 things to know in order to protect them.
Have you recently been made redundant, been told by your employer you are at risk of redundancy, or been offered a settlement agreement? If so, it is essential you understand your redundancy rights as you may have a claim to compensation for unfair redundancy at Employment Tribunal.
Being made redundant should always be used as a last resort by employers and there are clear procedures they need to follow not to fall foul of UK employment law.
There are many things to be aware of when it comes to redundancy. With this authoritative legal guide we will cover them. You will understand your rights, when a redundancy is deemed unfair, what you can do about it, whether there are alternatives, the procedures that should be followed by your employer, and ultimately what you are entitled to.
In other words, if their need for your role ends, or they simply need less people to do the role, whether generally or only at the place where you work, they can start the redundancy process.
Can you be made redundant unfairly?
Yes you can.
If you have more than 2 years’ employment, you have the general right not to be dismissed unfairly.
This means that, if your employer has made you redundant unfairly, then you have the right to bring a claim against them for unfair dismissal. (s.98 Employment Rights Act 1996).
In broad terms there are two main ways to prove that a redundancy dismissal is unfair.
If you can prove that your role is not redundant – ie that the redundancy is a sham. Some examples:
- If you can prove that your employer has taken on somebody else to do your role, or they have advertised your role externally – this might be enough to prove that there is no redundancy.
- Alternatively, if your employer simply changes the job title, but the role remains the same, this could also be used as evidence that the redundancy is a sham.
- If your employer makes you redundant from a part-time role because it wants the role to be done on a full-time basis – this can be used to prove that there has been no ‘cessation’ or ‘diminution’ in their need for your role – quite the opposite, it proves that there is a greater need!
If you can prove that the redundancy procedure that was followed was flawed. More on redundancy procedures below.
Examples of unfair reasons
- Any kind of discrimination, including age, race, gender and maternity. (More information on discrimination);
- Trade union membership;
- Working pattern (for instance part time or flexible working);
- Exercising a statutory right;
- Health & Safety issues;
- Taking lawful strike action;
- Jury Service.
What is a fair redundancy procedure?
There is no strictly defined procedure that your employer had to follow before making redundancies – i.e. it is not set in stone.
However, as with all other dismissal procedures, your employer has to ensure that the redundancy process is fair – and can stand up to scrutiny if reviewed by an employment tribunal.
The 1982 case of Williams and Ors v Compair Maxam Limited remains a leading authority as how your employer should approach making redundancies.
This case law was supplemented by the other leading case on reasonableness in redundancy cases, Polkey v A E Dayton.
These cases have established a fair procedure that employers are expected to follow when making redundancies.
What constitutes a fair procedure will depend upon the number of staff being made redundant and whether there is a need to pool employees, but the steps below are reasonably well established.
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What are the stages of redundancy?
Your employer should give you as much warning as possible about possible redundancies to all affected staff – not just those selected as ‘at risk’.
Your employer should then select those employees which it wished to place ‘at risk’ of redundancy. In order to do so your employer may:
- Need to select a group, or pool, or employees from which to select redundant employees.
- Establish objective selection criteria to be applied to all employees within the pool;
- Select redundant employees in accordance with those criteria – ie apply their selection criteria in a fair way.
Your employer should also engage in meaningful individual consultation with you and all other ‘at risk’ employees. Sometimes your employer will consult with all employees in the pool. Sometimes your employer will only consult with those employees who are ‘at risk’ after they have applied the selection criteria.
If there are more than 20 employees affected by the redundancy, your employer should engage in collective consultation.
Your employer should consider whether there is any alternative employment that you could be offered.
Finally, in order to ensure fairness, your employer should give you the right to appeal your dismissal.
“.. The basic approach is that as much as is reasonably possible should be done to mitigate the impact on the workforce and to satisfy them that the selection has been made fairly and not on the basis of personal whim”
This is a quote from the Employment Judge at the Employment Tribunal in the Williams case (above) and very concisely sums up your employer’s obligations.
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Taking these stages in turn:
1. Early Warning
It is important that your employer gives all staff (not just those at risk) early warning of possible redundancies. This often takes place at a group meeting.
This allows you to take stock and prepare for the redundancy process.
Being made redundant can be quite an upheaval, and it is only right that you are given the chance to understand the reasons why your employer is making redundancies, in order that you can all respond to them, and also make plans for the future.
At this meeting, your employer should explain the reasons why it is considering making redundancies, how many redundancies it is considering making and what process it intends to follow.
After this early warning meeting, your employer should write to the specific employees who have been identified at risk and to set out what the next steps will be.
2. Who to place at risk?
Sometimes this is simple task for your employer – for example, if there is only role that is being deleted, then only the person doing that role would be put at risk.
Alternatively, if a whole department is shutting down, then it may be justifiable to put all employees within that department at risk.
In other cases, for example if your employer needs to reduce the headcount in a department, they would need to define a pool of employees and to apply a selection criteria to that pool, in order to identify which employees within the pool (the lowest scorers) are at risk.
The pool is the grouping of employees from which your employer selects the employee/s who will be made redundant.
It is therefore very important that your employer gets the pooling right.
If they don’t consider a pool at all, this can lead to unfair dismissals.
If the pool is too narrow (in other words, they don’t include all the staff who should be in it) then this can lead to unfair dismissals.
And if the pool is too wide, this can also lead to unfairness.
So how should the pool identified?
Common sense should prevail.
The pool will normally consist of employees doing the same or similar work, at the same level of seniority.
For example, if a firm of accountants had 5 junior management accountants and needed to reduce headcount to three, then naturally all 5 junior management accountants would be put in the pool.
The pool may also consist of employees who do interchangeable work and / or who cover for each other.
For example, a manufacturing firm had four admin staff which it needed to reduce to two. Each member of staff had different day to day tasks, but they could all cover each others’ roles, or could easily be trained to do them. In this case, it would again be reasonable to put all 4 staff in the pool.
Or your employer may conclude that you should be put in a pool of one if you are the only person doing the role that needs to be lost.
In practice, your employer must prove that the pool that it chose is reasonable (the tribunal will apply the ‘range of reasonable responses’ legal test).
If it can’t then any subsequent dismissal is likely to be ruled unfair.
Point of interest
Question: Does your employer have to include all people who do the same job as you in the pool, even if they work at a different site?
Answer: Possibly. It would depend on the circumstances and in particular, how close the sites were to one another.
Once your employer has identified the pool, it must consider how to fairly choose which employees to make redundant.
The simplest way to do this is to apply objectively verifiable selection criteria to each of them.
In other words, give each one a score that can, if necessary, be checked independently.
For example, criteria such as ‘attitude’ or ‘teamwork’ is very subjective - one person may consider your attitude as good, whereas someone else may regard it as bad.
Your employer should therefore try to avoid using such malleable criteria in favour of criteria which can be verified, such as:
- or disciplinary record.
Tests and Assessments
Another method of selecting people from the pool can include tests or employee assessments, whereby each candidate is set the same test and the lowest scorers are made redundant.
Competitive interviews are also quite often used although, again, these are risky as they are subjective and open to abuse by employers – it is pretty easy for your employer to say that its preferred candidate performed the best at interview – and very difficult to independently verify.
It should go without saying that if your employer’s selection criteria is discriminatory will render any subsequent dismissal unfair.
For example, if your employer scores you down because you have had too much time off work (attendance) but all or most of your absences have been because you needed treatment for cancer (a disability) then this would be discriminatory and unfair.
Another example would be if your employer made you redundant because if your part-time status. This would constitute a breach of the The Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 and would be unfair.
Another dangerous criteria for your employer to use would be ‘last in, first out’ (or LIFO) as this can be discriminatory on the basis of age and/or sex.
Apply Criteria Fairly
Once your employer has chosen the criteria – it must apply it fairly.
However, we see that, quite often, employers fail to do this.
For example, if your employer gives you an unrecognisably low score for ‘skills’, when you are one of the most skilled employees in the pool - it may be possible to prove that they have applied the selection criteria unfairly.
Tribunals are reluctant to get too involved in the scores given to employees during the selection process (it is not the tribunal’s job to re-score you), but they do have the power to decide that your redundancy is unfair if the score that you have been given are not justified.
You should also be given the opportunity to consult with your employer with regards to the scores that you are given. If you are not given your scores or not allowed to challenge them, this lack of transparency can be used to prove unfair dismissal.
4. Collective Consultation
In summary, your employer must engage in a process called collective consultation where they must consult with representatives who have been appointed on behalf of the employees.
The obligation only arises if your employer proposes to dismiss 20 or more employees from one establishment (ie one office or one factory) and only if they want to dismiss you within a 90 day period.
If your employer fails to do this, then they can be liable to pay you (and your colleagues) a protective award of up to 90 days pay.
Your employer’s obligation to engage in meaningful consultation has been enshrined for many years.
Consultation means meaningful discussion.
Your employer must hold a series of meetings with you in which they have a genuine dialogue with you about the reasons that they are considering making redundancies and allow you to have your say – not just on the business rationale behind the redundancies, but also to give you the opportunity to comment on the selection criteria and to challenge their application of it. Without this, it will be very difficult for your employer to prove that your dismissal was fair.
After all, having discussions with you prior to making you redundant isn’t too difficult to organise.
The case of Poat v Holiday Inn Worldwide makes the point very well – in which the Employment Appeal Tribunal pointed out that it was:
“courteous and humane to consult people when you are thinking of making them redundant”.
Its also worth mentioning that consultations that are “insensitive and perfunctory” may also be considered to be defective, and capable of leading to unfair dismissal.
This was case in the 2016 Employment Appeal Tribunal case of Thomas v BNP Paribas Real Estate, where a manager of 40 years service was made redundant in a very harsh manner which lead to a finding of unfair dismissal.
Even very small employers are not excused from this obligation.
Despite this, we still find that many employers believe that it is acceptable to make staff redundant without having any consultation meetings.
It is worth pointing out at this juncture that, whilst you do not have the right to be accompanied to redundancy consultation meetings, it is generally considered to be good practice for your employer to allow you to be accompanied (by a colleague or a trade union representative).
Point of interest
Whether your employer consults with all people in the pool prior to applying a selection criteria, or afterwards, with the lowest scorers is a matter for them. We would suggest that it would be preferable for your employer to (1) hold initial consultation meetings with all staff in the pool (2) then to apply the selection criteria and (3) to then hold second consultation meetings with the lowest scorers.
5. Suitable Alternative Employment
Before making you redundant, your employer should make reasonable efforts to look for alternative employment for you within the organisation.
This stands to reason as it would clearly seem unfair for your employer to dismiss you at the same time as hiring someone in to do a job that you would have been willing and able to do.
Your employer should therefore take reasonable attempts to identify suitable alternative employment for you, not only when you are given notice of redundancy but also whilst you are working your notice period.
You should also make it clear to your employer if you are willing to accept a more junior position as, if your employer is not aware of this, they will not widen their search for such positions.
If your employer decides to dismiss you, it would be well advised to allow you to appeal the decision (although case law suggests that a failure to allow an employee to appeal against a redundancy dismissal doesn’t automatically render it unfair).
Your appeal should be dealt with by someone who has had no involvement in the original decision to dismiss.
Your employer should provide you with a reasonable amount of time to appeal – they tend to ask you to let them have your letter of appeal within 5 days of their decision.
Overall, if your employer has failed to follow a fair procedure (as outlined above) then a tribunal may conclude that the decision to dismiss you fell outside of the “range of reasonable responses” available to them (this is a well established legal test of dismissal fairness) and therefore rule that your redundancy dismissal was unfair.
What do I do if I think my redundancy is unfair?
Firstly, you should analyse your redundancy and work out why you believe it is unfair.
Is it because your role is not actually redundant? Is it because your employer has not followed a fair procedure? Or both?
Once you have formulated your argument, you should write it down and use your arguments as the basis of your appeal against your redundancy.
Alternatively, you may wish to take legal advice before you appeal (and even ask a solicitor to help you draft the appeal letter).
Ultimately, it you are unable to persuade your employer to reinstate you*, you will need to start the employment tribunal process within 3 months (less one day) from the original dismissal date (NOTE: not the date of the appeal decision). You may want to ask a solicitor to assist you with the employment tribunal process.
*Do you want your job back?
The outcome that you are trying to achieve by appealing is reinstatement – so if you don’t want your job back you should think twice about whether to appeal
How much compensation can I get for unfair redundancy?
However, there is one important exception – in redundancy dismissals, you don’t get a basic award, as this is cancelled out by the redundancy payment that you will have received.
In fact, you will have to give credit for all sums paid to you upon redundancy (including any enhanced redundancy payment (more than statutory), ex gratia payments or notice payments (PILON).
As such, how much you get in compensation is therefore very much dependant on how long you are out or work after you are dismissed – because you will only receive a compensatory award.
Employment tribunal judges have the right to award you a sum that they consider to be just and equitable in all the circumstances of the case.
What this normally means is that, if you win your case, the judge will try to put you back into the position you would have been in had you not been dismissed, so he/she will normally award you the equivalent to your lost earnings (subject to mitigation and the statutory maximum of 1 year’s gross earnings) until you get another job.
In addition to this, if you have lost out on bonuses or commission due to the redundancy, you could be awarded these as well.
What is the minimum consultation period for redundancy?
There is no minimum period of consultation, however the shorter the period, the easier it is to argue that it was meaningless, and therefore unfair.
There has been some case law to suggest that a week should be regarded as the ‘bare minimum’, but normally, consultations last 2 – 3 weeks at least.
Can I be made redundant without consultation?
If you are dismissed without any consultation, your dismissal is likely to be unfair.
What is a redundancy settlement agreement?
Instead of going through a time consuming redundancy process, your employer may offer you a settlement agreement.
A settlement agreement is a document which sets out the basis upon which your employment has been brought to an end on terms acceptable to both parties.
In a redundancy rights context, if you signed a settlement agreement, you would normally receive more than your basic statutory redundancy pay as you are also agreeing to sign away your legal rights.
The main advantage of settlement agreements is that they allow you and your employer to achieve a clean break. Your employer benefits as they can be agreed quickly and without too much involvement of management and HR and you benefit as you get paid more than you normally would. You can also negotiate a favourable reference.
What are you entitled to when you are made redundant?
This depends on whether you are paid contractual redundancy pay or statutory redundancy.
Sometimes (although this is quite rare these days) your employment contract may contain a clause specifying that, upon redundancy, you are entitled to an enhanced package.
For example, you may be entitled to two full weeks’ pay for each year worked.
This can be compared to statutory redundancy pay which is paid in accordance with a set formula:
- Half a week’s gross pay for each full year you have worked there up to the age of 22;
- One week’s gross pay for each full year you have worked there between the ages of 22 and 40;
- One and a half week’s gross pay for each full year you have worked there aged 41 and above.
Having said this, a week’s gross pay is limited to £544 per week, as of April 2021.
And the maximum period that you can be paid for is 20 years.
So even if you have worked there for 25 years, your statutory redundancy calculation will be based on your last 20 years’ service.
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How much of redundancy is tax free?
The first £30,000. Which means, if you are being paid statutory redundancy pay, all of it (as the maximum statutory redundancy pay is £16,320 as at April 2021).
What is the minimum redundancy payment?
You are only entitled to a redundancy payment if you have worked for your employer for more than 2 years.
After this, your redundancy payment is simply based on your weekly pay (or an average of your weekly pay over the 12 weeks prior to your date that you received your redundancy notice).
There is no minimum redundancy pay as such, although the application of minimum wage to your salary would determine a minimum sum on which the redundancy calculation is based.
Is redundancy based on current salary?
Yes, it is based on your salary on the date you received notice of redundancy – more specifically on a ‘week’s pay’.
How you calculate a week’s pay is set out in 221-229 of the ERA 1996.
If you are on a salary, you would normally divide your gross salary by 52 to get a week’s pay.
If your pay varies, broadly speaking, should add up your pay over the 12 weeks prior to receiving your redundancy notice and divide this figure by 12, to get the average.
Can I be made redundant if my role still exists?
You redundancy rights mean that you can only be made redundant of your role is no longer needed, or your employer needs less people to do your role.
If your role still exists, but your employer simply needs less people to do it, then you could be made redundant if you score lower than your colleagues after the selection process.
Are you entitled to holiday pay if made redundant?
Yes you are. When you are made redundancy, your employer should tot up how much unused holiday pay you accrued, and will pay this to you at the same time as they pay your redundancy money.
Whereas your redundancy pay will be tax free, your holiday pay will be subject to tax and national insurance in the normal way.
Can my employer refuse to pay redundancy?
As long as you have worked there for more than 2 years, no (normally – see below).
However, there is one way that your employer cam avoid paying you redundancy pay and that is if you have refused to accept an offer of suitable alternative employment.
In other words, if there is another job for you to be slotted into and you refuse, then your employer may decline to pay you redundancy pay.
Whether it is justifiable for you to have refused the role depends upon whether the role was suitable.
It will normally have to be the same salary and seniority. If it involved a drop in money or status, that would indicate that the role is not suitable and you should be able to decline it and still get redundancy.
In these circumstances, if your employer has refused to pay you, you can bring a claim against them in the employment tribunal under s.164 of the Employment Rights Act and a judge will decide whether you are owed it or not.
Can you raise a grievance during redundancy?
Yes. You can raise a grievance against your employer at any time, but whether they choose to deal with it after your employment has come to an end is up to them.
Normally, however, if you are unhappy about the redundancy, you would appeal the decision rather than raise a grievance.
What happens if a company cannot pay redundancy?
If your employer won’t pay, then you can apply to the tribunal for an order that they pay and then enforce this against them (for example by sending in the bailiffs).
However, if they cannot pay (because they don’t have the money), then this might mean that they are insolvent, in which case, you can apply to the Redundancy Payments Service (RPS) who will assess your claim and, if you are eligible, pay you your statutory redundancy (possibly in addition to notice pay, holiday pay and some outstanding salary (8 weeks max) from government funds.
Does my employer have to consider bumping?
Bumping is the practice of dismissing a person (often a person with less service) whose role was not redundant in order that an at risk employee can be deployed to their role instead.
There is no obligation on an employer to consider bumping – it is quite an old fashioned practice and can have a detrimental effect on employee relations and morale.
However, your employer can consider bumping as part of its redundancy procedure.
Whether the decision to bump or the decision not to consider bumping renders a dismissal unfair will depend on then circumstances of each case.
Alternatives to Redundancy
It good practice for your employer to consider alternatives prior to moving forward with redundancies and during the process itself.
Some alternatives to redundancy:
- Asking whether anyone would be willing to volunteer for redundancy;
- Placing a freeze on recruitment or withdrawing job offers;
- Terminating agency or temporary staff;
- Seeing whether anyone would be willing to accept early retirement;
- Offering unpaid leave or sabbaticals;
- Reducing hours or pay or bonuses;
- Offering flexible working/job shares;
- Reducing overtime.
Such options are not compulsory, but form part of a fair and comprehensive procedure.
Redundancy and Pregnancy / Maternity
There are special rules which apply when making employees on maternity leave redundant.
We cover these rules in more detail in our pregnancy/maternity discrimination section, but in summary, if you have been selected for redundancy whilst on maternity leave, you have the right (over and above your colleagues who are not on maternity leave) to be considered for suitable alternate vacancies.
This is covered by s.10 The Maternity and Parental Leave etc. Regulations 1999.
What to do if you think that you have been made redundant unfairly
We have helped many people like you successfully win unfair redundancy dismissals. We have represented employees at Employment Tribunal across the UK and are ready and able to help you achieve success.
Our professional and approachable team have helped many people like you are available to speak to you today
For a quick, preliminary assessment of your potential claim, you can call our professional and approachable team on. 0800 756 6605.
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Tom Street qualified as a solicitor in 2003 and has over 20 years experience in employment and litigation law. He studied law at the University of Manchester before undertaking the legal practice course at the College of Law in Guildford, going on to complete his legal training at a firm in Chancery Lane, London. Once fully qualified, he moved to a niche litigation practice in the City of London.
In 2010, Tom set up his own legal practice, Tom Street & Co Solicitors and as part of this, in accordance with his strongly held objective to provide everyone with an easy pathway to justice he established the online portals Do I Have A Case? and Tribunal Claim. These websites are trading names of Tom Street & Co Solicitors.