Redundancy and Breach of Contract

Redundancy is a specific form of dismissal in UK employment law that arises when an employer needs to reduce the workforce because certain work is no longer required. A breach of contract occurs when an employer fails to fulfil obligations under the employment contract, such as redundancy terms, notice periods or pay. This article explains how redundancy interacts with breach of contract, the legal rights involved, common disputes, remedies, and practical steps employees and employers can consider.

What Is Redundancy?

Under UK law, redundancy happens when an employee's contract is terminated because:

• The employer ceases to carry on the business, or
• The need for employees to carry out work of a particular kind has ceased or diminished, or
• The place where the employee works is closed.

Redundancy is one of the potentially fair reasons for dismissal under the Employment Rights Act 1996. It is distinguished from dismissal for misconduct or performance.

Contractual and Statutory Redundancy Payments

Statutory Redundancy Pay

Employees with at least two years' continuous service are generally entitled to statutory redundancy pay. The amount depends on age, length of service, and weekly pay, subject to statutory caps. Employers may choose to offer this or incorporate it into a contractual redundancy payment.

Contractual Redundancy Pay

Some employment contracts provide enhanced redundancy payments above the statutory minimum. If an employer does not pay this when due, the employee may have grounds for a breach of contract claim.

Breach of Contract in Redundancy Situations

A breach of contract claim can arise if the employer fails to honour express or implied terms of the employment contract in connection with redundancy. Common examples include:

• Failure to pay contractual redundancy pay
• Failure to give the contractual notice period
• Failure to comply with redundancy procedures promised in the contract
• Unfulfilled promises made during consultation

Express vs Implied Contract Terms

• Express terms are those written or clearly agreed (e.g., notice period, redundancy pay scale).
• Implied terms are not specifically written but arise from custom and practice or legal necessity (e.g., duty of mutual trust and confidence). Terms implied by consistent practice can create enforceable rights, including in redundancy contexts.

Case Example: Voluntary Redundancy Promise

In Lynam v Birmingham City Council, the employer promised voluntary redundancy but later made compulsory redundancies, which was held to be a breach of contract where such a promise formed part of the contractual obligations.

Legal Framework for Claiming Breach of Contract

Jurisdiction to Bring a Claim

Employees can bring breach of contract claims before an Employment Tribunal under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994. This enables claims for damages or sums due under an employment contract to be heard in the tribunal, provided the claim arises or is outstanding at termination of employment.

Time Limits

Claims for breach of contract arising from redundancy must generally be presented to an Employment Tribunal within 3 months less one day of the effective date of termination, unless a grievance process extends this period. If a claim is pursued in the civil courts instead, longer limitation periods (usually six years) may apply, but tribunal jurisdiction is primarily relied upon for employment-related claims.

Notice Periods and Contractual Rights

Employers must provide a notice period when terminating a contract for redundancy. Statutory minimum notice periods are:

• At least 1 week's notice for employment between 1 month and 2 years
• 1 week's notice for each year of service from 2 to 12 years
• Up to 12 weeks' notice for 12 or more years of service

If the contract offers a longer notice period, the employer must honour that contractual term. Failing to do so may give rise to a breach of contract claim.

Interplay Between Redundancy, Unfair Dismissal and Breach of Contract

Failing to follow a fair redundancy process (e.g., inadequate consultation or discriminatory selection) can lead to a claim for unfair dismissal as well as, or instead of, a breach of contract claim. Employers must demonstrate they acted fairly and reasonably in both substance and procedure.

Remedies and Compensation

Tribunal Awards

Employment tribunals can award damages for breach of contract, typically capped (for contractual redundancy pay claims) by statutory limits such as those in the 1994 Order (often capped around £25,000 for breach of contract awards, exclusive of statutory redundancy pay). Statutory redundancy pay claims are separate and not counted toward that cap.

Other Remedies

Where a contractual breach is sufficiently serious, an employee may resign and pursue a constructive dismissal claim. In such cases, the resignation must be a direct consequence of the employer's breach.

Step‑by‑Step Guide for Employees

1. Review your employment contract to identify express redundancy terms.
2. Check statutory rights, including redundancy pay and notice entitlements.
3. Document all communication during redundancy processes and consultations.
4. Raise a formal grievance with your employer if contractual or statutory rights are breached.
5. Seek early advice from a solicitor, trade union, or organisations such as ACAS or Citizens Advice.
6. Consider tribunal claims if internal resolution fails, ensuring you meet strict time limits.

Step‑by‑Step Guide for Employers

1. Follow statutory redundancy procedures, including fair selection and consultation.
2. Adhere to contractual terms related to redundancy and notice.
3. Document decisions and offers of alternative employment where applicable.
4. Seek legal advice early to mitigate risk of breach of contract or tribunal claims.

Common Questions

Can I claim both statutory and contractual redundancy pay?
Yes. Employers may owe both statutory and contractual redundancy pay. A tribunal may award contractual pay up to the breach of contract cap, and statutory redundancy pay separately.

What if my employer offered alternative work?
If alternative employment is reasonably suitable and you unreasonably refuse it, you may forfeit some redundancy rights, including statutory redundancy pay.

Is a promise made in consultation legally binding?
A clear, documented promise that is incorporated into the contract (express or implied by custom and practice) can form a contractual obligation; failure to honour it may be a breach.

Key Takeaways

Redundancy and breach of contract are distinct but interconnected areas of UK employment law. Redundancy must be handled according to statutory and contractual requirements. Where an employer fails to comply with these terms-such as not paying contractual redundancy, not providing proper notice, or breaking clear promises-employees may have grounds for a claim for breach of contract in an Employment Tribunal. Timely action, careful documentation, and understanding of rights and processes are crucial for both employees and employers.

James William Steven Parker

James is the founder of UKLegalGuides.com and a former agent at the Ministry of Justice (UK). With a background in processing legal claims, he launched this platform to make the laws of England and Wales accessible to everyone.