This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
A comprehensive guide to the differences between redundancy and dismissal under employment law in England and Wales, explaining legal definitions, procedures, employee rights, tribunal claims and practical distinctions between these two reasons for ending employment.
In employment law for England and Wales, redundancy and dismissal are both reasons why an employee's contract of employment may end, but they arise in very different legal contexts with different consequences for both employers and employees. Understanding the distinction helps employees know their rights and employers to comply with legal obligations, reducing the risk of claims before an employment tribunal. This article explains how redundancy and dismissal differ, what legal tests apply, employee entitlements, and common issues that arise in practice.
What Redundancy Means
A redundancy occurs when an employee's dismissal is attributable mainly to the employer's reduced need for employees to do particular work. The statutory definition is set out in section 139 of the Employment Rights Act 1996. It includes situations where:
- the employer has closed the business or the workplace;
- the employer no longer needs employees to carry out specific work; or
- the employer no longer needs employees to do that work in the place where the employee was employed.
Redundancy is a form of dismissal by operation of law. It reflects a change in the employer's operational requirements, not the conduct or performance of the individual employee.
What Dismissal Means
Dismissal is a broader concept encompassing any situation where the employer brings the employment contract to an end. Under the Employment Rights Act 1996, an employee is dismissed if the employer terminates the contract with or without notice or the employee resigns in circumstances that amount to a dismissal.
Dismissals can occur for various reasons, including:
- Misconduct – behaviour that breaches workplace rules;
- Poor performance – failure to meet performance standards;
- Capability – inability to perform the job due to health or skill limitations;
- Other substantial reasons – business needs or breakdown in trust;
- Redundancy – as a specific statutory category.
Unlike redundancy, many dismissals relate to the individual employee's conduct, performance or contractual matters.
Core Differences Between Redundancy and Dismissal
Reason for Ending Employment
Redundancy arises because the job itself is no longer needed. If the employer genuinely has fewer requirements for a type of work, the employment may end for this reason.
Dismissal for other reasons arises because of something about the employee's behaviour, performance, capacity, or another reason related to the person rather than the job. For example, repeated misconduct or long-term sickness can lead to dismissal.
Process and Procedures
For redundancy, employers must follow a fair process, including:
- establishing that a redundancy situation exists;
- using fair and objective selection criteria where more than one employee is at risk;
- consulting with employees about the proposals and exploring alternatives (including redeployment where possible);
- providing appropriate notice and redundancy pay where the employee qualifies.
For dismissal for performance or conduct, employers must follow fair disciplinary or capability procedures as set out in the Acas Code of Practice, including investigation, meetings, warnings, and the right to appeal, unless the conduct is so serious that dismissal without notice (gross misconduct) is justified.
Entitlements on Termination
In redundancy, employees with at least two years' continuous service (prior to reforms making dismissal rights available after six months from 1 January 2027) are generally entitled to statutory redundancy pay in addition to notice pay and accrued holiday pay.
In contrast, in a dismissal for conduct or performance, there is no statutory redundancy payment. Employees only receive notice pay (or payment in lieu of notice) and accrued holiday pay, unless dismissal also triggers an award for unfair dismissal in tribunal proceedings.
Burden of Proof and Legal Tests
Where an employer relies on redundancy, they must show that there was a genuine redundancy situation and that the process was fair. Failure to demonstrate this can lead to a claim of unfair dismissal or even discrimination if prohibited criteria influenced selection.
For non-redundancy dismissals, the employer must show they acted reasonably in all circumstances in dismissing the employee for the particular reason. In tribunal proceedings, the reasonableness of that decision and the process followed will be assessed according to established legal standards, informed by case law and the Acas Code.
When a Redundancy May Also Be an Unfair Dismissal
Redundancy is not automatically fair simply because the job is no longer needed. An employee may bring an unfair dismissal claim if:
- there was no genuine redundancy situation;
- the selection process was discriminatory or arbitrary;
- the employer failed to consult meaningfully;
- the employer did not seek suitable alternative employment.
In such cases, a tribunal may award compensation for losses including notice pay, basic award (similar to redundancy pay), and a compensatory award.
Other Types of Dismissal
Dismissal can also be categorised as:
- Constructive dismissal, where an employee resigns because of the employer's conduct breaching the contract;
- Wrongful dismissal, involving breach of contract terms (e.g. failure to pay notice);
- Automatic unfair dismissal, where the reason for dismissal is linked to a protected act or characteristic (e.g. pregnancy, whistleblowing).
These are distinct from redundancy, even though some may occur alongside a redundancy process if the employer's behaviour is improper.
Practical Examples
- Redundancy example: A retailer closes one branch due to declining sales, reducing the number of sales assistants required. Employees in that branch are made redundant with consultation and redundancy pay where eligible.
- Dismissal example: An employee repeatedly breaches company safety protocols. After warnings and a disciplinary process, the employer dismisses the employee for misconduct. There is no entitlement to redundancy pay, but the employee may claim unfair dismissal if the process was flawed.
Time Limits for Claims
Employees who believe a dismissal was unfair generally must initiate proceedings within three months less one day from the effective date of termination, after engaging in Acas Early Conciliation. Time limits and procedures may change with evolving employment law reforms.
Key Takeaways
Redundancy and dismissal are both reasons for the termination of employment, but they differ fundamentally in reason, process and employee entitlements. Redundancy arises from the employer's reduced need for work of a particular kind and can attract statutory redundancy pay where eligibility criteria are met. Dismissal for conduct, performance or other reasons relates to the individual employee's behaviour or capability and does not create an automatic right to redundancy pay. Both processes must be carried out fairly; failure to do so can lead to claims for unfair dismissal or discrimination before an employment tribunal.
