What Is a Redundancy Dismissal Under Employment Law?

A redundancy dismissal is a type of termination of employment that occurs when an employer no longer requires an employee's role to be carried out. In UK employment law, redundancy is treated as a potentially fair reason for dismissal under the Employment Rights Act 1996, provided it is genuine and the employer follows a fair procedure.

Redundancy situations often arise during business restructuring, workplace closures, or reduced demand for specific work. However, not every dismissal labelled as “redundancy” is legally valid. Employment tribunals will examine both the reason for the dismissal and the process used.

Legal Definition of Redundancy

The statutory definition of redundancy is set out in the Employment Rights Act 1996. A dismissal is treated as redundancy if it falls within one of the following situations:

• The employer ceases or intends to cease carrying on the business in which the employee is employed
• The employer ceases or intends to cease carrying on business at the employee's workplace
• The requirements of the business for employees to carry out work of a particular kind have ceased or diminished

This means redundancy is focused on the role, not the individual. The job disappears or reduces in need, rather than the employee being selected for personal reasons.

When a Redundancy Dismissal Is Lawful

For a redundancy dismissal to be lawful, two key requirements must be satisfied:

1. Genuine Redundancy Situation

The employer must be able to demonstrate that a redundancy situation actually exists. Common examples include:

• Closure of a workplace or branch
• Introduction of automation reducing staffing needs
• Business restructuring or downsizing
• Reduced customer demand for certain services

If the role still exists in practice or is quickly replaced, the redundancy may be challenged as unfair.

2. Fair Dismissal Process

Even where redundancy is genuine, employers must follow a fair process. This typically includes:

• Consultation with affected employees
• Fair selection criteria (where multiple employees are at risk)
• Consideration of suitable alternative employment
• Proper notice and communication
• Right of appeal

Failure to follow a fair process can lead to a finding of unfair dismissal, even if redundancy is genuine.

Selection for Redundancy

Where an employer is reducing staff but not closing the entire business or department, selection becomes critical.

Fair Selection Criteria

Employers must use objective and non-discriminatory criteria such as:

• Skills and qualifications
• Performance records
• Attendance history (excluding protected absences)
• Disciplinary records

Unfair Selection Practices

Selection may be unlawful if based on:

• Pregnancy or maternity leave
• Trade union membership or activity
• Whistleblowing
• Protected characteristics under the Equality Act 2010

Such dismissals may lead to claims for automatically unfair dismissal or discrimination.

Consultation Requirements

Consultation is a key legal safeguard in redundancy situations.

Individual Consultation

Employers must consult with affected employees about:

• Reasons for redundancy
• Selection process
• Alternatives to dismissal
• Possible redeployment options

Collective Consultation

Where 20 or more employees are at risk within 90 days at one establishment, collective consultation rules apply. Employers must consult with:

• Employee representatives or trade unions
• For a minimum statutory period (depending on numbers affected)

Failure to comply can result in a protective award of up to 90 days' pay per affected employee.

Suitable Alternative Employment

Employers must consider whether suitable alternative roles exist within the organisation.

A role is considered suitable if it reasonably matches:

• Skills and experience
• Pay level (or is within reasonable variation)
• Working conditions and status

Employees on redundancy notice may be entitled to a trial period in alternative roles.

Refusal of suitable alternative employment may affect entitlement to redundancy pay.

Redundancy Pay Entitlement

Employees with at least two years' continuous service are generally entitled to statutory redundancy pay.

Statutory redundancy pay is based on:

• Age
• Length of service (up to a statutory cap)
• Weekly pay (subject to a statutory maximum limit)

Some employers offer enhanced redundancy packages under contractual or discretionary schemes.

Redundancy and Notice Pay

In addition to redundancy pay, employees are entitled to:

• Statutory or contractual notice pay
• Payment in lieu of notice (if applicable)
• Accrued but untaken holiday pay

Notice periods must comply with the employment contract or statutory minimums, whichever is greater.

When Redundancy Dismissal Becomes Unfair

A redundancy dismissal may be deemed unfair if:

• There is no genuine redundancy situation
• The selection process is biased or unreasonable
• Consultation is inadequate or absent
• Suitable alternative employment is ignored
• The employer fails to follow its own procedures

Tribunals assess fairness based on the “range of reasonable responses” test, considering whether a reasonable employer would have acted in the same way.

Wrongful Redundancy vs Unfair Redundancy

It is important to distinguish between:

• Wrongful dismissal (breach of contract): focuses on failure to give proper notice or contractual payments
• Unfair dismissal: focuses on the reason and fairness of the process

A redundancy dismissal may be lawful under contract law but still unfair under employment rights legislation.

Time Limits for Redundancy Claims

Employees generally must bring claims within:

• 3 months less one day for unfair dismissal claims
• 3 months less one day for redundancy-related claims linked to dismissal
• ACAS early conciliation is required before submitting a tribunal claim

Strict time limits apply, and delays can prevent a claim from proceeding.

Common Issues in Redundancy Dismissals

Fake or “Sham” Redundancies

A dismissal may be challenged where the employer:

• Replaces the employee shortly after dismissal
• Rehires under a different job title
• Uses redundancy to remove specific individuals

Discriminatory Redundancy Selection

Redundancy processes must not disadvantage employees based on protected characteristics under the Equality Act 2010.

Procedural Failures

Common procedural issues include:

• Lack of consultation
• Inadequate scoring systems
• Failure to consider alternatives

Key Takeaways

A redundancy dismissal occurs when an employer no longer requires an employee's role due to business closure, reduced demand, or restructuring. For the dismissal to be lawful, the redundancy must be genuine and the employer must follow a fair and transparent process, including consultation and consideration of alternative employment.

Employees may be entitled to statutory redundancy pay, notice pay, and other contractual entitlements. However, failures in procedure, selection, or consultation can make a redundancy dismissal unfair and subject to challenge in an employment tribunal.