Guide
Manage redundancies correctly
How to make employees redundant fairly and legally. Covers collective consultation requirements, fair selection criteria, statutory redundancy pay calculations for 2025/26, and Northern Ireland differences.
Making employees redundant is one of the most difficult tasks for any employer. Get it wrong, and you face unfair dismissal claims, protective awards, and reputational damage. Get it right, and you treat people fairly while protecting your business.
This guide covers the legal requirements for redundancy in the UK:
- Collective consultation (20+ redundancies)
- Fair selection criteria
- Statutory redundancy pay calculations
- Northern Ireland differences
Follow ACAS guidance throughout the process. Even individual redundancies require a fair procedure.
Collective consultation requirements
If you're proposing to make 20 or more employees redundant at one establishment within 90 days, you must collectively consult. This is a legal requirement - not optional.
The 90-day rolling period
The 90 days is a rolling period, not a fixed window. If you make 10 redundancies in month 1 and 15 in month 2 at the same establishment, you've triggered collective consultation for the second batch.
Who to consult:
- Trade union representatives (if recognised)
- Otherwise, elected employee representatives
- You must allow time for representatives to be elected
Consultation must be genuine and meaningful - not a box-ticking exercise after decisions are made.
HR1 notification
You must notify the Secretary of State (in practice, the Insolvency Service) using Form HR1 before any redundancies take effect:
- 20-99 redundancies: At least 30 days before first dismissal
- 100+ redundancies: At least 45 days before first dismissal
Failure to notify is a criminal offence with an unlimited fine. Send the form even if you're still consulting.
Fair selection criteria
Your selection criteria must be objective, measurable, and non-discriminatory. Using unlawful criteria makes dismissals automatically unfair - employees can claim regardless of length of service.
Building a fair selection process
Step 1: Define the pool
Include all employees doing similar work or with interchangeable roles. Don't artificially narrow the pool to target specific individuals.
Step 2: Choose objective criteria
Good criteria are based on documented evidence:
- Skills and qualifications (can be verified)
- Performance ratings from existing appraisals
- Disciplinary record (live warnings only)
- Attendance record (excluding protected absences)
Step 3: Apply criteria consistently
Use a scoring matrix. Have more than one manager score each employee. Document everything.
Step 4: Consider alternatives
Before confirming redundancy, consider suitable alternative employment. Offer a 4-week trial period in alternative roles.
Statutory redundancy pay (2025/26)
Employees with 2+ years' continuous service are entitled to statutory redundancy pay. You can pay more, but not less.
How to calculate redundancy pay
Use the GOV.UK redundancy pay calculator for accuracy. The formula is:
- Under 22: 0.5 week's pay per year of service
- Age 22-40: 1 week's pay per year of service
- Age 41+: 1.5 weeks' pay per year of service
The calculation uses age during each year of service, not just current age. Maximum 20 years counted.
Tax treatment: First £30,000 of redundancy pay is tax-free. No National Insurance is payable on statutory redundancy pay.
Penalties for getting it wrong
Failing to properly consult can result in protective awards at tribunal.
Other risks
- Unfair dismissal claims: Compensatory award up to £118,223 (2025/26 cap, removed from January 2027) plus basic award
- Discrimination claims: Unlimited compensation for discriminatory selection
- Criminal penalties: Unlimited fine for failing to notify (HR1)
- Reputational damage: Publicity from tribunal cases
Northern Ireland differences
Redundancy law in Northern Ireland is covered by separate legislation, though the principles are similar.
Key differences for NI employers
- Collective redundancy notification goes to Department for the Economy, not the Insolvency Service
- Different HR1 form and process
- Same statutory redundancy calculation formula and week's pay cap
- Employment tribunals operate under Industrial Tribunals (NI) rules
Redundancy process step by step
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Establish genuine redundancy situation
Document the business reason: closure, reduced need for employees, restructuring. Redundancy must be genuine - not a cover for performance management.
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Check if collective consultation applies
If proposing 20+ redundancies at one establishment within 90 days, you must collectively consult. Start consultation and submit HR1 form.
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Define the selection pool
Include all employees doing similar or interchangeable work. Don't artificially narrow to target individuals.
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Agree selection criteria
Choose objective, measurable, non-discriminatory criteria. Weight by business need. Document the rationale.
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Apply criteria and score employees
Use a scoring matrix. Have multiple managers score independently. Keep all documentation.
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Consult with at-risk employees
Meet individually. Explain the situation, why they're at risk, and their score. Listen to their representations.
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Consider suitable alternative employment
Before confirming redundancy, offer any suitable alternative roles with a 4-week trial period.
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Confirm redundancy and pay notice
Give written notice. Pay statutory (and any contractual) redundancy pay, notice pay, and accrued holiday.
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Provide time off for job hunting
Employees with 2+ years' service are entitled to reasonable paid time off to look for work or arrange training.