Redundancy is when you dismiss an employee because you no longer:

• carry out the business they’re employed for
• carry out business in the place where they’re employed
• need them to carry out work of a particular kind

For a redundancy to be genuine, you must demonstrate that the employee's job will no longer exist.

Redundancies can be compulsory or non-compulsory. If you do have to make redundancies you can get help from Jobcentre Plus.

Employee rights

Employees have certain rights and may be entitled to redundancy pay if they’re made redundant.

All employees under notice of redundancy have the right to:

• reasonable time off to look for a new job or arrange training
• not to be unfairly selected for redundancy

You should always take steps to avoid redundancies before dismissing staff.

Alternative employment

Employers must try to find suitable alternative employment within the organisation for employees they’ve made redundant.

Employees have the right to a trial period without losing the right to redundancy pay if they accept an alternative role.

You should take steps to avoid compulsory redundancies, eg by:

• seeking applicants for voluntary redundancy or early retirement
• seeking applications from existing staff to work flexibly
• laying off self-employed contractors, freelancers etc
• not using casual labour
• restricting recruitment
• reducing or banning overtime
• filling vacancies elsewhere in the business with existing employees
• short-time working or temporary lay-offs

Offers of alternative work

Even if you’ve selected someone for redundancy, you can still offer them alternative work.

For an offer to be valid:

• it should be unconditional and in writing
• it must be made before the employee’s current contract ends
• it should show how the new job differs from the old
• the job must actually be offered to the employee - they shouldn’t have to apply
• the new job must start within 4 weeks of the old job ending

Employees who accept an offer of alternative work are allowed a 4-week trial period to see if the work is suitable - if you both agree that it isn’t, they can still claim redundancy pay.

The trial period can be longer than 4 weeks if you agree this in writing.

If you think the job is suitable but the employee refuses to take it, they might lose any redundancy pay entitlement.

You can lay off an employee (ask them to stay at home or take unpaid leave) when you temporarily can’t give them paid work - as long as the employment contract allows this.

Short-time working is when an employee has no paid hours for a number of working days in a week. This is because:

• they’re working a reduced number of paid hours
• their pay is less than half a week’s pay

Laying off staff or short-time working can help avoid redundancies - but you have to agree this with staff first.

This could be in:

• their employment contract
• a national agreement for the industry
• a collective agreement between you and a recognised trade union

National and collective agreements can only be enforced if they're in the employee's employment contract.

You may also be able to lay off an employee or put them on short-time working:

• where you have clear evidence showing it’s been widely accepted in your organisation over a long period of time
• if you agree with the employee to change their employment contract to allow them to be laid off or put on short-time working (this won’t automatically give you the power to do this without their consent in the future)

Statutory guarantee payments

Employees are entitled to these if you don’t provide them with a full day’s work during the time they’d normally be required to work.

The maximum payment is £25 a day for 5 days in any 3 months (ie £125). If employees usually earn less than £25 a day, they’ll get their usual daily rate. For part-time workers, the rate is worked out proportionally.

Employees can claim a redundancy payment from you if the lay-off or short-time working runs for:

• 4 consecutive weeks or longer
• a series of 6 or more weeks with not more than 3 consecutive weeks - in a 13-week period

They must give you written notice in advance that they want to make a claim.

You don’t have to pay if they’ll return to normal working hours within 4 weeks.

If you don't give guarantee pay to someone who's entitled to it, they could take you to an employment tribunal.

Wrongful lay-offs or short-time working

You’ll be in breach of contract if you lay off an employee or put them on short-time working without pay if there’s no contractual agreement.

The employee may:

• accept the breach of contract and claim a guarantee payment
• sue for damages for breach of contract in a civil court or at an employment tribunal
• claim unlawful deduction of wages at an employment tribunal
• claim unfair dismissal at an employment tribunal

There's more advice on lay-offs and short-time working on the Acas (Advisory, Conciliation and Arbitration Service) website.

This covers voluntary redundancy and early retirement.

Voluntary redundancy

This is where you ask employees if they’d like to volunteer for redundancy and then select those to be made redundant.

You must have a fair and transparent selection process and let employees know that just because they apply, it doesn’t mean they’ll get selected.

Early retirement

This is where you offer employees incentives to retire early. It is used as an alternative to voluntary redundancy.

The offer must be made across the workforce - you can’t single out specific individuals.

You can't force anyone into early retirement - it must come from the employee.

If you decide you need to make compulsory redundancies, you must:

• identify which employees will be made redundant
• make sure you select people fairly - don’t discriminate

Fair selection criteria

Fair reasons for selecting employees for redundancy include:

• skills, qualifications and aptitude
• standard of work and/or performance
• attendance
• disciplinary record

You could also select employees based on their length of service (‘last in, first out').

You can only do this if you can justify it - otherwise this could be indirect discrimination if it affects one group of people more than another.

You shouldn't rely solely on length of service as your only selection criteria - this is likely to be age discrimination.

Unfair selection criteria

Some selection criteria are automatically unfair. You must not select an employee for redundancy based on any of the following reasons:

• pregnancy, including all reasons relating to maternity
• family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants
• acting as an employee representative
• acting as a trade union representative
• joining or not joining a trade union
• being a part-time or fixed-term employee
• their age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation
• pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage

You should always consult employees in a redundancy situation - if you don't, any redundancies you make will almost certainly be unfair and you could be taken to an employment tribunal.

If you don’t consult employees in a redundancy situation, any redundancies you make will almost certainly be unfair and you could be taken to an employment tribunal.

You must follow ‘collective consultation’ rules if you’re making 20 or more employees redundant within any 90-day period at a single establishment.

There are no set rules to follow if there are fewer than 20 redundancies planned, but it’s still good practice to fully consult employees and their representatives. An employment tribunal could decide that you’ve dismissed your staff unfairly if you don’t.

Consultation doesn't have to end in agreement, but it must be carried out with a view to reaching it, including ways of avoiding or reducing the redundancies.

Collective consultation

Before a consultation starts, notify the Insolvency Service Redundancy Payments Service (RPS) by filling out form HR1. Instructions on where to send it are on the form.

Download 'Form HR1' (PDF, 48KB)

Download the guidance on how to manage collective redundancies from ACAS.

Download 'How to Manage Collective Redundancies' (PDF, 1.2MB)

Then follow these steps.

1. Consult with trade union representatives or elected employee representatives - or with staff directly if there are none.

2. Provide information to representatives or staff about the planned redundancies, giving representatives or staff enough time to consider them.

3. Respond to any requests for further information.

4. Give any affected staff termination notices showing the agreed leaving date.

Timescales

There’s no time limit on how long a consultation should last, but consultations must start in good time.

You can issue redundancy notices as soon as the consultation is complete, but there are minimum periods before they can take effect.

You must send in the notification form at the start of the consultation period - if you don't, you'll get a criminal record and can be fined up to £5,000.

Information you must provide to representatives or staff

You must provide written details of:

• the reasons for redundancies
• the numbers and categories of employees involved
• the numbers of employees in each category
• how you plan to select employees for redundancy
• how you’ll carry out redundancies
• how you’ll work out redundancy payments

You must give staff notice and agree a leaving date once you’ve finished the redundancy consultations.

Give staff at least the statutory notice period, based on how long they have worked.

You can allow staff to leave earlier than the planned leaving date - eg without notice - by offering payment in lieu of notice.

Notice pay

You must give staff notice pay - based on their pay rate and notice period - or make a payment in lieu of notice.

Pay in lieu of notice

If you have included a payment in lieu of notice clause in the employment contract, you can end your staff’s employment with no notice. This lets you make a payment to cover the notice period they’d normally have had to work.

These payments must have tax and National Insurance deducted.

When you make payments in lieu of notice, you still have to pay staff the basic pay they would have got during the notice period, including any pension, private health care insurance or other contributions.

Employees you make redundant might be entitled to redundancy pay - this is called a ‘statutory redundancy payment’.

To be eligible, an individual must:

• be an employee working under a contract of employment
• have at least 2 years’ continuous service
• have been dismissed, laid off or put on short-time working - those who opted for early retirement don’t qualify

You must make the payment when you dismiss the employee, or soon after.

A redundant employee also has the right to a written statement setting out the amount of any redundancy payment and how you worked it out.

Statutory redundancy pay rates

These are based on an employee’s age and length of employment and are counted back from the date of dismissal.

Employees get:

• 1.5 weeks’ pay for each year of employment after their 41st birthday
• a week’s pay for each year of employment after their 22nd birthday
• half a week’s pay for each year of employment up to their 22nd birthday

Length of service is capped at 20 years and weekly pay is capped at £464. The maximum amount of statutory redundancy pay is £13,500.

You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.

You can use the redundancy pay calculator to work out payments.

If you don’t pay

If you fail to pay redundancy pay or if an employee disagrees with the amount, they have 6 months from the date their employment ended to make a claim for payment to an employment tribunal.

If they don’t make the claim in time, a tribunal still has the power for a further 6 months to decide whether or not they should get a payment.

If you have financial difficulties

If your business would become insolvent as a result of making the statutory redundancy payments, the Insolvency Service’s Redundancy Payments Office may be able to help.

You’d have to repay any debt as soon as possible - contact the Redundancy Payments Helpline for more information:

Redundancy Payments Helpline
Telephone: 0845 145 0004
Find out about call charges

Tax

Redundancy pay isn’t taxable if it’s less than £30,000. Nor will the payment be subject to National Insurance. If you decide to make extra payments over the £30,000 threshold, they’re subject to tax but again not to National Insurance.

Other termination payments, like payment in lieu of a holiday or notice, must have tax and National Insurance deducted.

If you have to make redundancies, Jobcentre Plus can give you and your employees support and advice through its Rapid Response Service.

Support could include:

• helping people facing redundancy to construct CVs and find jobs
• providing general information about benefits
• helping people identify their transferable skills and training needs
• providing training to help people develop vocational skills
• helping with costs like travel to work expenses

Jobcentre Plus may also provide on-site support for large scale redundancies.

In Scotland, Rapid Response Service support is delivered through Partnership Action for Continuing Employment (PACE) - there’s more information on the Skills Development Scotland website.

In Wales, the service is delivered by the Redundancy Action Scheme.

Acas has an online redundancy helpline.

How to get help

To find out how your business can use the Rapid Response Service, email rrs.enquiries@jobcentreplus.gsi.gov.uk and include:

• your contact details
• the town(s) your business is based in (including postcodes)
• the location(s) of the redundancies