Redundancy: a guide for employees

If your redundancy is fair, then the compensation you are entitled to will either simply be Statutory Redundancy Pay or possibly a more generous redundancy package offered by your employer.

However, if the business requirement for your redundancy is not genuine, or if mistakes are made by your employer in the redundancy process, including your selection, you can use these as the basis for negotiating a better redundancy financial package and settlement agreement.

We look briefly at each of the above in this guide.  For more detailed information, see our separate related guides listed at the end of this page, and particularly those on

• Sham redundancy
• Is my redundancy fair?
• Redundancy negotiations

What is redundancy?

Redundancy means that you get dismissed from your job because the work that you carried out is no longer required or has significantly diminished. 

The reason for the quantity of work reducing could be anything from parts of your work being automated, to the product or service you were working on becoming obsolete, or less in demand due to changes in buyers’ circumstances.

However,  before making you as an individual employee redundant, your employer has to be able to demonstrate that there is a genuine business need to reduce or do away with the work that you carried out. It should not be a ‘sham redundancy’.

They also have to take certain legally required steps in how they go about making redundancies – usually referred to as the ‘redundancy process’. 

If they fail to do these things or do them incorrectly, then you may have a claim against them for unlawful practices such as unfair dismissal and possibly discrimination.

What redundancy process should be carried out?

If you can identify the errors or weaknesses in the way your employer handled (or is handling) your redundancy circumstances, then you can use those shortcomings to negotiate a better redundancy compensation package. See also our guide on Redundancy negotiations.

Below we outline the key questions you should ask when facing a redundancy situation and the answers to those questions.

Is there a genuine redundancy situation?

In order for the redundancy to be fair, there has in fact to be a genuine redundancy situation. A redundancy situation occurs with the closure of a business, a workplace, or a whole department,  or when there is a ‘diminished need for work of a particular kind.’

The latter is often broad enough to cover the situation where an employer restructures the business. For example, your employer might decide to merge two roles into one or divide the work amongst other staff.

Is the redundancy a sham?

However, if you are dismissed for ‘redundancy’ and then your employer recruits someone to do the same job that you were doing, then that looks more like a sham redundancy than a genuine redundancy.

(The exception is where that person is on significantly less money than you were, which is a legally acceptable reason to make you redundant).

You might also think that a decision to make you redundant is really bad for the business and will result in lost revenues, but that is not the test for the employment tribunal, unfortunately.

The tribunal will not get involved with whether a decision about making redundancies was sensible, only whether it was genuine, and whether the selection process was objectively fair.

Two of our letter templates/examples illustrate particularly well what sham redundancy means in practice:

• One example shows how an employee has been subjected to bullying and stress, then a sham redundancy
• A second example features a sham redundancy selection process

See also our separate sham redundancy guide for more.

Is your selection for redundancy fair?

Your employer can come unstuck in a redundancy dispute in relation to who they decide is at risk of redundancy. In other words, how have they chosen people to go into what’s called the redundancy ‘selection pool’, from which individuals will be selected for redundancy?

If you have not been placed in a redundancy pool, then ask what the business reason for selecting you for redundancy is. If there are other people doing the same job as you, then point out that they should also be in the redundancy selection pool with you.

Selecting for redundancy when roles are similar

It becomes more complicated when there are people who are not doing the same job but where the roles are interchangeable or the skill sets for the jobs are similar. In those circumstances, you should be arguing that the redundancy selection pool should include those roles as well. See also our selection of Q&As about being replaced by another in a redundancy.

Size of the redundancy selection pool

Obviously, the bigger the selection pool, the less likely it is that you will be selected for redundancy.

You may also be able to negotiate a better redundancy compensation package:

• if the redundancy pool is small (i.e. only two or three of you) and your employers are looking for voluntary redundancies, or are targeting you unfairly.
• if there is a large pool and you have evidence that you should not have been selected – for example,  through a mistake in the scoring (see below) or the pooling.

Were the selection criteria objective and fairly applied?

It is supposed to be the role itself that is identified as being redundant first, and then the employee is identified afterwards, but all too often managers will select those people who, perhaps for personal reasons, they would like to see made redundant.

In these ‘fake’ or ‘sham’ redundancies your employer may even build a seemingly objective redundancy selection process that just happens to select you when the whole time it was a foregone conclusion.

Selection criteria and scores

If there’s a number of people in the selection pool for redundancy, your employer has to set selection criteria for determining who should be made redundant. This could be things like attendance, punctuality, skills and experience, for each of which you will be given a numerical score.

Facts about attendance can be checked against HR records so are easily verified. Questions about skills and experience are more subjective and are often based on the opinion of the person scoring you.

In those circumstances, your employer should be able to back up their scores, for example, by looking at past appraisals or peer reviews. If your employer has no basis for their scores, then your redundancy may be easier to prove to be unfair.

Interviewing for redundancy selection

Sometimes employers will hold interviews to decide who will be selected for redundancy. They are allowed to do this, but again they should be able to back up their interview scores objectively and the interview panel should be impartial and free from bias.

Discrimination in redundancy selection

You should also consider whether your selection for redundancy is discriminatory.  For example, if you have been absent from work due to maternity-related sickness or due to a disability, and are scored down for attendance as a result, then the dismissal may be unfair and in breach of discrimination legislation. If that’s the case, you may be entitled to claim discrimination compensation.

What to do if the selection criteria are unfair

If the way that your employer selected you for redundancy is unfair, then you are within your rights to ask for an increased redundancy settlement agreement package.

To this end, you might like to try Grapple, our AI-based document creator which can create a legal letter from you to your employer when you are facing or have recently been made redundant.

See also our page on Redundancy selection.

Were you consulted about the redundancy?

If you are in a redundancy process with your employer then they do have to consult you about the proposals. They should meet you to discuss the rationale behind the decision to put you at risk of redundancy and allow you to put forward alternatives.

They should also consult with you about what other roles might be available to you in the business (see below).

Numbers at risk affect the consultation period

The duty to consult with you is much more onerous if 20 or more people are at risk of redundancy within a 90 day period.  In that case,  your employer has to consult for 30 days or more.

If there are 100+ people being made redundant, then consultation is for a minimum of 45 days.

Redundancy consultation meetings

For consultations with individual employees, there should be at least one redundancy consultation meeting with the employer and they should give you written notice in advance of the meeting.

They should also give you the chance to bring a colleague to accompany you. A colleague can ask questions, but can’t answer questions on your behalf.

At the redundancy consultation meeting, they will have to say to you quite clearly that they are going to discuss your redundancy. It will be a serious meeting where you can have a long chat and you can raise any and all issues that you have.

If you are a member of a trade union you can take your union rep to the meeting. Normally trade union reps actually work for your employer, and they are not trained lawyers either, so you may think that they are not always the best people to fight your corner in terms of negotiating you the highest reasonable amount for an exit package.

If you have some potential claims to bring against the employer, this meeting may be a good time to mention, on a ‘without prejudice’ basis, that you would consider negotiating a redundancy package in the form of a settlement agreement.

Were you considered for alternative work?

In a redundancy situation, your employer should consider alternative roles for you within the business or any group company. This should include for example sending you lists of all available vacancies. Often this will depend on the size and resources of the employer.

It is important to note though that your employer does not have to create a role in the organisation for you where none exists.

You will be in a much better position to argue that your redundancy was unfair if you apply for lots of roles but are not successful, than if you don’t apply for anything at all.

It is also worth remembering that if you are offered an alternative role you are legally entitled to a four-week trial period, and if it doesn’t work out in that time you can still claim your redundancy pay.

How much is statutory redundancy pay?

Statutory redundancy pay is calculated with reference to your number of completed years of service. To qualify for a statutory redundancy payment, you must have been continuously employed for at least two years.  You get:

• 1.5 weeks’ pay* for each year in which you were 41 years old or above
• 1 week’s pay* for each year in which you were over 22 but under 41 years old
• 0.5 week’s pay* for each year in which you were under 22 years old

 

*A week’s pay is subject to a maximum figure of £700 (from  6 April 2024).  The maximum number of years which may be counted is 20.

Even if you have been somewhere for say 20 years, from the age of 41 to 61, you would be entitled to only (20 x 1.5 x £700) = £21,000.

(See the government’s website page on calculating statutory redundancy for more details.)

 

Is redundancy pay taxable?

Redundancy payments up to £30,000 are not taxable. Any money above the statutory minimum is usually offered in exchange for you agreeing not to sue your employer.

 

When will you get your redundancy pay?

You should receive your redundancy pay on your official last day of work. Alternatively, it should be paid to you on a specified date soon after which should have been agreed upon beforehand in writing between you and your employer.

The payment may be combined with other payments as part of a wider settlement agreement, but you should be given a written statement saying how much your redundancy payment is and how it was worked out.

It will be paid into your bank account or whichever other account is normally used to pay you.

 

How much redundancy notice should you get? 

Your employer is only required to give you the statutory minimum notice period of your forthcoming redundancy dismissal.  Some employers offer more generous notice periods, so check your contract of employment to see if this is the case. 

How should you participate in the redundancy process?

At the same time as negotiating redundancy on a without prejudice basis, you should be running an ‘open’ position whereby you attend all the consultations and go through the appeals process, flagging up where you think they have gone wrong.

Be aware that sometimes it can be best not to point out these errors before you actually get made redundant, as your employer would then have a chance to correct them before making you redundant.

That assumes that by now you don’t actually want your job back because you feel so aggrieved with their unfair treatment, or you’re sure they will select you anyway.

Ask questions about the redundancy process

Ask for disclosure of documents, especially scoring criteria. Demand to know who rated you against the criteria and why, and ask to see any evidence which the managers referred to, such as absence records or disciplinary records.

You should also ask to see the scores of the other employees in your redundancy pool.

By this stage, your employer may start to get nervous and offer you increased redundancy compensation. This is when submitting a written grievance to your employer can also be a good way forward, as it forces them actually to consider your arguments rather than just fobbing you off.

Can just a test result determine your redundancy?

No, said the employment tribunal and the Employment Appeal Tribunal in Mental Health Care (UK) Ltd v Biluan & Anor. In this case, workers had to sit a test, similar to the kind of test used in recruitment situations, and the outcome determined if they were made redundant or not.

No account was taken of the employee’s employment record or managers’ views. In fact, management was surprised by who was selected. Despite this “some very good workers” were dismissed by way of redundancy and the tribunal found their dismissals unfair. Some account should have been taken of other matters not just their test results.

 

Should you offer to resign before you’re made redundant?

There is one tip that applies to all redundancy situations, whether you have a decent legal case or not:

If you are sure that you are going to be made redundant, then you could offer to resign voluntarily first, on the basis that your employer gives you a good redundancy package that recognises the amount of time and effort saved by short-circuiting the redundancy process.

For example, you might save them a month of HR and management time, so you could ask for a month’s salary plus say another month to take into account their time and effort.

It’s attractive from their point of view too as they won’t have to carry out any kind of fair process or give you a right of appeal.

 

Appealing against your redundancy

If you are finally made redundant, then you should make sure that you appeal in writing against the decision, pointing out any defects with the procedure as set out above.

This can be useful evidence if you do end up challenging the decision in an employment tribunal, and more importantly, it gives you that additional firepower for a negotiation. See our guide on Appeals for more.

How can I get help to negotiate a redundancy package?

Our specialist employment solicitors have years of experience in winning redundancy cases for employees and we offer a range of services to help you through this difficult time.

To find out whether we could help you negotiate a redundancy package that’s better than the statutory minimum, or better than anything you’ve been offered so far by your employer, simply click the button below.

Alternatively, you can email us at communications@monacosolicitors.co.uk 0r speak to one of our advisers by phoning 020 7717 5259