Introduction

The law on redundancy is complex and our guide is designed to provide information about the key points. If you are an employer considering undertaking or announcing any redundancies, we recommend that you get legal advice - check this website to see what might be available to you.

When does a redundancy arise?

Redundancy arises in 3 main situations:

1. Closure of the entire business

2. Part of the business is closing (i.e. the employees' workplace)

3. A reducing need for employees to carry out work of a particular kind (i.e. fewer employees are required to do a particular job)

Redundancies may also arise in other situations, such as a reorganisation of the business due to an economic, technical or organisational reason (e.g. changes in working hours or technological changes). See Types of redundancy for a fuller list of when an employee may be in a redundancy situation.

It's important to establish whether a dismissal falls within the legal definition of redundancy, for 2 reasons:

1. There are well-established obligations for employers (including the need for consultations), and failure to meet them could result in a claim for unfair dismissal being made at an Employment Tribunal.

2. To determine if an employee is entitled to a redundancy payment.

Note: the sale of a business will not usually constitute a redundancy situation. This is governed by the Transfer of Undertakings Regulations 2006, better known as TUPE. For more about TUPE, see How is the employee affected?.

Redundancy payments

A redundant employee will not be entitled to redundancy pay unless they have at least 2 years' service. There are several categories of employee who are excluded from the right to statutory redundancy pay, such as members of the armed forces or police services.

Qualifying employees must receive at least a minimum statutory amount of redundancy pay. The amount due is related to age, length of service and weekly pay. You must provide the employee with a written statement of how the amount has been calculated.

If there is a contract of employment, it may contain a provision for the employee to be paid more than the statutory minimum. This is known as an enhanced redundancy payment.

A redundancy payment is intended to serve as compensation where an employee is dismissed through no fault of their own. The statutory redundancy payment must still be paid even if an employee finds another job immediately. Where there's a dispute over the right to receive a payment or over the correct amount, an employee can start a claim at an Employment Tribunal to determine it.

See Redundancy payments for a more information.