Fair Reasons for Redundancy in the UK

By April Harrington.
12 Mar 2021

During tough times, businesses may need to consider redundancies. Naturally, as this is getting rid of a person’s livelihood, there are many laws protecting employees.

In employment law, redundancy is a potentially fair reason for dismissal. However, getting a redundancy procedure right can be tricky.

It is essential that you establish valid reasons for redundancy. The law does not allow you to make them for no reason. And you need to show whatever reason is fair in your process.

If the redundancy is not fair, genuine or didn't follow the correct process, the dismissed employee may bring a claim. This claim can allege that the dismissal was unfair and/or discriminatory. This leads to costly employment tribunals.

Let’s look at some fair reasons to make employees redundant, to make sure you follow the correct redundancy process.

What is a fair business reason for redundancy?

For a redundancy to be genuine, you must show that the need to conduct work of a particular kind has been reduced or removed entirely. This is not the same as dismissing someone.

You should only make employees redundant if there is no need for their job to continue to exist. Any other would not be genuine reasons for redundancy.

The typical reasons for being made  redundant include:

  • When a business, or part of it, shuts down completely.
  • When a business shuts down at a specific location (even if moving to a new location.)
  • Relocation of the business.
  • The requirement for employees to do work of a particular kind has reduced or ended.
  • The work of an employee is being completed by others.
  • Redundancy through restructuring.

These are examples of genuine and legal reasons for redundancy.

It is crucial that your statutory redundancy reasons fall into this definition and not be seen as a situation to get rid of a problem employee. This would be an unfair dismissal.

Redundancy selection

There are many stages to redundancy which redundancy employment law outlines. The law recommends you outline a redundancy plan to stay compliant.

This will help you show that there was a fair procedure and legitimate reason for redundancy. A fair procedure helps to prove that the redundancy selection process doesn't discriminate.

One stage that should be in the plain is redundancy selection. It must outline a fair and genuine reason for redundancy selection. This will link to the main reasons for redundancy.

For example, it is not enough to say it was simply redundancy for economic reasons to get rid of an employee. You need to show that there was a reduced need, or removed need, for work of a particular kind to be removed

Consequences for unfair reasons

As mentioned before, you should only make employees redundant if there is no need for their job to continue to exist. Any other would not be genuine reasons for redundancy.

A redundancy that is not deemed genuine would be an unfair dismissal if they have employed 23 months and 3 weeks. If they have worked for you less than that time period, they have no legal right to claim.

The maximum amount that they can award employees as compensation for unfair dismissal is presently the statutory cap of £88,519 or 52 week's gross salary. Whichever is the lower amount. This is besides the basic award the tribunal can award up to a maximum of £16,140.

Automatically unfair reasons for redundancy

Automatically unfair reasons for redundancy in Acas’s guidance are as follows. They do not allow employers to make an employee redundant because of the following reasons, if they do it is unfair dismissal:

  • Age, gender, sexual orientation, gender reassignment, disability, religion or belief or marriage or civil partnership.
  • Where an employee has taken health and safety action or requested a statutory right, for example, minimum wage, maternity leave or annual leave.
  • Working on a part-time basis or on a fixed-term contract.
  • The employee is a trade union member, a trade union representative, or an employee representative.

Alternative options to redundancy

To ensure it is a fair redundancy, you must show you have explored all other options for redundancy.

Implementing alternative options can help you meet your aims. This can reduce costs while minimising the damaging impact that redundancies are likely to have on the organisation and employees.

Some alternatives include:

  • Reduction in working hours.
  • A period of unpaid leave Layoffs or short-time working.
  • Early retirement.
  • Retraining or redeploying staff.
  • Restricting or banning overtime.

Expert support on redundancy with Croner

Understanding the laws around redundancy can confuse the best of us. Establishing policies, understanding rules and legislation around the topic, it's all important information to have at hand.

Get our expert team to advise you on contractual agreements and the redundancy process for you. Croner clients get access to our 24/7 HR specialists.

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About the Author

April Harrington.

An experienced Senior Employment Law Consultant, who has worked for the group for over 9 years. April specialises in discrimination legislation. April has an extensive background in training, as well as recruitment and hospitality.