Everything Employers Should Know About Statutory Redundancy

Redundancy is a form of dismissing employees. In most cases, redundancies can happen when you decide to close down your business or if you no longer need certain employee roles. You may also make an employee redundant if you wish to reduce your workforce due to the lack of demand for particular work, or you intend to move the business to another location.

As an employer, you must utilise redundancy in a fair and legally compliant way as employees being made redundant may be entitled to statutory redundancy if they meet the criteria. Incorrectly utilising redundancy could expose your business to the risk of being taken to an employment tribunal, as well as financial and reputational damage. Talk to a member of our HR and Employment Law advisory team today. Call 01455 858 132.

Employees have statutory rights and responsibilities. For example, before making them redundant, you must first try to find a suitable alternative role within the company. They can try out the new role for up to four weeks without giving up their right to redundancy pay.

• Alternatives to redundancy
• What is statutory redundancy pay?
• Reasons for redundancy
• Fair selection
• Redundancy Payments Service (RPS)
• Redundancy consultations
• How much notice is needed for redundancy?
• Get expert advice on statutory redundancy

Alternatives to redundancy

There are several alternatives’ employers can explore before taking the redundancy route, these are:

• Job sharing schemes
• Reduction of working hours
• Retraining and redeployment in another role (of equal seniority and pay)
• Pay and bonus freezes
• Reductions of overtime
• Early retirement
• Voluntary redundancy
• Career sabbaticals

There are clear advantages to considering alternatives to redundancy, these include better retention of your top talent, improved staff morale and overall business reputation.

However, if redundancies are inevitable then you must follow the correct process, especially when it comes to the statutory redundancy rights of eligible employees.

What is statutory redundancy pay?

Statutory redundancy pay is the legal minimum your employee should receive after redundancy. Employees are entitled to statutory pay if they have been in your employment for two years or more.

How much are UK statutory redundancy payments?

To calculate redundancy payment, employers must base it on the employee’s age, weekly pay, and the number of years in the job.

Employees will get:

• Half a week’s pay for each year of employment that they were under 22.
• One week’s pay for each year of employment that they were 22 or older, but under 41.
• One and a half weeks’ pay for each year of employment that they were 41 or older.

It’s important to remember that the employee’s length of service is usually capped at 20 years. And the weekly pay is capped at the statutory rate which is currently £719 per week (as of April 2025).

Reasons for redundancy

There are several reasons an organisation might have to go through redundancies, the only and 'golden' rule is that it must be fair.

Some examples of fair reasons for redundancy

• Introduction of new systems such as software or machinery, making certain roles irrelevant.
• Reducing costs by eliminating certain services or products.
• Business closing or relocating.

Some examples of unfair reasons for redundancy

• Marital status.
• Sexual orientation.
• Health & safety activities.

Fair selection

There is a selection process employers must follow in cases where more than one employee is affected by redundancy.

To maintain fairness in the selection process, you first need to create a pool of those who are ‘at risk’ of redundancy. Employers should do this by analysing the job roles that are no longer needed, where the demand for work has stopped or decreased, and then include those with similar or interchangeable job roles.

During consultation, you must create a list of objective selection criteria, and, after consultation, you need to apply these to all those who are at risk by scoring the employees against the criteria. The lowest scoring employees are then selected.

The criteria can’t be discriminatory i.e. last in, first out. This should be avoided because, in some cases, it can be deemed discriminatory based on age. Instead, employers should look at disciplinary, absence (minus any disability/pregnancy absence), qualifications, skills etc.

Redundancy Payments Service (RPS)

The Redundancy Payment Service exists to speed up the process of paying ex-employees when your organisation becomes insolvent. Pending payments, get addressed faster than they would be if your employees had to wait for your assets to get released.

Once you have identified a potential redundancy situation affecting 20 or more employees within a 90-day period, you should fill out form HR1 to notify RPS of potential redundancies.

You’ll have 30 days before the first redundancy to submit the form if you’re proposing to make 20-99 employees redundant within a 90-day period.

If you’re proposing to make 100 or more employees redundant within a 90-day period, then you have 45 days before the first redundancy to submit form HR1.

Redundancy consultations

Consulting employees is an important aspect of dealing with redundancy situations in your organisation. Redundancies made without employee consultation could result in a case of unfair dismissal. This could open you up for claims at an employment tribunal.

As an employer, you must follow collective consultation rules if you are making 20 or more employees redundant within a 90-day period.

There are no set rules to follow when making fewer than 20 employees redundant. However, it’s still advisable to consult with your employees or their representatives.

During these consultations, you must discuss the redundancy plans with your employees and their representatives. Discussions should also involve taking suggestions from employees to avoid being made redundant.

Other discussion topics during the consultation include:

• The reasons for the redundancies.
• The number and categories of employees involved in the redundancy.
• The number of employees in each category.
• Details of how you plan to select employees for redundancy.
• How do you plan to carry out redundancies?
• How you’ll work out redundancy payments.

How much notice is needed for redundancy?

Give your affected employees enough notice in advance. The statutory notice period depends on the length of service.

• A week’s notice when employed between one month and two years.
• A week’s notice for each year when employed between two and twelve years.
• 12 weeks’ notice when employed for 12 years plus.

If you have longer notice periods set out in your contracts of employment, then employees need to be given their contractual notice, or they could bring a claim for wrongful dismissal.

Get expert advice on statutory redundancy

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