UK Redundancy Law in 2026: Employer Obligations, Fair Process, Consultation, and the New Protective Award Changes

Redundancy remains one of the most legally complex and high-risk areas of employment law for UK employers. The Employment Rights Act 2025, which comes into force from April 2026, has significantly increased the financial exposure for employers who fail to follow proper procedures. The maximum protective award for breaching collective consultation duties has doubled from 90 days' to 180 days' pay, fundamentally altering the cost-benefit analysis of cutting corners in the redundancy process. Understanding your obligations is no longer optional.

What Constitutes Redundancy Under UK Law

Redundancy has a specific legal definition in the Employment Rights Act 1996. A dismissal is by reason of redundancy only if the employee's dismissal is wholly or mainly attributable to the employer ceasing, or intending to cease, to carry on the business for the purposes of which the employee was employed, or to the cessation or intended cessation of the business in the place where the employee was employed, or to the employer's requirement for employees to carry out work of a particular kind, or in a particular place, ceasing or diminishing.

This translates into three primary scenarios. First, the entire business closes. Second, a particular workplace closes while the business continues elsewhere. Third, the need for employees to perform particular work has genuinely diminished. The word "diminished" is key. It means the number of posts performing that work must reduce. Simply reorganising existing staff or changing duties without reducing headcount does not constitute redundancy.

Common misconceptions trap employers. Redundancy is not a discretionary reason for dismissal. If the employer has a genuine business need for the work to continue, it cannot claim redundancy. Equally, poor performance, misconduct, and capability issues cannot be dressed up as redundancy. The reason must be objective and documentable.

Individual Redundancy Consultation Requirements

Individual consultation is required whenever an employee faces redundancy, regardless of the business's size or the number of redundancies. This is a separate duty from the collective consultation requirements discussed below.

The consultation must begin as soon as the decision to make the redundancy is made and before notice is given, or in practice, at the same time. Employers must provide clear information about the redundancy, the reasons for it, and the selection criteria used. The employee should understand why they were selected and must have a genuine opportunity to make representations.

Consultation is not a tick-box exercise. The employer must genuinely listen, consider the employee's suggestions, and be prepared to explore alternatives. An employee with 20 years' service selected for redundancy might propose flexible working, part-time work, or demotion to a lower-paid role. Dismissing such proposals without serious consideration undermines the consultation process and provides grounds for an unfair dismissal claim.

The employee should be given reasonable time to respond. A one-hour meeting with a same-day decision is unlikely to satisfy the requirement. Reasonable time depends on the employee's circumstances, but one to two weeks is generally expected for meaningful consultation.

Collective Consultation Duties: When They Apply

Collective consultation is triggered when an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days. The figure is 20 people, not 20 employees, so redundancies proposed in multiple tranches can aggregate if they fall within the 90-day window.

The "one establishment" concept has been refined through case law. It refers to the place where the affected employees work rather than a separate legal entity. A company with multiple offices triggers collective consultation only if 20 redundancies occur at one location within 90 days.

When collective consultation is triggered, the employer must consult with either a recognised trade union or, where no union is recognised, with elected representatives of the affected employees. The employer must inform these representatives in writing of the reasons for the redundancies, the numbers and descriptions of employees affected, how selection will be conducted, the timing of the notices, and how redundancy payments will be calculated.

The Collective Consultation Timeline: Section 188 TULRCA 1992

Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 sets mandatory minimum periods for collective consultation. These are statutory minimums. Good practice often requires longer.

For redundancies of 20 to 99 employees, the employer must consult for at least 30 days before the first notice of redundancy is given. For 100 or more employees, the period increases to 45 days. These periods run from the date of the employer's first written notification to the representatives. If an employer fails to meet these periods, it is in breach regardless of the quality of consultation conducted.

During consultation, the employer must provide updated information as circumstances develop. If the number of redundancies increases or the timetable changes, this must be communicated. The representatives must be given paid time off to carry out their consultation duties.

The Employment Rights Act 2025: Protective Award Changes from April 2026

The most significant change for employers taking effect from 6 April 2026 is the increase in the maximum protective award. A protective award is an award of pay made against an employer that has breached its duty to collectively consult. Until March 2026, the maximum award was 90 days' gross pay per employee. From 6 April 2026, this doubles to 180 days' gross pay per employee.

For a large redundancy exercise affecting 200 employees, a complete failure to consult could expose an employer to protective awards totalling 180 days multiplied by 200 employees. At the current average salary of £30,000 per annum, this calculation yields £29.5 million. Even a partial failure to consult can result in awards running into millions.

The protective award is calculated on the basis of each employee's gross pay, not statutory redundancy pay. There is no cap on the amount per employee, though the tribunal has discretion to reduce it if the breach is deemed less serious. In practice, this discretion is limited. An employer that simply fails to consult receives the full award.

An employee can claim a protective award whether they are selected for redundancy or remain with the employer. The measure is intended to deter breaches of collective consultation obligations and to compensate all affected employees fairly.

Planned Changes to the Redundancy Consultation Threshold

The Government is currently consulting on raising the threshold for collective consultation. Currently, the trigger is 20 employees at one establishment within 90 days. The consultation, which closes on 21 May 2026, proposes a new tiered system. For organisations employing 250 to 1000 people, the threshold would rise to 200 redundancies within 90 days at one establishment before collective consultation is triggered. For organisations with 1000 or more employees, no collective consultation would be triggered unless 250 redundancies occur within 90 days.

The stated aim is to reduce bureaucracy for larger employers. Critics argue it weakens protections for employees in large companies. If implemented, these changes are expected to take effect in 2027. Employers should factor this into planning, as the landscape may shift significantly. Until the consultation closes and regulations are made, the current 20-person threshold applies.

Selection Criteria and Avoiding Discrimination

The selection criteria used to decide who is made redundant must be objective and non-discriminatory. Selecting employees at random is not objective. Selecting based on sex, race, disability, age, or pregnancy is unlawful.

Common objective criteria include last in, first out (LIFO), skills and qualifications, performance records, and attendance. Many employers use a matrix approach, scoring employees on multiple criteria. This can be effective but must be applied consistently and documented thoroughly.

LIFO is objective but can have a disproportionate impact on certain protected groups. If employees with disabilities or women have lower average tenure, LIFO may trigger indirect discrimination claims. The criteria must be capable of justification. Similarly, performance-based selection must be based on documented appraisals, not subjective impressions. An employee who was previously marked as "performing well" cannot suddenly be scored as "underperforming" without clear evidence.

Employees who voice health and safety concerns, raise grievances, or support union activities must not be disadvantaged in selection. This would constitute automatically unfair dismissal. Equally, employees on maternity leave, sick leave, or adoption leave should not be scored down because they are absent from the workplace.

Statutory Redundancy Pay: Calculation and Caps

Statutory redundancy pay is calculated using a formula based on age, length of service, and weekly pay. An employee is entitled to 0.5 weeks' pay for each year of service whilst under 22, one week's pay for each year of service between 22 and 40, and 1.5 weeks' pay for each year of service after 40.

The maximum service period counted is 20 years. An employee with 25 years' service is treated as having 20 years. The weekly pay cap is currently £719, increasing to £751 from 6 April 2026. These figures are annual adjustments linked to inflation.

Example calculation: An employee aged 45 with 18 years' service at £30,000 per annum. The weekly pay is £30,000 divided by 52, which equals £577 per week. The statutory redundancy is calculated as 0.5 weeks for each of the first two years (£1,154), one week for 13 years aged 22 to 40 (£7,501), and 1.5 weeks for three years aged 40+ (£2,597). Total is £11,252. The weekly pay cap does not apply here as £577 per week is below the cap.

If the employee earned £40,000 per annum (£769 per week), the weekly pay cap of £751 applies. The calculation becomes 0.5 weeks at £751 (£375.50), one week at £751 for 13 years (£9,763), and 1.5 weeks at £751 for three years (£3,379.50). Total is £13,518 instead of the uncapped £15,350.

From 6 April 2026, the maximum total redundancy payment is £22,530, calculated as 20 years multiplied by 1.5 weeks at the capped rate of £751.

Statutory redundancy pay is tax-free up to £30,000. Anything above this threshold is taxed as income. Employers often provide contractual redundancy pay in excess of the statutory minimum, and the same tax treatment applies to the first £30,000.

Alternative Employment and the Trial Period

Before making an employee redundant, the employer must consider whether suitable alternative employment is available. If a role exists within the organisation or an associated company that the employee could perform, the employer must offer it.

When suitable alternative employment is offered, the employee is entitled to a trial period of four weeks. During this period, either party can terminate the new employment, and the employee retains their redundancy rights. If the employee rejects suitable alternative employment without good reason, they lose their entitlement to redundancy pay.

What constitutes "suitable" depends on the employee's skills, experience, and position. Offering a junior role to a senior manager or requiring geographic relocation without prior agreement is unlikely to be suitable. The remuneration, status, and location must be broadly comparable to the original role.

Notice Periods and Time Off to Seek Work

Notice periods for redundancy are governed by the contract and statutory law. The statutory minimum is one week's notice per year of service, up to a maximum of 12 weeks. An employee with three years' service must be given at least three weeks' notice. An employee with 15 years' service must be given 12 weeks' notice.

Employees with two or more years' service are entitled to reasonable time off to look for new work or arrange training. This is paid time off and must be granted during working hours. An employer cannot restrict this to one afternoon per week if more time is needed. The amount granted must be reasonable given the employee's circumstances.

Unfair Dismissal Claims and Procedural Defects

A redundancy dismissal can still be unfair if the employer fails to follow fair procedure. The tribunal considers whether the employer acted reasonably in all the circumstances. Even if the business need for redundancy is genuine, a dismissal will be unfair if the selection process is flawed, consultation is inadequate, or suitable alternative employment is not considered.

Common procedural defects include failing to consult individuals or representatives, using discriminatory selection criteria, failing to score selection criteria consistently, ignoring an employee's representations, and not genuinely considering alternatives to redundancy. An employer cannot rely on a genuine redundancy reason to cure procedural failures.

The remedy for unfair redundancy dismissal is compensation. The tribunal calculates this by reference to the employee's loss of earnings, loss of statutory rights, and any failure of the employer to mitigate loss. Unlike protective awards, there is no prescribed maximum, but practical compensation is normally based on salary multiplied by reasonable notice period or time to find equivalent work.

Practical Guidance for Employers

Start any redundancy process with a clear written business case documenting the need to reduce headcount. Identify which roles or locations are affected and why. Do not cherry-pick employees for reasons other than redundancy. If poor performance is the issue, use capability procedures. If attendance is a problem, address it through disciplinary procedures.

Establish objective, transparent selection criteria and apply them consistently. Document the scoring of each employee and the reasoning. Be prepared to explain and justify decisions to affected employees and, if necessary, to a tribunal.

Meet with each affected employee individually before notice is given. Listen to their concerns. Consider whether suitable alternative work is available. If collective consultation is required, notify representatives in writing and maintain the statutory consultation period. Provide regular updates and genuine opportunity for meaningful dialogue.

Calculate redundancy pay correctly using the statutory formula. Pay it on time. If redundancy payments exceed £30,000, advise the employee of the tax liability. Consider whether contractual redundancy in excess of statutory minimums is appropriate for senior staff or long-serving employees.

Communicate clearly and sensitively with all affected employees. The redundancy announcement should explain the business reasons, the selection process, what happens next, and what support is available. Signpost employees to redundancy support services, outplacement agencies, or employee assistance programmes. This demonstrates good faith and reduces tribunal claims.

The Employment Rights Act 2025 changes mean that the cost of getting redundancy wrong has doubled. Investing in proper legal advice at the outset is substantially cheaper than paying protective awards and unfair dismissal compensation at the end.

Sources and Further Reading

• ACAS Redundancy Guidance - Comprehensive guidance on redundancy law and procedure
• ACAS Redundancy Pay Calculations - Detailed explanations of statutory pay calculations and examples
• DLA Piper: Employment Rights Act 2025 Consultation on Collective Redundancy Trigger - Analysis of proposed changes to consultation thresholds
• Lewis Silkin: What's in the Employment Rights Act 2025 - Overview of legislative changes including protective award increases

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