Checklist: Conducting a redundancy exercise (UK)

Introduction

This checklist will assist in-house counsel, private practice lawyers and human resource professionals who are responsible for conducting redundancy exercises in England, Wales and Scotland (GB). This checklist does not apply to Northern Ireland, where employment law is devolved to the Northern Ireland assembly.

This checklist addresses the following steps:

1. Evaluate the business need for redundancies
2. Prepare the required documentation
3. Identify affected employees
4. Consider and address practical issues
5. Ensure consistency throughout the process
6. Conduct meaningful consultation
7. Deal with practical impacts

This checklist can be used in conjunction with How-to guide: Overview of UK employment law and Quick view: Collective redundancy consultation.

Employers should be aware that the Employment Rights Bill 2024, introduced on 10 October 2024, aims to significantly enhance worker protections in the UK. Key provisions include granting day-one rights for unfair dismissal, paternity, parental, and bereavement leave, changes to sick pay and flexible working rights, protections against zero-hours contracts and restrictions on the use of ‘fire and rehire’ practices. New legislation will be introduced throughout 2025 and 2026. Further information can be found at UK Parliament: Employment rights bill and Employment Rights Bill: factsheets.

Step 1 – Evaluate the business need for redundancies

Step 2 – Prepare the required documentation

Step 3 – Identify affected employees

Step 4 – Consider and address practical issues

Step 5 – Ensure consistency throughout the process

Step 6 – Conduct meaningful consultation

Step 7 – Deal with practical impacts

Explanatory notes

Legal framework

It is not possible for employers in GB to lawfully dismiss an employee without:

• establishing a fair reason, which must be one of the five potentially fair reasons set out in the Employment Rights Act 1996 (ERA 1996) – conduct, capability, redundancy, illegality, or some other substantial reason (SOSR); and
• following a fair procedure.

See section 98, ERA 1996.

Employers that are seeking to make one or more employees redundant must comply with both requirements.

Employees who are made redundant are also entitled to receive a statutory redundancy payment (ERA 1996 part XI) calculated in accordance with a prescribed formula (see 4.3 below).

Step 1 – Evaluate the business need for making redundancies

1.1 Assess the employer’s current situation and needs

Assessing the business need for making redundancies is the initial and perhaps most fundamental step for an employer to consider.

It is essential for an employer to have a robust and genuine rationale for making redundancies, as any redundancy process based on an insufficient or non-genuine reason may lead to legal action. This could involve unfair dismissal claims and/or discrimination claims, based on arguments that the redundancy dismissal was used as a smoke screen to remove employees because of protected characteristics, or because they blew the whistle or were union members. Employers who have to defend such claims also face reputational risks.

What is necessary when evaluating the business need will depend on the motivation for making redundancies. For instance, an operational imperative to reduce headcount will have different evaluations from a change of strategic direction.

1.2 Establish the business reason for making redundancies

Once the employer has carried out the assessment referred to at 1.1, the employer should be able to establish its business reason for seeking to make redundancies. To ensure that the business reasons are justifiable, employers must consider the alternatives to redundancy, such as retraining, temporary layoffs, or reductions in working hours.

Step 2 – Prepare the required documentation

Preparing the required documentation during a redundancy process is essential to ensuring legal compliance, transparency and consistency. Detailed records can demonstrate compliance with legal requirements and can be pivotal in the event of legal challenges. The consistency achieved through the process outlined in this guide should ensure that every employee is treated fairly, and that decisions are unbiased.

The key documents employers will need for a redundancy process are outlined below.

2.1 Business case for redundancy

Prepare a detailed report outlining the reasons for considering redundancies, such as financial challenges, organisational restructuring or technological changes. It should include an analysis of the alternatives that were considered before opting for redundancies.

2.2 Legal and regulatory notices

A document or checklist can be helpful for employers to use to ensure the redundancy process is compliant and to confirm that all legal and regulatory requirements have been met, including any collective consultation obligations (see step 6 below), notice periods and payment of entitlements.

2.3 Core documents

Employers need to prepare formal letters that will be sent to the employees at each stage of the process to inform them of their proposed redundancy and provide information on the selection process, the consultation process and the reasons for any selection for redundancy.

2.4 Redundancy timeline

At the outset of the process prepare a schedule outlining the timeline of the redundancy process, including the dates of notification, consultation, notice periods and final termination.

Step 3 – Identify affected employees

Having assessed the business need for making redundancies, it should be easy to identify the specific areas or departments where redundancies are appropriate.

3.1 Define the selection pool

Employers must identify a group (or groups) of employees from which the redundancies will be made, based on clear, objective and non-discriminatory criteria. This is known as the ‘selection pool’.

Determine the selection pool by considering factors such as job functions, skills, department, or locations that align with the reasons for the redundancies.

3.2 Establish selection criteria

In situations where an organisation is closing a workplace or site, the entire workforce will likely be redundant and there will be no need to establish selection criteria (although employers must still follow the procedural steps outlined in step 6 below, and larger multi-site employers may need to consider ‘bumping’ – where an employee who is potentially at risk of redundancy is moved into another role currently being carried out by another employee, resulting in the other employee being made redundant). However, when the organisation is seeking to make a proportion of the selection pool redundant, it will be necessary to establish selection criteria.

The establishment of robust selection criteria is a cornerstone in executing a fair redundancy exercise.

3.2.1 Objective criteria

It is important to establish clear, objective and fair selection criteria for selecting the employees who will be affected by the redundancies. Employers must use objective criteria such as skills and qualifications, disciplinary records and performance evaluations.

Employers should avoid subjective criteria such as ‘attitude and personality’, or ‘potential for future growth’, as these can expose employers to unfair dismissal claims.

3.2.2 Avoid discriminatory criteria

Employers must be mindful of protected characteristics such as age, race, gender, disability, sexual orientation and religion when establishing selection criteria.

Employers must ensure that the selection process does not disproportionately impact any particular group, by evaluating the impact of the redundancy exercise on different groups of employees, including those with protected characteristics such as age, race, gender, disability or religion.

Examples of common failings in selection criteria include:

• Selection based on attendance – using attendance records as a selection criterion may disproportionately impact employees with disabilities, pregnant employees or those with health conditions who may have required time off for legitimate reasons.
• Applying ‘last in, first out’ (LIFO) policies – without consideration of other factors this could indirectly discriminate against younger employees, who may have less service time due to their age.
• Overlooking part-time employees for alternative employment – if part-time employees are less likely to be offered alternative employment or to be considered for redeployment, this could inadvertently discriminate against certain groups, such as women, who are statistically more likely to work part-time.

Step 4 – Consider and address practical issues

There are a number of practical issues for employers to consider during a redundancy process.

4.1 Assess impact on remaining workforce

Employers should consider how the redundancies may affect the remaining workforce. Will the remaining employees have the necessary skills and resources to meet the organisation’s needs? If not, the employer may need to consider retraining, restructuring and potential outsourcing of any remaining work that needs to be covered.

4.2 Review contractual provisions and collective bargaining agreements

Before implementing any redundancies, the employer should review the employment contracts of the affected employees. Some contracts may have specific provisions related to redundancy, such as notice periods or severance pay.

Employers should also check whether there are any workplace policies or collective bargaining agreements with trade unions that impact the redundancy process.

4.3 Consider the practical impact of redundancies

Employers should consider the details of employee severance packages, notice periods and any other entitlements of the redundant employees. Employers can calculate statutory redundancy entitlements using the government’s redundancy calculator. Many employers offer enhanced redundancy payments above the statutory minimum entitlements and may have committed to do so in a workplace policy or collective bargaining agreement.

Employers may also consider providing outplacement services or counselling to help employees transition smoothly out of their roles and into new opportunities.

Step 5 – Ensure consistency throughout the process

Where different managers are involved in scoring employees during a redundancy process it is vital to ensure there is a consistent approach. This is essential to fairness and to reduce the risk of disputes.

5.1 Establish clear criteria and guidelines

Employers should provide all managers tasked with effecting the redundancy process with clear guidelines and criteria for scoring employees. These guidelines should include detailed explanations and examples of how to apply the criteria. Employers should standardise the scoring system, such as by using a numerical scale, to ensure a common approach.

5.2 Scoring templates

Standardised scoring templates (also known as selection forms or selection matrices) can be utilised to guide managers through the process step by step. This ensures that all managers are following the same process and capturing the same information. Employers should ensure that all managers document their scoring decisions, including the reasons behind each score. This provides a record of the process and can help identify any inconsistencies.

5.3 Training

Employers should provide training sessions for all managers involved in the redundancy exercise. The training should cover the scoring criteria, how to apply them consistently and the importance of avoiding bias and discrimination.

5.4 Consider cross-checking and moderation

A cross-checking system involves another manager or HR representative reviewing the scores given by each manager. This helps identify and address inconsistencies or potential bias in the scoring process. Employers can hold moderation meetings where managers discuss and compare their scores and the rationale behind them. This provides an opportunity to identify discrepancies, align scores and ensure a consistent approach.

5.5 External review and centralised oversight

Employers might consider engaging an external consultant or employment lawyer (although this may be subject to legal privilege and care should be taken so as not to waive that privilege by revealing the advice obtained to employees or others) to review their proposed redundancy and scoring process and provide feedback on its consistency and fairness. Where possible, employers should also assign a central team or HR representative to oversee the redundancy process and monitor the consistency of scoring across different managers. They can provide guidance and support as needed.

Step 6 – Conduct meaningful consultation

A meaningful consultation process with affected employees is an integral component of any redundancy exercise, underscoring the values of respect, transparency and fairness. A consultation process offers employees an opportunity to voice their concerns, ask questions and explore alternatives to redundancy. The format, timing and duration of a consultation process will vary on a case-by-case basis (see Joseph De Bank Haycocks v ADP RPO UK Limited [2024] EWCA Civ 1291) depending on a number of factors, such as how many redundancies are proposed and the number of matters the employer needs to consult on. 

If an employer is proposing to make 20 or more employees redundant within any 90-day period at a single establishment they must follow ‘collective consultation’ rules. These rules are beyond the scope of this note but are detailed in Quick view: Collective redundancy consultation.

6.1 Notify affected employees

Employers must inform affected employees in writing that they are at risk of redundancy (‘at risk employees’) and provide details about the upcoming consultation process, including the schedule, format, and objectives. Employers must inform employees that at this stage of the process that the redundancies are only proposed, with no final decisions being made until the consultation is complete. It is important for employers to notify employees that they are at risk, and to commence consultation, at an early stage in the process, so that meaningful consultation can take place.

Employers should also consider how to manage communications with the wider workforce. It is usually sensible to provide high-level information about the redundancy exercise to the wider workforce to avoid speculation and rumours.

6.2 Provide information

Provide at risk employees with relevant information about the redundancy process, including the reasons for the proposed redundancies, the selection criteria, the number and categories of affected employees, and any proposed measures to minimise or mitigate the impact of the redundancies. There is no set formula for providing this information, with many employers opting to hold an initial meeting which is followed up with written details, often in the form of a Q&A.

6.3 Hold consultation meetings

Following the provision of the initial information, employers must conduct consultation meetings with affected employees. Consultation can take place with employees on an individual basis or may involve meetings with groups of employees where appropriate. Employers should allow employees to ask questions, provide feedback, and suggest alternatives to redundancy. Employers should engage in meaningful discussions and consider the input of the employees. There is no set number of meetings required, but employers should have sufficient engagement with the employees for meaningful consultation to take place.

6.3.1 Consider alternatives

During the consultation process employers should explore alternative solutions proposed by employees, such as voluntary redundancy, job sharing, reduced working hours, redeployment or retraining. Employers should assess the feasibility of these options and discuss them with affected employees. In some cases, employers may also consider inviting employees to volunteer for redundancy.

6.3.2 Review selection criteria

During the consultation process discuss the selection criteria and consider any objections or concerns raised by employees or their representatives.

6.3.3 Ensure individual consultation takes place

If some of the consultation meetings take place with groups of employees, employers should also ensure that they meet individually with each employee at least once, and in some cases on a second occasion to follow up on any questions raised by the employee about their scoring. Employers should consider allowing employees to be accompanied by a colleague or trade union representative during any consultation meeting.

6.4 Communicate outcomes

Once the consultation process is complete, employers must communicate the outcomes and decisions to affected employees. The employer should inform each employee individually of any agreed-upon alternatives or changes to the redundancy plan, or confirm that the employee has been selected for redundancy. Any employee selected for redundancy should be given written notice of their redundancy, including details of:

• the date on which their employment will terminate;
• any financial entitlements such as redundancy pay, notice pay, and accrued and untaken annual leave; and
• how to appeal their redundancy.

6.5 Support measures

During individual consultation meetings discuss any measures to support affected employees, such as outplacement services, assistance with job searches, retraining opportunities or the opportunity to undertake a trial period in any available vacancy, or financial support such as severance pay or extended benefits.

Employees facing redundancy have the statutory right to a four-week trial period in an alternative role (where one is available) offered by their employer without losing their redundancy rights if the alternative role is unsuitable (see section 138, ERA 1996).

6.6 Allow appeals against selection for redundancy

Employees must be allowed to appeal against their selection for redundancy. When confirming an employee’s selection for redundancy, employers should inform employees that they have the right to appeal and give them a timescale within which to submit in writing any appeals. This is usually between 7 and 14 days although policies can impose different time limits.

Step 7 – Deal with practical impacts

At the conclusion of a redundancy process employers must take steps to deal with the practical impacts set out below.

7.1 Financial aspects

Employers must ensure that all financial entitlements, including redundancy pay, outstanding salary, accrued leave, and any other contractual benefits, are accurately calculated and paid to employees.

Employers should clearly communicate to employees the timeline for the payment of these entitlements.

7.2 Workload issues and employer property

Employers should organise a structured process for the handover of ongoing projects, responsibilities and any essential information. Make arrangements for the return of any employer property such as ID cards, equipment and access keys.

7.3 Administrative issues

Prepare and provide all necessary documentation, including employment termination letters and any references. Employers may consider conducting exit interviews to gather feedback, which can be helpful for organisational improvement.

7.4 Legal and regulatory

Employers must ensure all legal and contractual obligations are met, including notice periods (which must either be worked or paid in lieu) and payment of any financial entitlements such as redundancy payments. Address issues related to data protection and confidentiality, including a review of any data held by the employer relating to the departing employees. Employers may also need to consider the impact of any post-termination restrictions, should any redundant employees take up new employment with a competitor, or set up a rival business.

Related Lexology Pro content

How-to guides:

Overview of employment law
How to carry out a fair termination of employment
Overview of workplace discrimination and harassment law
How to avoid disability discrimination in the workplace
How to comply with the duty to make reasonable adjustments in the workplace

Checklists:

Identifying, reviewing and updating the terms of an employment contract
Drafting a staff handbook
Employment law considerations during a recruitment process
Determining the difference between an employee, a worker and an independent contractor
Carrying out a disciplinary process
Managing multi-jurisdictional redundancies in Europe
Employment, immigration and tax considerations when dealing with cross-border working
Carrying out a capability process

Quick views:

Protected characteristics under the Equality Act 2010
Key players in collective labour law – UK, Germany, Italy, France and the Netherlands
Collective redundancy consultation

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