How to Handle Redundancies Fairly and Legally in 2025

Lady dealing with long term absence of an employee

At the end of last year, the Government announced changes in costs that all businesses in the UK are set to face from April 2025. These include an increase in tax and National Insurance.

This has put increasing pressure on companies to review their financial situation, which could potentially lead to restructuring the way the business operates and/or redundancies in order to manage these new financial pressures. We look at alternative options and what you should consider in terms of redundancies.

I need to take action – can I avoid redundancies?

Before proceeding with a redundancy situation, there are some alternative solutions that can be explored:

Limiting or banning recruitment for new positions
Limiting or banning overtime
Exploring if employees would work flexibly for a temporary period
Exploring job sharing for specific positions
Exploring short-time working or a temporary layoff situation

I’m still going to need to make some employees redundant. What do I need to consider?

It is important that you plan carefully before proceeding with redundancies to avoid both unnecessary panic within the workforce and any potential unfair dismissal claims from employees who have over two years’ service. First steps are:

Identify a fair reason for redundancy. Generally, this could be either financial difficulties faced by the business or a severe downturn in work.
Establish who would be affected by the potential redundancy. If this is in a department or employees, those who complete the same job or use similar skills would need to be grouped together in a pool. You then need to understand how many of those similar roles may need to be made redundant.

What if it is only one employee? Or a whole department?

If there is only one employee, this would be classed as a non-pool process, as there are no other employees involved. Again, if a whole department, team or company is closing down then you would need to complete a non-pool process, as there would be no element of scoring that would be required.

Is there any other legislation I need to be aware of?

When planning, be mindful of the Pregnancy and Family Act 2023; this gives employees on maternity or paternity leave 18 months as a protected period, which starts from the expected week of childbirth. This doesn’t mean these employees can’t be included in the redundancy, but they do have the right for first refusal for any alternative job roles.

What happens next?

You will then need to complete a series of consultation meetings with the employees: first a group meeting and then a series of individual consultation meetings. You need to explain the reasons why the company is exploring this process, why the employee is affected and look at ways to avoid redundancy, taking into account the employee’s skills and any alternative available job roles.

How do you decide who gets made redundant?

A scoring process may have to be completed in a pool process to identify who would be at risk of being made redundant. Ideally the scoring process should be completed by two independent managers to avoid any potential bias. The criteria for scoring could be based on:

Standard of work
Skills, qualifications and experience
Employee’s attendance: any absence related to either maternity or paternity leave or a medical condition should be excluded, to avoid any potential discrimination claims
Disciplinary records

Can the employee respond?

Once the employees with the lowest scores have been identified, you should give the employees the opportunity to challenge these scores. Once all scoring has been confirmed, the company can conclude the redundancy process by confirming this formally to the employee.

Do I need to pay a redundancy package? How is that calculated?

Employees of over two years would be entitled to a redundancy package, in addition to their contractual notice. Any redundancy payment will be based on the employee’s age, length of service and earnings before tax.

We strongly recommend that any client should contact their HR Advisor for specific advice regarding their redundancy situation to avoid any potential unfair dismissal or discrimination claims.

Disclaimer

The information and any commentary contained within these updates are for general information purposes only and do not constitute legal or any other type of professional advice. Stallard Kane does not accept and, to the extent permitted by law, exclude liability to any person for any loss which may arise from relying upon or otherwise using the information contained in these blogs. If you have a particular query or issue, you are strongly advised to obtain specific, personal advice about your issue and not to rely solely on the information or comments in these updates.