Employers have to follow specific procedural and legal obligations when making people redundant. This includes giving a minimum period of notice to affected workers.
The following guide provides an overview of the rules relating to redundancy notice periods and how to avoid issues in the redundancy process.
Redundancy notice periods
If you are making an employee redundant, as part of a fair and lawful redundancy process you must provide them with their statutory entitlements. This includes paying them statutory redundancy pay and giving a minimum set notice period before the contract of employment can be brought to an end.
The statutory redundancy notice periods are as follows:
- At least 1 week’s notice if the individual has been employed between 1 month and 2 years
- 1 week’s notice for each year if they have been employed between 2 and 12 years
- 12 weeks’ notice if they have been employed for 12 years or more
These are the minimum periods required by law to both voluntary and compulsory redundancies. Employers cannot give employees less redundancy notice than they are entitled to. You can give more notice, for example if the employment contract provides the employee with a longer redundancy notice period.
Redundancy notice period & redundancy pay
The employee will be entitled to be paid throughout their redundancy notice period, or to receive payment in lieu of notice where permitted by their contract of employment.
If an employee works their notice, they will be entitled to the payment of their wages as normal, in accordance with their contract of employment. If you make a payment in lieu instead, this should still be based on the employee’s normal rate of pay, including any contractual entitlements, such as pension contributions.
How is redundancy pay calculated?
If an employee has worked for you continuously for at least 2 years they will be entitled to a redundancy payment. Subject to satisfying this continuous service requirement, and assuming there is no suitable alternative employment available to them, the pay-out will be calculated as follows:
- 0.5 week’s pay for each full year the employee was under 22
- 1 week’s pay for each full year they were 22 or older, but under 41
- 1.5 week’s pay for each full year they were 41 or older
The overall length of service is capped at 20 years, with the statutory weekly pay capped at £643 from 6 April 2023. As such, the maximum statutory redundancy payment and unfair dismissal basic award is £19,290. An employee’s contract of employment may make provisions for higher payments, which the employer would have to adhere to or risk breaching the contractual terms.
Does an employee have to work their redundancy notice period?
There are a few reasons why an employee might not want to work their redundancy notice period. For example, they may have already found a new job, or they may not feel comfortable working for their employer any longer. Additionally, they may be able to negotiate a better PILON payment if they agree to leave early.
By law, employees do not have to work their redundancy notice period, however, if they do not work their notice period, they will not receive any PILON payment that they would otherwise be entitled to.
The employer may wish to ask an employee not to work their notice period by paying them PILON or through a specific redundancy settlement agreement.
How to follow a lawful redundancy process
It is crucial that you follow a fair procedure when making redundancies. In addition to providing employees with the statutory minimum redundancy notice period, you must ensure that the reasons for redundancy are lawful, that you follow the correct consultation rules and adopt a fair and objective procedure to select individuals for redundancy.
As for deciding which employees to make redundant, you do not need to follow a selection process if an employee’s job no longer exists, for example, where your business is being shut down and the entire workforce is being made redundant.
Otherwise, you must adopt a fair way to decide who will be dismissed by redundancy. Common methods of redundancy selection include:
- Inviting employees to volunteer for redundancy, ie; self-selection
- Devising and applying a redundancy matrix with lawful selection criteria such as experience, disciplinary records, performance and last-in, first-out status.
You must not discriminate against any individual, or groups of individuals when selecting for redundancy, for example, because of someone’s age, gender, sexual orientation, disability, pregnancy, or race and religion. It would also be unfair, for example, to dismiss an employee by redundancy because they are a woman or have a disability.
If you are making up to 19 redundancies, there are no set rules as to how you should carry out a consultation, although you are still required to discuss with affected employees why they are being made redundant and any alternatives to this, such as reduced hours. It is generally advisable to follow the rules on collective redundancies, even where there are fewer than 19 redundancies being made, to reduce the risk of unfair dismissal complaints.
If you are making 20 or more redundancies at the same time, the collective redundancy rules will apply. The required length of a collective consultation will significantly extend the period in which you can reach a conclusion to the whole process, where the statutory minimum is as follows:
- For 20 to 99 redundancies, the consultation must start at least 30 days before any dismissals take effect
- For 100 or more redundancies, the consultation must start at least 45 days before any dismissals take effect
Alternatives to redundancy
Redundancy should always be the measure of last resort for employers. Letting people go is unpleasant for everyone involved; redundancy impacts workforce morale and company reputation, and the redundancy process is fraught with legal risk. Before embarking on redundancies, employers should consider alternative solutions:
If employment costs are a concern, consider putting a hold on new recruitment activity. This could include withdrawing offers of employment.
By law, employers should not force employees to take unpaid leave, save except where this is expressly permitted within their contract of employment. However, given the risk of redundancy, you may be able to negotiate an agreement with your staff to temporarily take unpaid leave in the short-term.
In the absence of any prior contractual arrangement or subsequent agreement to vary the terms of an employee’s contract, by forcing someone to take a leave of absence without pay would amount to a breach of contract.
Strictly speaking, it would be open to you to dismiss an employee for any refusal to co-operate, although this would potentially expose you to an unfair dismissal claim for any employee with more than 2 years’ continuous service. You would also be liable for any pay in lieu of notice.
Layoffs & short-term working
If the business is facing reduced demand and labour costs are too high for current needs, one option could be to seek to reduce workers’ hours, rather than dismissal. This would require a considered approach to ensure you are meeting your legal obligations.
Short-time working, for example, is when you reduce the hours of some or all of your employees, or pay them less than half a week’s pay.
By law, employers can lay off employees if:
- This is permitted in the employee’s employment contract
- There is a national agreement for the industry
- There is an agreement between your workplace and a trade union
- There is custom and practice in your workplace, with clear evidence
- An agreement is reached with any affected employee to vary the terms in their employment contract to include layoffs or short time working
If you are looking to temporarily suspend a worker’s employment, unless there is prior agreement within the contract of employment or otherwise, or will again need the agreement of your staff to vary their contractual terms to include a temporary suspension from work without pay.
That said, even though there is no upper limit on how long a layoff can last, an employee can resign and apply for redundancy pay if the layoff lasts for
- 4 or more consecutive weeks in a row, or
- 6 or more weeks in a 13-week period, where no more than 3 are in a row
They will also be entitled to a minimum guarantee pay. You may also find that any employee, whose express agreement you need to enable you to lay them off, will be looking for a much higher rate than the statutory minimum.
When dealing with workforce issues, it is important to consider the full legal risks and rights of your workers. Our specialists are on hand to help you assess the circumstances and understand the options that are in your best interests, not least to avoid unwanted tribunal claims and damage to reputation.
As employment law specialists, we can assist if you have any queries relating to redundancy, changing contract terms and working arrangements or settlement agreements, particularly in complex situations. Speak to our experts today for advice.
Redundancy notice period FAQs
Do employees have to work their redundancy notice period?
An employee may not be required to work their notice period if their contract of employment allows their employer to provide pay in lieu of notice. Where a business is forced to close, or shuts down unexpectedly, an employee will be entitled to what they would’ve been paid if they had been able to work.
What is the statutory notice period?
The minimum statutory redundancy notice periods are 1 week’s notice if employed between a month and 2 years, 1 week’s notice for each year if employed between 2 and 12 years, and 12 weeks’ notice if employed for 12 years or more. The contract of employment may provide for longer periods.
Do you get paid notice period when made redundant?
When made redundant an employee is still entitled to their notice period or to pay in lieu of notice (PILON). The PILON calculation will be based on the minimum statutory redundancy notice periods of between 1 to 12 weeks.
Last updated: 28 October 2032