Redundancy Advice for Employers: Navigating Change in 2025 and beyond

Redundancy remains one of the most challenging processes for employers and HR professionals. It’s not just about compliance—it’s about balancing legal obligations, business needs, and the human impact of job loss. In 2025, this challenge is amplified by significant legal reforms, economic pressures, and heightened employee expectations. Here’s what you need to know to manage redundancies lawfully, fairly, and compassionately.

Why Redundancies Are Back on the Agenda

Economic uncertainty, rising operational costs, and technological transformation are driving many organisations to restructure. The increase in National Insurance contributions from April 2025 and the continued integration of AI and automation have prompted businesses to reassess workforce needs. Against this backdrop, redundancies are becoming more common—and with this, the increased risk of Employment Tribunal claims when things go wrong.

Legal Framework: What’s Changed and What’s Coming

Current Law

• Redundancy is a potentially fair reason for dismissal under the Employment Rights Act 1996, provided the process is genuine and fair. Employers must:
• Demonstrate a genuine redundancy situation (e.g., business closure, reduced need for certain roles).
• Follow a fair selection process using objective criteria.
• Consult with affected employees.
• Offer suitable alternative employment where possible.
• Pay statutory redundancy pay to eligible employees.

Recent Updates

• Extended Redundancy Protection for Family Leave: Since April 2024 the right of first refusal for suitable available roles in a redundancy situation (previously available to those on maternity, adoption and shared parental leave) has been extended to pregnant employees and employees who have recently returned from a period of maternity, adoption, or shared parental leave, essentially protecting them for a period of 18 months from the child’s birth / adoption placement . Since April 2025, similar rights have been afforded to those taking and returning from a period of neonatal care leave.
• Statutory Redundancy Pay Cap: From April 2025, the weekly pay cap for redundancy calculations increased to £719.

On the Horizon: Employment Rights Bill

The Employment Rights Bill, expected to receive Royal Assent in late 2025, will introduce sweeping changes including:

• Day-One Unfair Dismissal Rights: Employees will gain the right to claim unfair dismissal from day one (the shorter initial probationary period with a lighter dismissal procedure will not apply to redundancy dismissals).
• Collective Consultation Changes: Thresholds may apply across multiple sites (rather than the existing regime where the employee count is restricted to one ‘establishment’), and penalties for failing to consult could double from 90 to 180 days’ full pay per employee.
• Fire and Rehire Restrictions: Dismissals for refusing certain contractual changes, including reductions to pay and time off, pension changes and certain changes to working hours, will be automatically unfair unless strict justification tests are met.
• Additional Dismissal Protection for Pregnant Employees: It will be unlawful to dismiss women who are pregnant or on maternity leave and for six months after they return to work - except in specific circumstances. Although the Government has not said what these specific circumstances might be, redundancy is likely to be one of them.

These changes will come in over the course of the next couple of years.

Best Practice for HR Professionals

1. Build a Robust Business Case

Redundancy decisions must be based on genuine business needs, not performance issues. Document the rationale clearly—this will be critical if challenged later.

2. Plan Early and Communicate Clearly

As soon as redundancies are contemplated, engage legal advisers and develop a clear timeline and communication strategy, ideally under legal privilege. Communications with employees are critical: those who feel informed are less likely to challenge the process.

3. Consult Properly

• Collective Consultation: Mandatory if 20 or more redundancies are proposed at one establishment within 90 days. The Government must be notified using an HR1 form—failure to do so is a criminal offence.

• Individual Consultation: Always required, even for small-scale redundancies and even if collective consultation has been carried out.

4. Apply Fair Selection Criteria

Use objective, measurable factors such as skills and qualifications, performance records and attendance (excluding absence for disability or pregnancy-related illness and family leave). Avoid criteria that could indirectly discriminate against protected groups such as atypical working hours/patterns.

5. Explore Alternatives

Before confirming redundancies, consider redeployment to other roles, reduced hours or job sharing and voluntary redundancy schemes. Remember your obligation to offer any suitable available vacancy to pregnant employees and those who are on or have recently returned from family leave (see above).

6. Support Affected Employees

Offer reasonable time off to seek work or training, clear information on redundancy pay and notice periods and, where applicable outplacement support.

7. Manage the Survivors

Redundancy affects morale beyond those leaving. Communicate openly with remaining staff to maintain trust and engagement.

Practical HR Checklist

• Confirm genuine redundancy situation and document business case.
• Identify affected roles and selection pool.
• Prepare objective selection criteria and scoring matrix.
• Submit HR1 form and collectively consult if 20+ redundancies.
• Notify and consult with employees.
• Explore redeployment and alternatives.
• Provide support and maintain communication with remaining staff.

Common Pitfalls to Avoid

• Failing to Consult Properly: Skipping or rushing consultation is one of the most common reasons for unfair dismissal claims.
• Using Discriminatory Criteria: Avoid criteria that disadvantages those with protected characteristics.
• Not Offering Suitable Alternative Roles: Especially critical for employees on family leave—failure here can lead to automatic unfair dismissal.
• Poor Documentation: Lack of evidence for decisions can be fatal in an Employment Tribunal.
• Neglecting Employee Wellbeing: Overlooking the emotional impact can damage morale and reputation.

Key Takeaways for 2025

• Stay Ahead of Legal Changes: The Employment Rights Bill will reshape redundancy law—start reviewing your policies now.
• Document Everything: From business rationale to consultation notes, good records are your best defence.
• Engage Legal Advisers: Benefit from privilege when making sensitive decisions and assessing risk.

Final Thought

Redundancy is never easy, but with careful planning, legal compliance, and a people-first approach, HR professionals can navigate this process responsibly. In a year of significant employment law reform, staying informed and proactive is essential.