What are the detailed steps for conducting a legally compliant layoff in a UK company?

11 June 2024

Layoffs are a reality of the business world. As a company owner or manager, you may find yourself in a position where you need to reduce your workforce. This could be due to various reasons such as economic downturns, business restructuring, or outsourcing. Layoffs are a crucial decision for a company and can have a significant impact on both the employees and the business. They should be executed with careful consideration and in compliance with all legal requirements. In the UK, there are specific regulations and procedures to be followed when making employees redundant. This article will guide you through the detailed steps for conducting a legally compliant layoff in a UK company.

Understanding Redundancy

Redundancy occurs when an employer reduces their workforce because a job or jobs have ceased to exist. This could be due to the business closing down entirely, the business moving location, or the need for fewer workers to execute a role.

Redundancy is a form of dismissal, and hence, the normal rules of dismissal apply. The employer must treat their employees fairly and follow the correct procedure. Failure to do so could lead to the employee(s) claiming unfair dismissal.

Employers have a duty to explore all possible alternatives to redundancy and must demonstrate that they have done so. If redundancy is unavoidable, employers must follow a fair redundancy process.

The Redundancy Process

The redundancy process involves a series of steps that ensure the redundancy is conducted legally and fairly. It is crucial that you understand these steps and follow them diligently.

Step 1: Identify the Reason for Redundancy

The first step in the redundancy process is identifying the reason for redundancy. This should be a legitimate business reason such as financial difficulties, technological changes that render the job obsolete, or a reduction in the requirement for specific work.

Step 2: Consultation

Once the reason has been identified, the employer must consult with the employees or their representatives. This consultation should include discussions about ways to avoid the redundancies, reduce the number of employees to be made redundant, and mitigate the effects of redundancies.

Step 3: Selection Criteria

To avoid claims of unfair dismissal, the employer must use a fair and objective method of selecting which employees will be made redundant. This could be based on skills, qualifications, experience, or performance.

Step 4: Notice of Redundancy

After the selection process, the employer must give the employees a notice of redundancy. The length of notice will depend on the employee's length of service.

Step 5: Redundancy Pay

Employees who have been made redundant are usually entitled to a redundancy pay. The amount will depend on the employee's age, length of service, and weekly pay.

Legal Rights of Employees

During a layoff process, it's important to consider the legal rights of your employees. Under UK employment law, employees have the right to a fair redundancy process. This includes the right to be consulted, the right to a notice period, and the right to redundancy pay.

Employees also have the right to be considered for any suitable alternative vacancies. If an employee is dismissed for redundancy while there are suitable alternative vacancies, this may be considered unfair dismissal.

Potential Pitfalls

While conducting a layoff, it's crucial to avoid potential pitfalls. These could include failing to follow a fair redundancy process, discriminating during the selection process, or failing to consult with employees or their representatives.

If an employer fails to follow the correct redundancy process, they could face legal action. To avoid such a scenario, it's highly advisable to seek legal advice during the process.


Laying off employees is a challenging task. However, by following the correct procedure and taking into account the legal rights of your employees, you can ensure a fair and legal process. Remember, it's always advisable to seek legal advice before starting a redundancy process.

Addressing Short Time Working and Lay-offs

Considering how delicate the process of laying off employees can be, it's essential to consider all viable alternatives. One such alternative is short time working or temporary lay-offs. These measures can be useful in situations where work is short for a brief period due to economic difficulties or changes in the company's operations.

Short time working denotes a reduction in employees' working hours, while temporary lay-offs refer to providing employees with less work than their employment contract stipulates for a particular period. Both these measures can be used if there's an explicit clause in the employment contract permitting such actions.

However, when implementing short time working or temporary lay-offs, it's significant that the employer respects the employees' rights. For instance, employees should receive statutory guarantee pay for any workless days. This guarantee pay is calculated based on a worker's normal daily wage, up to a maximum of £30 per day for a maximum of five days in any three-month period.

In case employees are put on short time working or laid off for four consecutive weeks or a total of six weeks in 13 weeks without any guarantee pay, they could claim redundancy payment from the employer. Therefore, employers must tread cautiously while considering these alternatives, always keeping in mind the legal implications.

Redundancy Payment and Trial Periods

When a worker is made redundant, they are entitled to a redundancy payment, often referred to as severance pay. This statutory redundancy pay depends on the employee's age, length of service, and weekly wage. Note that only employees with at least two years of service qualify for redundancy pay.

However, it's essential to bear in mind that if you offer a suitable alternative job to the employee and they refuse it without a good reason, you may not have to pay them redundancy pay. A suitable alternative job is one that bears similarity to the employee's previous job in terms of pay, location, hours, and skills required.

Once an offer for a suitable alternative job is made, there should be a trial period to verify if the new job is indeed suitable for the employee. This trial period typically lasts for four weeks. If it becomes apparent during the trial period that the job is unsuitable, the employee can still claim redundancy pay.


The process of laying off employees can be fraught with potential pitfalls, so it's crucial to understand the redundancy process thoroughly. Adhering to the letter of employment law is non-negotiable. From identifying the reason for redundancy and establishing a fair selection process to appreciating the statutory redundancy pay and the rights of your employees, every step carries equal importance.

If there are uncertainties, always seek professional legal advice. Failure to comply with the legal requirements could lead to an employment tribunal for unfair dismissal claims, which could be costly and time-consuming. Ultimately, the goal should be to ensure a legally compliant, fair, and respectful redundancy process. Remember, in tough times, the aim should be to provide as much support as possible to your employees while making necessary business decisions.

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