The cost of getting redundancy wrong

Redundancy is one of the highest risk processes an employer can manage. When it is handled poorly, the financial and legal consequences can be severe, and often far greater than businesses expect.

An individual redundancy dismissal can result in an unfair dismissal claim, with compensation currently capped at £118,223 per employee and this cap is to be removed in January 2027. Where redundancy selection criteria disadvantage a protected group, even unintentionally, employers can also face discrimination claims, for which compensation is unlimited.

The risks do not stop there. Failures around collective consultation can be extremely costly. Even where redundancies do not ultimately go ahead, employers can still face significant penalties. Under forthcoming changes to the Employment Rights Act, this is expected to rise to the equivalent of six months’ pay per affected employee. For many businesses, that level of exposure is simply not survivable.

Some employers may have managed a redundancy at some point. However, far fewer fully appreciate the technical detail that employment tribunals examine when things go wrong. Tribunals do not just look at the outcome; they scrutinise how decisions were made, whether consultation was genuine, how selection criteria were chosen and applied, and whether alternatives were properly explored.

What often catches employers out is not deliberate unfairness, but a lack of structure, rushed decision making, or assumptions that “common sense” will be enough.

The reality is that redundancy is not just a business decision, it is a legal process. Getting it right requires careful planning, clear documentation and a proper understanding of the obligations involved. Getting it wrong can expose a business to claims that far outweigh the cost of doing the process properly in the first place.

If redundancy is on the horizon, early advice and a structured approach are not a luxury, they are a critical safeguard.

Contact us at enquiries@121hrsolutions.co.uk We can advise and support in all areas regarding staff absence, termination, employment tribunals, and more.

The cost of getting redundancy wrong

121 HR Solutions Ltd