BLOG
Are you in a redundancy situation?
Written by Danielle Scott on 9 January 2023

The UK economy is on course to shrink in 2023, forcing UK businesses to make some difficult decisions regarding their workforce. With labour costs accounting for as much as 70% of total business costs, many employers will be forced to reduce their headcount in an attempt to stay afloat.
Redundancy is a particularly complex area of employment law, and those who find themselves facing a redundancy situation may be confused about the legalities involved. First and foremost, it can be hard for organisations to establish when redundancy applies.
So, are you actually in a redundancy situation?
The business case
When contemplating making redundancies, the first item on the agenda for employers should be to give thorough consideration to the practicality, viability, and necessity of it. While many businesses are facing financial hardship in 2023, and redundancy may seem like the only viable way forward, this is still a consideration that should always take place.
More specifically, every redundancy situation should start with a plan. Employers must consider necessity, what alternatives have been considered or implemented, how many redundancies are needed, where will they come from, how people will be selected, and what the timeline is.
Many of these points may well be flexible and, as part of a proper consultation process, may be liable to change following discussion with employees. That said, it is still vital to start with some kind of plan of what you are trying to achieve and why. As employment lawyers, we will always want to see a client’s redundancy rationale as a first port of call to make sure their business case is robust, and to better understand what they are trying to achieve.
While an Employment Tribunal won’t look behind the decision to make redundancies or judge whether or not they were commercially sound (instead being concerned about the process, the consultation, the pooling, the selection criteria and the search for alternatives), having a sound business case is still important for your own planning requirements, as well as to explain the ‘why’ to your workforce. The latter will be crucial to avoiding disputes.
Do you need support?
Speak to us for an honest, no obligation chat on:
0345 226 8393 Lines are open 9am – 5pm
When is redundancy an option?
Employers must also understand what constitutes a redundancy situation.
Under the Employment Rights Act 1996, there are three situations in which an employee may be dismissed due to redundancy. These are:
- If the employer has ceased, or intends to cease, trading (i.e a total business closure);
- If the employer has closed, or intends to close, a particular site; or
- If there is a reduced requirement for employees to carry out work of a particular kind.
In order to legitimately issue a redundancy, one of these scenarios must apply. In other words, redundancy cannot be used as a way to evade a problem or as a convenient workaround to get rid of a troublesome or underperforming employee; these situations must be dealt with through the correct route, i.e. via the disciplinary or performance management procedure.

Total versus temporary closures
The ‘total closure’ scenario is self-explanatory. If a business is due to close completely, then that will amount to a redundancy situation. Here there is no issue about pooling, selection, or alternative employment, as it’s likely everyone will be made redundant.
However, this can include temporary closures too, which is where it gets complicated. A common example of this would be if the site was closed for refurbishment. Whether this sort of situation would provide grounds for redundancy would be fact-specific and determined on a case-by-case basis.
When it appears that the employer is replacing one business with another, a Tribunal may have to decide whether the new business is sufficiently different in nature from the original one. If so, the dismissal of the employer’s original employees will be for redundancy. Again, this will come down to a question of fact.
A site or workplace closure is, again, relatively self-explanatory. For instance, if a company owns a series of factories and closes one of them, then that is likely to be a redundancy situation.
One caveat that often arises is the question of which site the employee actually works at and if they should even be affected at all. The general consensus here is that the Tribunal will largely ignore what the contract says and instead look at the reality of the situation.
When considering this type of redundancy, the starting point is the requirements of the business. This implies a commercial judgement, on the employer’s part, about the priorities of the business and about which kind of work has become surplus to requirement.
TUPE
When it comes to a business closure, employers must also be mindful of the Transfer of Undertakings (Protection of Employment) Regulations, also known as TUPE.
With business closures, especially those being instigated as part of a pre-pack administration, TUPE will apply and the workforce will transfer to the new owner rather than being made redundant.
These situations can be very fact specific, so you always want to run any sales/takeovers past your legal advisers to be sure that you don’t accidentally make employees redundant, when they are legally entitled to something else.
Related Content

FREE WEBINAR
Redundancy and Restructuring | People, Process and Protecting Your Business
Get redundancy right with WorkNest
From determining whether your organisation is in a genuine redundancy situation to understanding redundancy pay and settlement agreements, we assign named experts who will help you transform complex legislation into a series of manageable steps. Learn more about our redundancy support.
Sign up for the latest news & insights
Resources
Latest News & Insights

Do ADHD and autism qualify as a disability? | Understanding the Equality Act 2010 and new case law
BLOG Written on 14 July 2025 When an employee discloses that they have ADHD or autism, many employers find themselves asking: Is this classed as

Privacy vs practicality | Are you entitled to know the reason for an employee’s sickness absence?
BLOG Written on 14 July 2025 When an employee calls in sick, it’s natural for employers to want to understand the situation. However, questions around

Education | What school leaders need to know about September 2025 pay changes
BLOG Written on 9 July 2025 As we near the end of the summer term, headteachers, school business managers and senior Trust staff, along with

Employment Rights Bill Implementation Roadmap | Your quick guide to what’s coming when
BLOG Written on 4 July 2025 The Employment Law Bill promises the biggest shake-up of UK employment law in decades. Having recently cleared the Committee

Fewer lives lost | Key takeaways from the HSE’s 2024/25 fatal injury statistics
Blog Written on 3 July 2025 The Health and Safety Executive (HSE) has published its provisional fatal injury statistics for 2024/25, revealing a welcome decline

Candidate feedback | The secret superpower that can strengthen your recruitment process
BLOG Written by Danielle Fargnoli-Read on 25 June 2025 Let’s be honest – recruitment can be tough. You spend a lot of time writing job

New sentencing guidelines could see fines soar for very large organisations
BLOG Written on 23 June 2025 On 1 June 2025, the Sentencing Council introduced important amendments to its guidelines for health and safety, corporate manslaughter,

Don’t rely on AI | 5 areas where employers should exercise caution
BLOG Written by Amy Waters on 20 June 2025 Artificial Intelligence (AI) tools are transforming the way employers manage their operations, from streamlining recruitment to

Can employers lawfully demote employees?
BLOG When faced with performance or conduct issues, employers may look for alternatives to dismissal – one of which is demotion. This usually means reducing