Redundancy vs Dismissal: What Is the Difference?
Understanding the difference between redundancy and dismissal is vital for UK employers and employees alike. Knowing when a role is simply no longer needed versus when performance or behaviour is at fault can save time and money.
Redundancy occurs when an employer no longer requires a job role, not due to any fault or misconduct of the employee. This might be due to business closure, reduced workload, or automation. Dismissal, on the other hand, can occur when an employee’s performance falls below expectations or due to misconduct. Both have legal implications, but the process and employee rights differ significantly.
- Redundancy happens when an employer no longer needs a job role; dismissal can be due to misconduct or poor performance.
- Employers must consult with employees before making redundancies and offer alternative roles if possible.
- Employees eligible for unfair dismissal claims have two years of continuous service.
Let's consider a small marketing agency, 'Bright Spark Media', needing to make a redundancy.
- The Trigger: Bright Spark Media has lost a major client, reducing the overall workload. The role of Junior Social Media Manager is no longer needed. This is a redundancy situation, not a dismissal due to performance.
- Consultation: The agency has 15 employees. They must consult with the Junior Social Media Manager and any relevant employee representatives. Let’s assume they hold three consultation meetings over a two-week period.
- Alternative Roles: The agency explores if the Junior Social Media Manager could fill a role in the content creation team, but the skill set doesn’t match.
- Redundancy Payment: The employee has worked at Bright Spark Media for three years. They are entitled to statutory redundancy pay. Let's say the employee earns £25,000 per year. The maximum statutory redundancy pay is calculated as follows:
* Age under 22: £25,000 x number of years of service.
* Age 22-40: £500 x number of years of service.
* Age 41+: £643 x number of years of service.
In this case, the employee is 30 years old and has three years of service, so the statutory redundancy pay is £500 x 3 = £1,500.
- Notice Period: The employee is entitled to a notice period, which is typically one week for each year of service, up to a maximum of 12 weeks. In this case, the notice period is three weeks.
Statutory Redundancy Pay Calculator
Statutory Redundancy Pay Calculator
| Stage | Value | Formula |
|---|---|---|
| Annual Salary (£) | £25,000 | Input |
| multiplier | 0.06 | Annual Salary (£) × multiplier (£25,000 × 0.06) |
| Statutory Redundancy Pay (£) | £1,442 | £25,000 × 0.06 = £1,442 |
What triggers redundancy in the UK?
Redundancy in the UK isn’t simply about reducing staff numbers. It’s a specific legal term that applies when a job role itself is no longer required by the employer. This can happen for several reasons. Business closure is an obvious trigger, but redundancy also occurs due to restructuring, reduced demand for a service, or the introduction of new technology like automation. A company might reduce its headcount overall, leading to redundancies, or it might eliminate specific roles, even if other positions remain available.
Importantly, redundancy isn’t about the employee’s performance. Even a high-performing employee can be made redundant if their role is no longer needed. Employers are still legally obliged to follow a fair process, including consultation and consideration of alternative roles within the company. Failure to do so could lead to claims for unfair dismissal.
How does dismissal differ from redundancy?
Dismissal, unlike redundancy, is linked to the employee’s conduct or capability. An employee might be dismissed for poor performance if they consistently fail to meet the required standards for their role, even after receiving support and training. More seriously, dismissal can occur due to misconduct, such as theft, fraud, or gross negligence. Fair reasons for dismissal also include capability, conduct, redundancy, illegality, and some other substantial reason.
The process for dismissal is different from redundancy. While redundancy requires consultation to explore alternatives, dismissal often involves an investigation and disciplinary hearing. The employer must demonstrate that the dismissal was fair and justified, following a reasonable process. Unlike redundancy, where the role is eliminated, dismissal focuses on the employee’s actions or abilities.
What are the employer's obligations during redundancy?
When considering redundancies, UK employers have important legal duties to follow. First and foremost, you must consult with any employees who are at risk of redundancy. The amount of consultation needed depends on how many people you propose to make redundant, the more roles affected, the longer the consultation period should be.
Beyond consultation, you're legally obliged to consider all possible alternatives to redundancy. This means looking at options like offering suitable alternative roles within the company to those at risk. Could employees be retrained to fill different positions? Is voluntary redundancy a viable option?
Remember, a fair process is crucial, regardless of an employee’s length of service. You must use objective criteria when selecting roles for redundancy, and document every step of the process. This includes records of consultation meetings and the reasoning behind any decisions. Failing to follow the correct procedures can lead to legal challenges.
When can an employee claim unfair dismissal?
If an employee believes they’ve been unfairly dismissed, they have the right to claim unfair dismissal, but there’s a qualifying period. Generally, employees need to have two years of continuous service with the same employer before they can make a claim. This gives employers time to address any performance or conduct issues, and employees time to build a solid work history with the company.
There are important exceptions to this two-year rule. For example, if an employee is dismissed for whistleblowing, reporting wrongdoing at work, or because of discrimination, they may be able to claim unfair dismissal regardless of their length of service.
To successfully claim unfair dismissal, an employee must show their employer either didn’t have a fair reason for the dismissal, or that the dismissal process itself wasn’t fair. This means the employer should have a valid reason like poor performance, misconduct, or redundancy, and they must have followed a reasonable process, including a fair investigation and a chance for the employee to respond. A tribunal will decide if the dismissal was fair and, if not, determine any compensation owed.
It's vital to understand the legal distinctions between redundancy and dismissal. Employers should meticulously document every stage of the process and seek legal advice to ensure compliance. Employees should be aware of their rights and seek guidance if they believe they've been unfairly treated. Proactive communication and a transparent process can mitigate risks for both parties.
Watch on YouTube
Redundancy vs Dismissal: What Is the Difference?
Prefer to watch? The same answer, under five minutes, on YouTube.
Read the transcript
Most managers treat redundancy and dismissal as two words for the same outcome. They are not. Confusing them can expose your business to a legal claim before you have even realised your mistake.
The fundamental distinction: redundancy is about the role, dismissal is about the person. Redundancy happens when a job ceases to exist. The business closes a site, reduces headcount, or automates a function. The employee has done nothing wrong. The role is simply no longer needed. Dismissal happens when the issue is with the individual. Poor performance, misconduct, or a breach of company policy. The role may continue. The employee does not. The financial consequence differs too. An employee with at least two years of service is entitled to a statutory redundancy payment. A dismissed employee receives notice pay and pay for untaken leave, and nothing more. Different routes, different obligations, different legal frameworks.
Getting the label right is only half the job. You then have to run the correct process, and that is where most employers come unstuck. For redundancy, you need a genuine business reason: the role is truly disappearing, not being quietly refilled under a different title. You must consult with the affected employee individually before any decision is made. If you are proposing twenty or more redundancies at one site within ninety days, collective consultation rules apply and the obligations become significantly more demanding. For dismissal, you need a fair reason and a fair procedure. That typically means documented warnings, a formal hearing, and the right of appeal. Skipping steps does not make the dismissal invalid, but it gives a tribunal grounds to find it unfair. The right label with the wrong process still exposes you.
Here is the risk that catches employers out most often. A manager wants to move a poor performer on, but the dismissal process feels slow. So they frame it as redundancy instead. A tribunal will look past the label. If the role was filled again shortly after, if selection targeted one individual, or if no genuine consultation took place, the redundancy may be found to be a sham. At that point you face a potential unfair dismissal claim, and using the wrong process to avoid the right one makes your position harder, not easier. Disguising a dismissal as redundancy does not remove your obligations. It adds to them.
One question resolves this: is the role disappearing, or is the person the problem? If the role is genuinely disappearing, the route is redundancy. Establish the business reason, consult properly, and do not refill the position. If the person is the problem and the role continues, the route is dismissal. Follow a fair procedure: document, warn, hear, and allow appeal. Never use one to avoid the obligations of the other. And if you are unsure which applies, take legal advice before you act. A short call with an employment solicitor costs considerably less than getting this wrong.
If that was of value, subscribe to the channel for one real business question answered every video. For the same clarity in writing, the website and newsletter is at www.fiveminutebusiness.com.
Business answers,
tailored to who you are.
Pick the vault that sounds like you. We'll send its answers — and every new one — straight to your inbox, in order. Free, nothing gated.
We reviewed 35 sources across 8 research queries, including 5 primary-authority publishers, and selected 10 for citation below (5 primary).
- gov.uk, Making staff redundant: Overview - GOV.UK
- gov.uk, Making staff redundant: Redundancy consultations - GOV.UK
- gov.uk, Redundancy: your rights: Being selected for redundancy - GOV.UK
- gov.uk, Redundancy: your rights: Overview - GOV.UK
- acas.org.uk, Types of dismissal - Dismissals - Acas
- ARAG Law, ARAG Law
- Banner Jones Solicitors, Banner Jones Solicitors
- Mullis & Peake Solicitors, Mullis & Peake Solicitors
- Compensation / Redundancy Ready Reckoner - Horizon
- Redundancy vs. Dismissal: What is the difference?