Redundancy Clause in UK Contracts: What It Means & Example Wording

When to Include a Redundancy Clause

• In employment contracts where the employer wants to set out its redundancy process and any enhanced redundancy terms from the outset
• In contracts for roles in industries or sectors prone to restructuring or cyclical downturns
• When offering enhanced redundancy as a recruitment incentive for senior employees

Example Wording

This example wording is illustrative only. Customise it to your specific circumstances and consider seeking legal advice.

Is a Redundancy Clause Enforceable in the UK?

Redundancy rights are primarily statutory under the Employment Rights Act 1996. Statutory redundancy pay is calculated as: 0.5 week's pay per year of service under age 22, 1 week's pay per year of service aged 22-40, and 1.5 weeks' pay per year of service aged 41 and over, subject to a maximum of 20 years' service and a statutory cap on weekly pay (reviewed annually). Enhanced contractual redundancy terms are enforceable as contractual obligations. Employers must follow a fair process — failure to do so can result in unfair dismissal claims. Collective redundancy (20+ employees within 90 days) triggers additional obligations to consult with trade union or elected employee representatives.

Common Mistakes

• Failing to follow a fair selection process — using purely subjective criteria or targeting specific individuals without genuine business reasons will make the dismissal unfair
• Not searching for suitable alternative employment within the organisation before confirming redundancy — this is a key requirement of a fair process
• Ignoring collective consultation obligations — making 20 or more employees redundant within 90 days without consulting employee representatives can result in a protective award of up to 90 days' gross pay per employee