Redundancy vs Unfair Dismissal

Understanding the legal difference between genuine redundancy and unfair dismissal disguised as redundancy.

Overview

Redundancy and unfair dismissal are distinct legal concepts, but employers sometimes use 'redundancy' as a label for a dismissal that is actually motivated by other reasons. Understanding the distinction is critical: redundancy entitles you to statutory redundancy pay but forecloses most other claims, while unfair dismissal may allow you to challenge the dismissal and seek reinstatement or a larger compensatory award.

Side-by-Side Comparison

Genuine Redundancy

Cost: N/A — this is a right, not a claim

Time: Notice period plus redundancy payment on termination

Pros

Entitlement to statutory redundancy pay (based on age, weekly pay, and years of service) — up to 30 weeks' pay
Right to a 'trial period' in alternative employment
Right to reasonable time off to look for new work
Can be combined with a negotiated settlement (enhanced redundancy package)

Cons

The redundancy may still be unfair if the selection criteria were discriminatory or the process was flawed (e.g. failure to consult, failure to consider alternatives)
Statutory redundancy pay is capped (currently at a weekly rate of £700)
If you accept a redundancy payment, you cannot usually claim unfair dismissal for the same dismissal

Best For

Genuine restructuring situations where the role has genuinely ceased — provided the process was fair and selection criteria were objectively applied.

Unfair Dismissal Claim (Including Sham Redundancy)

Cost: Free to bring; potential legal costs if represented

Time: 6–18 months to a final hearing

Pros

If you win, the tribunal can award the basic award + uncapped compensatory award for discrimination; or capped compensatory award (currently £115,115) for unfair dismissal
Tribunal can expose a sham — if the role was re-filled quickly, this strongly suggests the redundancy was not genuine
No qualifying period for automatically unfair reasons (whistleblowing, pregnancy, union membership, etc.)
Can be combined with a discrimination claim if the selection was based on a protected characteristic

Cons

Requires 2 years' service for ordinary unfair dismissal
Time limit: 3 months less one day from dismissal
Stressful and time-consuming — tribunal proceedings average 6–18 months
Risk of losing — even poor-quality dismissals can be fair if the employer followed a reasonable process

Best For

Cases where your role was immediately advertised after you left, the real reason was your protected characteristic, or the selection process was discriminatory or predetermined.

Key Differences

AspectGenuine RedundancyUnfair Dismissal Claim (Including Sham Redundancy)

Legal basiss.139 ERA 1996 — diminished need for works.94 ERA 1996 — no fair reason or unfair procedure

Qualifying service2 years for statutory redundancy pay2 years for ordinary unfair dismissal; no minimum for automatically unfair

Financial remedyStatutory redundancy pay (capped at 30 weeks' pay at £700/week)Basic award + compensatory award up to £115,115; uncapped for discrimination

Key indicatorRole genuinely ceases to exist; fair selection; meaningful consultationRole re-filled; predetermined selection; protected characteristic used in selection

Acceptance of paymentAccepting redundancy pay does not prevent a tribunal claim if dismissal was also unfairA tribunal will reduce the compensatory award by any redundancy payment received

Our Recommendation

If you have been made redundant but believe your role still exists (or was re-filled), or if you were selected because of a protected characteristic, challenge the redundancy as unfair. Contact ACAS within 3 months of dismissal. Accept redundancy pay if offered — it does not waive your right to bring a tribunal claim. Seek legal advice to assess whether a sham redundancy argument has merit.