The Employment Rights Act 1996 sets out the conditions under which redundancy may occur. In broad terms redundancy arises when: employers cease to carry on the business which employs people; the business is closing down at the site where a particular group of employees work and is relocating to another site; fewer employees are required to do a particular kind of work.

The acid test of redundancy is whether employers need fewer employees, either across the organisation or at a particular location. The amount of work need not have changed but it must be capable of being done by fewer people.

Redundancy is a fair reason for dismissal but there are a number of circumstances in which an employee who has been made redundant may pursue a claim for unfair dismissal. This unhappy state of affairs may be avoided by developing a clear and fair redundancy policy and consulting carefully with trade unions or employee representatives.

Whilst compulsory redundancy is the most clearly understood and sometimes rather emotive route, there are in fact three possible routes to redundancy. These are: a voluntary scheme where employees are invited to apply for redundancy; an early retirement scheme; a compulsory scheme where the organisation identifies and selects employees who are to be made redundant.