Everything That Has Changed in UK Redundancy Law Since 2020: A Complete Guide for Employers

If the last time you made someone redundant was before 2020, you are operating on outdated knowledge. UK redundancy law has changed significantly in the past five years — with more changes already in force and further reforms arriving in 2027. This article sets out every material change, in plain English, so you can understand exactly what is different and what it means for you.

Why this matters if you have not done a redundancy recently

Employment law does not stand still. The process a small business owner followed in 2018 or 2019 is not the same process they need to follow today.

The changes since 2020 cover four distinct areas that directly affect how redundancy must be handled: who is protected and how strongly, what you owe employees financially, what the consequences of getting it wrong look like, and what is coming next that you need to prepare for now.

Missing any one of these changes does not just create an administrative problem. It creates tribunal liability.

The statutory redundancy pay cap: it has increased every year

If you calculate redundancy pay based on figures you remember from five years ago, you will underpay your employee. Underpayment creates a financial dispute and potentially a tribunal claim.

The statutory redundancy pay cap — the maximum weekly pay figure used in the calculation — is reviewed every April and increases most years. Here is what has happened since 2020:

If you were made redundant on or after 6 April 2025, your weekly pay is capped at £719, with a maximum statutory redundancy payment of £21,519 for the 2025/26 tax year. From April 2026, the new weekly cap rises to £751, meaning employers should review redundancy calculations and ensure payroll systems reflect this figure.

The jump from £571 in 2022/23 to £643 in 2023/24 — an increase of £72 in a single year — was the largest single-year increase in recent history, driven by high inflation. The increases in 2025/26 and 2026/27 have returned to a more typical 2 to 5 per cent pattern.

What this means in practice: An employee earning £800 per week gross with 15 years of service and a mix of age bands could receive significantly more statutory redundancy pay under the current cap than they would have under the 2020 cap. Always use the current year's cap figure. Using an out-of-date figure, even by a few pounds, creates a dispute that costs far more to resolve than the underpayment itself.

The rates are confirmed annually in a statutory instrument called the Employment Rights (Increase of Limits) Order, usually announced in mid-March and taking effect from 6 April.

April 2024: The biggest change to protected employee rights in years

This is the change that catches the most employers off guard, and it came into force on 6 April 2024.

What changed

The Protection from Redundancy (Pregnancy and Family Leave) Act 2023 and the Maternity Leave, Adoption Leave and Shared Parental Leave (Amendment) Regulations 2024 significantly extended the period of protection that employees on maternity, adoption or shared parental leave receive in a redundancy situation.

Before April 2024, the enhanced protection from redundancy applied only during maternity leave itself. From April 2024, that protection was dramatically extended.

The new rules

Protection now begins on the day the employer is first notified of the employee's pregnancy and ends 18 months after the date of the child's birth. For parents taking adoption leave, protection extends to 18 months after the date of adoption. For parents taking at least six weeks of shared parental leave, protection extends to 18 months after the child's birth.

In concrete terms, this means an employee who returns from maternity leave in January 2025 is protected from redundancy until July 2026 — eighteen months after her child was born. If you make her redundant during that period and cannot demonstrate the redundancy was entirely unconnected to her maternity leave and return, you face an automatic unfair dismissal finding.

What the protection actually requires

During the protected period, if a redundancy situation arises, the employer must offer the protected employee any suitable alternative vacancy that exists within the business before offering it to anyone else. This right of first refusal applies even if the protected employee would not score highest in a fair selection process.

Failure to comply with this requirement is automatic unfair dismissal, meaning the employee does not need two years of service to bring a claim, and there is no defence based on the reasonableness of the employer's actions.

Why this catches employers out

An employer who last did a redundancy in 2022 or 2023 operated under the old rules, where protection applied only during leave itself. If they now make redundancies without checking whether any affected employee is within the 18-month protected window, they may have automatic unfair dismissal liability without realising it.

Before making anyone redundant, check the dates. If any affected employee is pregnant, on maternity or adoption leave, or has given birth or adopted within the last 18 months, take specialist advice before proceeding.

2024: The fire and rehire code of practice

While not directly a redundancy law change, the introduction of the statutory Code of Practice on dismissal and re-engagement in July 2024 is relevant to any employer considering restructuring.

In July 2024, the Code of Practice on fire and rehire was introduced to regulate the practice of firing and rehiring, ensuring that it is only used as a last resort. The Code does not ban the practice but encourages employers to enter into a dialogue with employees or their representatives to explore options before unilaterally seeking to dismiss and re-hire on new terms.

From 20 January 2025, where an employer is found to have unreasonably failed to comply with the fire and rehire Code of Practice, protective awards can be increased by up to 25 per cent — meaning employers could be ordered to pay a protective award of up to 112.5 days (uncapped) pay per affected employee.

The relevance for redundancy: any employer considering restructuring that involves changing terms and conditions for retained employees, alongside making others redundant, needs to be aware that the fire and rehire code applies to those retained employees. The two processes — redundancy and restructuring — intersect here and both carry significant legal exposure if handled incorrectly.

2024: Court of Appeal clarification on consultation

In a significant 2024 Court of Appeal decision that every employer should be aware of, the court considered whether a fair redundancy process requires general workforce consultation even where fewer than 20 employees are affected.

The Court of Appeal confirmed that non-unionised employers are not required to conduct general workforce consultation in small-scale redundancy situations. In the case of De Bank Haycocks v ADP RPO UK Ltd, an employer had used a scoring matrix before the redundancy consultations had started to determine the pool of recruitment consultants. The employee was not told how he, or his colleagues, had been scored against the selection criteria until after his dismissal when he appealed internally. The Court of Appeal held that the appeal process had been conducted well enough to mitigate deficiencies in the pre-dismissal consultation.

What this means in practice: while general workforce consultation is not a strict legal requirement for small-scale redundancies, the Court of Appeal made clear that individual consultation must be genuine and substantive. The fact that the employer's appeal process saved them in this case does not mean employers can rely on the appeal to fix a broken consultation. The better approach — and the legally safer one — is to get the individual consultation right the first time.

The case also confirms that selection scores should be shared with employees during the consultation process, even if the timing of disclosure can be managed. Employees need a genuine opportunity to challenge their scores before dismissal is confirmed.

December 2025: The Employment Rights Act 2025

The Employment Rights Act 2025 represents the most significant reform of UK employment law in decades. It received Royal Assent on 18 December 2025. Changes are being phased in across 2026 and 2027.

Here is what is already in force and what is coming.

Already in force: April 2026

From 6 April 2026, employers must keep records of annual leave and holiday pay. This is directly relevant to redundancy, because accrued holiday pay must be calculated correctly as part of the final payment on termination. Without proper records, employers cannot accurately calculate what they owe.

Coming January 2027: The qualifying period drops from two years to six months

This is the single most significant change in a generation for small business employers.

From 1 January 2027, employees will be able to make a claim for unfair dismissal after they have been employed for six months. Before then, they need to be employed for two years before they are eligible to make a claim.

Currently, around 6.3 million employees — 22 per cent of all employed adults — have been working with their current employer for between six months and two years. Under current law, these employees cannot bring an unfair dismissal claim. From January 2027, every one of them will have full unfair dismissal protection.

For small businesses making redundancies, this change transforms the risk profile of dismissing any employee with more than six months of service. A redundancy that would previously have been unchallengeable because the employee had less than two years of service will, from January 2027, require a fully compliant process or face tribunal exposure.

Coming January 2027: Changes to collective redundancy rules

Enhanced collective redundancy protection will be achieved by a change to the test for establishment. Separate geographical establishments will not apply, and each employing company will be one GB establishment. This means that where an employing entity proposes to make 20 or more redundancies in a 90-day period, a collective redundancy consultation process will be required regardless of how those redundancies are distributed across sites.

The maximum protective award for failure to collectively consult will double from 90 days to 180 days' pay.

For businesses with multiple sites, this is a material change. Currently, the 20-employee threshold for collective consultation is applied site by site. From 2027, it will be applied across the whole organisation. A business with three sites making seven redundancies at each site currently falls below the collective consultation threshold at each individual site. From 2027, 21 redundancies across three sites triggers the full collective consultation process.

Coming January 2027: Fire and rehire restrictions tightened further

There will be defined categories of restricted variations where it will be automatically unfair to dismiss and offer re-engagement on new terms unless a financial necessity test is met.

Any employer considering restructuring that involves changing terms and conditions needs to plan significantly further ahead than previously, given that the fire and rehire route will become much more legally constrained.

Coming January 2027: Compensation caps removed for unfair dismissal

Under the Employment Rights Act 2025, the statutory caps on unfair dismissal compensation are being abolished. Currently, the compensatory award for unfair dismissal is capped at the lower of 52 weeks' gross pay or £118,223. From January 2027, that cap will no longer apply.

Combined with the qualifying period dropping to six months, this creates an environment where a wrongly handled redundancy involving a well-paid employee with more than six months of service carries open-ended financial exposure.

A summary: what has changed and when

What this means if you are making a redundancy now

You are making redundancies in an environment that is significantly more legally complex than it was five years ago. The process has not changed in its fundamental structure: at-risk letter, genuine consultation, outcome letter, confirmation letter, correct financial payment. But the risks at each stage are higher, the financial exposure is greater, and specific employee categories carry enhanced protections that did not exist in their current form before 2024.

If your knowledge of redundancy law was formed before 2020, you need to update it before you take any steps. The cost of doing so is trivial. The cost of proceeding on outdated knowledge can be substantial.

Redundly keeps pace with UK employment law changes. Every pack generated reflects current statutory rates, the extended maternity and parental leave protections introduced in April 2024, and built-in risk flags for the situations that carry the highest tribunal exposure. From £149 at redundly.co.uk. For situations involving the 2027 changes, collective redundancy, or protected employees, our specialist HR consultants are available for a one-hour consultation from £150.