🇬🇧 UK · Employment Law · Updated 2026-06-27
Redundancy vs dismissal: what's the difference?
Both redundancy and dismissal result in your employment ending, but they arise from different circumstances and carry very different consequences for your pay, benefits, and ability to claim further compensation. Employers sometimes blur the line between them — understanding the distinction protects your rights.
Key differences at a glance
| Aspect | Redundancy | Dismissal |
|---|---|---|
| Definition | Your role is no longer required — the business ceases, the workplace closes, or the need for employees doing your type of work diminishes | Your employer ends your employment for a reason relating to you personally — conduct, capability, or another substantial reason |
| Qualifying period for pay | 2 years' continuous employment for statutory redundancy pay | 2 years for unfair dismissal; wrongful dismissal available from day one |
| Redundancy pay | Statutory: up to £22,530 based on age, service, and weekly pay (capped at £751). Contract may provide more. | None. Redundancy pay is only owed on genuine redundancy. |
| Notice entitlement | Full statutory or contractual notice (or PILON) is owed in addition to redundancy pay | Full statutory or contractual notice owed, unless gross misconduct justifies summary dismissal |
| Consultation requirement | Individual consultation required; 45-day collective consultation if 100+ redundancies | Depends on reason: capability requires support and warnings; conduct requires disciplinary procedure (ACAS Code) |
| Tax treatment | Redundancy pay up to £30,000 is tax-free. Amounts above £30,000 are taxable. | No tax-free element for dismissal compensation (unless part of a settlement agreement) |
| Benefit entitlement | Eligible for Universal Credit/JSA immediately (no reduction for statutory redundancy pay for first 26 weeks) | May face a waiting period if you resigned, or questions about conduct if dismissed for gross misconduct |
| Challenge at tribunal | Can challenge if dismissal was not genuine redundancy or selection was unfair | Unfair dismissal claim if reason not fair or procedure flawed (2-year service required) |
The bottom line
If your employer is calling your departure 'redundancy' but your role is being filled by someone else, your duties are simply being transferred, or you were selected for personal reasons, this may not be a genuine redundancy — and you may be entitled to challenge the decision at tribunal. Genuine redundancy entitles you to statutory redundancy pay (and possibly a tax-free payment) on top of your notice pay. Dismissal for conduct or performance carries no redundancy pay entitlement.
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Calculate →Frequently asked questions
Can I be made redundant if someone else is taking over my job?
No. If your role continues and is simply being done by someone else (or by a new hire), this is not redundancy in law — it is dismissal. The definition of redundancy in ERA 1996 s.139 requires that the requirement for employees to carry out work of a particular kind has ceased or diminished. A genuine redundancy means the role itself disappears, not that you as an individual are replaced.
Does my employer have to offer me alternative employment before making me redundant?
Your employer must consider suitable alternative roles before making you redundant. If a suitable vacancy exists and they fail to offer it to you, the redundancy may be unfair. If they do offer a suitable alternative and you unreasonably refuse it, you may lose your right to statutory redundancy pay.
Is redundancy pay taxable?
Statutory redundancy pay is tax-free up to £30,000 in total (combined with any other termination payments). The weekly pay used to calculate it is also subject to the £751/week cap. Contractual redundancy pay above the statutory minimum is also tax-free up to the £30,000 threshold. Amounts above £30,000 are subject to income tax (but not National Insurance).
Can I be dismissed for redundancy if I'm on sick leave or maternity leave?
Yes, but with significant restrictions. You cannot be selected for redundancy because you are on sick leave or maternity leave — that would be automatically unfair. Employees on maternity, adoption, or shared parental leave have a right to be offered any suitable alternative vacancy before other employees at risk of redundancy. The pool for selection must be genuinely fair and not skewed against protected groups.
What is 'bumping' in the redundancy context?
Bumping is where an employee whose role is redundant is moved into another role (displacing the person in that role, who is then made redundant instead). It is a legitimate redundancy process in the UK, provided the selection is fair and the employee who is 'bumped' has not been selected on discriminatory grounds. Employers are not required to bump, but failure to consider it may make a redundancy unfair.