What are the alternatives to redundancy? Employers guide (2026)

Woman discussing redundancy pay with employees

When your business is under financial pressure, one potential option is to consider whether you could make redundancies. This applies when you could manage without a particular role, or if you could reduce the number of people doing a role. However, there are alternatives to making redundancies, and you’re legally required to explore them before you make a decision.

Under the Employment Rights Act 1996, genuinely exploring alternatives to redundancy is part of what makes any redundancy dismissal fair, whether you’re making one person redundant or one hundred.

Those alternatives potentially include short-time working, lay-offs, redeployment, voluntary redundancies, pay freezes, natural attrition, and recruitment freezes.

What are the main alternatives to redundancy?

Alternative	What it involves	Best suited for
Short-time working	Reducing employees’ hours (and accordingly pay) temporarily	Temporary drops in demand
Lay-offs	Giving employees no work on certain days or for a period of time	Short-term disruption/dip
Redeployment	Moving employees to other suitable roles	Restructures where new roles exist or there are vacancies
Voluntary redundancy	Inviting employees to apply to leave voluntarily	Reducing headcount without forced dismissal
Pay freeze	Holding pay at current levels	Cost reduction without headcount cuts
Pay cut	Temporarily reducing pay	Significant, ongoing cost pressure
Recruitment freeze	Not recruiting/expanding	No dramatic payroll increase
Natural attrition	Reducing headcount through voluntary departures	Long-term restructuring
Reduced overtime	Cutting overtime rather than jobs	Workplaces where overtime is common

Do you have to consider alternatives to redundancy before making people redundant?

Under the Employment Rights Act 1996 and established caselaw, considering alternatives to redundancy is part of what makes a dismissal fair. Employment Tribunals do look at whether alternatives were genuinely explored, so you should approach this stage thoughtfully rather than treating it as a formality.

If you can’t show that you explored alternatives seriously, any resulting dismissals risk being found unfair at tribunal. Under the Employment Rights Act 1996, employees with two or more years of continuous service can bring an unfair dismissal claim. From January 2027, following the Employment Rights Act 2025, the qualifying period will reduce to six months, which means the pool of people who could bring a claim is set to grow.

From 6 April 2026, the maximum protective award for failing to comply with collective consultation obligations doubled from 90 days’ pay to 180 days’ uncapped pay per employee, as confirmed by Acas guidance on collective redundancy consultation. Taking the time to explore alternatives properly is the best protection against that risk. Collective redundancy is where you are making 20 or more employees redundant at one establishment within a 90 day period.

Can you reduce hours instead of making redundancies?

If you need to reduce costs but want to keep your workforce intact, short-time working and lay-offs are two ways to temporarily reduce your wage bill without dismissing anyone. However, you can only use short-time working or lay-offs if your employment contract allows it, or if your employee agrees to the variation.

What’s the difference between short-time working and a lay-off?

Short-time working means temporarily reducing an employee’s hours so they then earn less pay.
A lay-off means giving an employee no work at all for one or more complete days.

Both mechanisms are defined in sections 147 to 154 of the Employment Rights Act 1996.

What are you required to pay during a lay-off or short-time working?

If you do lay someone off, you’ll need to pay them statutory guarantee pay. The current rate from 6 April 2026 is £41 per workless day, up to a maximum of one week’s pay (e.g. five days for a five day a week employee) in any 13 week period (maximum £205). If the employee normally earns less than £41 a day, you’ll pay their usual daily rate instead.

If a lay-off or short-time working (of less than half the employee’s usual pay) continues for four or more consecutive weeks (or six non-consecutive weeks in a 13-week period), the employee may become entitled to claim statutory redundancy pay, even if you haven’t issued a redundancy notice. They must have at least two years’ continuous service to qualify, and must give you written notice of intent to claim.

Can you cut pay or benefits temporarily instead of making redundancies?

Temporarily cutting pay or benefits is an option some employers consider, but it’s important to understand what you can and can’t do without employee agreement.

Depending on your financial situation, you could consider a pay freeze instead. Pay freezes (holding pay at current levels rather than cutting it) don’t require employee consent, because you’re not changing existing contractual terms. It would only be different if there was a contractual right to a pay rise.

Pay cuts are a different matter. Reducing pay is a change to an employee’s contract, and you really need each affected employee’s written agreement before making that change. Without it, you could face:

Unlawful deduction from wages claims
Breach of contract claims
Constructive unfair dismissal claims if the cut is significant enough that the employee treats it as a fundamental breach

If a pay reduction could help avoid redundancies, you’ll need to consult with affected employees, explain the business case, and get their written agreement before making any changes to their contract. When employees understand that the alternative may be redundancy, they may be willing to agree to at least a temporary reduction. If you do reach an agreement, confirm the change in writing before it takes effect. Trying to force through a pay cut requires careful advice as this could be very risky, and the law is changing on this in January 2027.

Can you redeploy staff to other roles?

Redeployment is well worth considering if you have suitable roles available elsewhere in your business. Offering them to at-risk employees can be a genuinely good outcome for everyone, and Employment Tribunals do take into account whether it was offered.

Under the Employment Rights Act 1996, employees have the right to a four-week trial period in a new role. If it doesn’t work out and they leave within that period, they can still claim statutory redundancy pay provided they already qualified for it.

If an employee unreasonably refuses a ‘suitable alternative role’, they may lose their entitlement to statutory redundancy pay. Whether a role counts as suitable depends on factors like pay, status, location, and the skills required. Also, personal reasons, such as childcare or additional travel time, can make a refusal reasonable even if the role looks suitable on paper.

Can you ask for volunteers for redundancy?

Voluntary redundancy means inviting employees to put themselves forward to be made redundant, usually in exchange for a payment above the statutory minimum. Some people genuinely welcome the opportunity, which makes it a less difficult process for everyone involved.

You don’t have to accept every application for redundancy. Voluntary redundancy is an invitation, not a guarantee, and you should make it clear that you can choose to decline if keeping a particular person is important to the business.

What other alternatives to redundancy should you consider?

There are several further measures worth considering before concluding that redundancy is unavoidable. Some of these are low-impact changes that can make a real difference over time.

Natural attrition and recruitment freezes are the lowest-risk options. If people leave of their own accord, you don’t replace them. A recruitment freeze costs nothing to implement and requires no employee agreement. The downside is that it’s slow and unpredictable: the wrong people might leave at the wrong time.
Reducing overtime is a way to reduce costs without touching anyone’s basic pay or contractual hours, if your business often runs paid overtime. But first you should be careful to check employees’ contracts to confirm what’s guaranteed and what’s discretionary.
Retraining and upskilling can help if you’re looking at redundancies because certain roles have become redundant while demand for other skills is growing. Retraining takes time and investment, but it may allow you to retain experienced people in new roles rather than paying to exit them and recruit again later.
Secondments to other businesses or departments can reduce headcount in a particular area temporarily while keeping the employment relationship alive. This works best where you have group companies, established networks, or relationships with partner organisations and can then agree the employee will second.
Flexible working arrangements, including compressed hours, reduced days, or job sharing, can reduce your labour costs while keeping people employed. Again, these require employee agreement and, where permanent, a formal variation to the employment contract.

What should you do if alternatives to redundancy aren’t feasible?

Sometimes, even after working through every option, redundancy is the right outcome. If you’ve genuinely explored alternatives, documented your reasoning, and concluded that the role or roles can’t be preserved, you can should still proceed through a fair redundancy consultation process with confidence.

A fair process includes:

properly choosing the roles affected (if relevant)
selecting fairly against objective criteria
consulting in group (where relevant) and individually with each affected employee
considering alternatives and any representations they make
paying at least the statutory minimum redundancy payment

But you’ll need careful advice to make sure you navigate through it properly and remember that the rules are even more complicated where there are 20 or more employees being made redundant.

What matters is that you can show the alternatives were considered seriously. If a tribunal can see that they were, the rest of your process stands on much stronger ground.

Quick answers

Does an employer have to offer alternative employment before making someone redundant?: Yes, you should consider if you have any vacancies and suitable alternative employment as part of a fair redundancy process. If a suitable role exists and it wasn't offered, that's something an Employment Tribunal is likely to consider.
What happens if an employee refuses a suitable alternative role?: If the role is genuinely 'suitable' and the employee refuses it without good reason, they may lose their right to statutory redundancy pay. Whether a refusal is reasonable depends on the specific circumstances, including the employee's personal situation.
Can you lay off staff temporarily instead of making them redundant?: Laying off staff temporarily is an option, as long as your contracts allow it or the employee agrees. You must pay statutory guarantee pay of £41 per day (from 6 April 2026) for up to a week (e.g. five days pay for a five day a week employee) in any 13 week period. If the lay-off continues for four or more consecutive weeks (or six non-consecutive weeks in a 13-week period), the employee may be entitled to claim statutory redundancy pay.
How long can you put an employee on short-time working?: Under the Employment Rights Act 1996, employees who have been on short-time working of less than half their usual pay for four or more consecutive weeks (or six weeks in a 13-week period) and who have at least two years' service may be eligible to claim statutory redundancy pay.
Do redundancy alternatives apply to small businesses with fewer than 20 staff?: The duty to consider alternatives applies to all employers, regardless of size. Collective consultation obligations (30-day or 45-day minimum) apply only when you propose 20 or more redundancies at one establishment within 90 days. Small businesses still need a fair process, including genuinely exploring alternatives to redundancy.
Can you cut pay to avoid redundancies?: A pay cut requires employee agreement, because it changes their contractual terms. You'd need written consent from each affected employee before making that change. A pay freeze (holding pay at current levels) is different and doesn't require agreement, because you're not changing existing terms, unless a pay rise is part of their contract.
What is voluntary redundancy and do you have to offer it?: Voluntary redundancy means inviting employees to apply to be made redundant, typically with an enhanced payment. You're not legally required to offer it, but it's good practice as part of exploring alternatives.

Need help managing a redundancy process?

Nobody wants to make redundancies. But if your business is under pressure, knowing your options and getting the process right makes a real difference, both for you and for your employees.

Citation’s HR and employment law experts support employers through every stage: from exploring alternatives and running a fair consultation, to defending tribunal claims if things go wrong. When you follow our advice, we back you with our advice guarantee.

What are the alternatives to redundancies?