Difference between Redundancy and Dismissal

Redundancy vs. DismissalRedundancy and dismissal are two distinct concepts that refer to different employment situations in the workplace.

Redundancy occurs when an employee’s position or role is deemed no longer necessary or is no longer required due to various reasons such as organizational restructuring, technological advancements, or economic downturns.

In such cases, the employee is typically made redundant and may be offered severance packages or alternative employment options within the organization.

On the other hand, dismissal refers to the termination of an employee’s contract or employment due to reasons such as poor performance, misconduct, violation of company policies, or breach of contractual obligations.

Dismissal is usually a result of individual shortcomings or actions that are deemed detrimental to the organization and often occurs without any alternative employment options or severance benefits


A redundancy situation arises when the employer determines that a specific role is no longer necessary within the organization. This can occur due to various reasons such as business closure, headcount reduction, or the implementation of automation or outsourcing. Before resorting to compulsory redundancies, the employer is obligated to explore all possible alternatives. If redundancies cannot be avoided, fair criteria must be employed to select the roles for redundancy.

Often, this involves grouping similar positions into a selection pool and evaluating them against a scoring matrix. When redundancies are a possibility, employers must engage in consultation with their employees, the length and format of which will depend on the number of redundancies taking place simultaneously. It is advisable for employers to offer alternative employment options to employees whose roles have been deemed redundant, although there is no obligation to create new positions.

Finally, employees whose roles are made redundant are entitled to receive a redundancy payment, which can be either the statutory amount or an enhanced payment if specified in their employment contract


In contrast, a dismissal is typically the result of an employee’s inadequate performance or misconduct. However, before resorting to dismissal, except in severe cases of misconduct, the employer should follow a procedure that allows the employee an opportunity to improve their performance or behavior. This procedure should involve notifying the employee of the allegations against them and providing them with a chance to present their side of the story.

In cases of poor performance, dismissal may be considered if the employee has been given adequate time, additional training, and support to meet their performance targets but still cannot fulfill the requirements of their role. In disciplinary situations, dismissal may be appropriate if the employee has received prior warnings for misconduct or if a single act is deemed so serious as to constitute gross misconduct.

When the decision to dismiss an employee is made, it is essential to provide clear reasons for the decision and offer the employee the opportunity to appeal against their dismissal.

It is crucial for the employer to document all aspects of the decision-making process to demonstrate adherence to the relevant policies and procedures for a fair dismissal.

Read more: What happens if all employees quit

Key Differences

It is important to note that the decision to terminate an employee’s employment, whether through redundancy or dismissal, is not at the discretion of the employer but rather dictated by the specific circumstances surrounding the situation. Dismissal occurs as a consequence of an action or inaction by the employee, while redundancy arises as a legal matter when the employer no longer requires a specific type of work to be performed.

The primary distinction lies in the entitlements afforded to the employee. In the case of redundancy, an employee with a minimum of two years of service is eligible for a redundancy payment in addition to notice pay and compensation for untaken annual leave. Conversely, an employee who is dismissed is entitled only to notice pay and compensation for any unused leave.

It is crucial for employers to recognize and navigate these distinctions appropriately to ensure compliance with employment laws and provide fair treatment to their employees in these different circumstances.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.