Redundancy During Administration in the UK: Key Steps for Employers

If your company is heading into administration, it’s completely normal to feel overwhelmed - especially when you realise you may need to make redundancies quickly to keep the lights on or facilitate a sale.

The stakes are high. There are strict UK rules around consultation, notice and payments, and the administrators will expect you to move fast while still staying compliant. The good news is that with clear steps and the right legal documents, you can manage redundancy in administration lawfully and minimise risk.

In this guide, we’ll explain how redundancy works during administration, what your consultation and notification duties look like, where liabilities sit, and practical steps to follow so you’re protected from day one.

What Does “Redundancy In Administration” Actually Mean?

Administration is a formal insolvency process under the Insolvency Act 1986. An administrator is appointed to rescue the company as a going concern where possible, or otherwise achieve a better result for creditors than liquidation.

Very often, that means reorganising the workforce at speed. Roles may no longer be needed, or a leaner structure is required to trade while a buyer is sought. When you dismiss employees because their roles are no longer required, that’s redundancy - and UK employment law still applies, even in insolvency.

Key laws to keep in mind include:

• Employment Rights Act 1996 - redundancy pay eligibility, statutory notice, unfair dismissal risk.
• Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) - collective consultation duties and the HR1 notification to the Insolvency Service for 20+ redundancies at one establishment.
• Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) - if there’s a business sale out of administration, TUPE may protect transferring employees with some insolvency-related modifications.
• Data Protection Act 2018 and UK GDPR - careful handling of employee personal data during consultation, selection and any sale process.

Administration changes some practical aspects (for example, who pays what and when), but the legal standards for a fair redundancy process don’t disappear. A structured approach will help you stay compliant and avoid unnecessary claims.

Do We Still Have To Consult During Administration?

Yes. Your consultation duties under TULRCA continue to apply. If you’re proposing to dismiss 20 or more employees at one establishment within a 90-day period, you must collectively consult “in good time” and at least 30 days before the first dismissal takes effect (45 days if 100+ redundancies are proposed). You also need to file an HR1 with the Insolvency Service.

In administration, you can rely on the “special circumstances” defence if full compliance is genuinely not reasonably practicable, but you still need to take all steps that are reasonably practicable in the circumstances. In other words, document what you can’t do and why, and do everything you reasonably can - for example, provide information, invite feedback, consider alternatives, and consult with any recognised trade union or elected employee reps.

For fewer than 20 redundancies, there’s no collective consultation duty, but you still need to consult individually with affected employees, explain your rationale, apply fair and objective selection criteria, and consider whether there are any suitable alternative roles.

It’s also important to align your consultation timeline with the administrators’ strategy. If a quick pre-pack sale is likely, plan your messaging and consultation windows carefully to minimise disruption and risk. If you’re unsure what “fair” looks like in practice, it’s sensible to obtain tailored redundancy advice early.

Who Pays Redundancy And Arrears When Cash Is Tight?

When a company is insolvent, administrators often don’t have funds to cover everything immediately. The UK has a safety net: eligible employees can claim certain amounts from the National Insurance Fund via the Redundancy Payments Service (RPS). Typically, the RPS can cover:

• Statutory redundancy pay (based on age, length of service and a capped weekly pay figure).
• Up to 8 weeks’ wage arrears (capped per week).
• Up to 6 weeks’ holiday pay (capped per week).
• Statutory notice pay (subject to mitigation and capped weekly amounts).

If the administrator “adopts” employment contracts (in simple terms, keeps staff working beyond the initial 14 days post-appointment), certain ongoing employment liabilities become payable as an expense of the administration. This can influence whether redundancies happen quickly or after a short trading period.

You can, of course, agree terms that go beyond the statutory minimums - for example, an enhanced package to support morale, avoid disputes or in exchange for waivers. Just remember that anything above statutory entitlements usually won’t be covered by the RPS, so ensure the business can fund it before you commit. If you’re weighing options like enhanced packages or ex gratia payments, this explainer on enhanced redundancy pay is a handy reference.

How To Run A Fair Redundancy Process In Administration

Even under time pressure, aim for a fair, well-documented process. It protects the business in case of claims later (e.g. unfair dismissal or protective awards) and supports an orderly administration.

1) Define Your Business Rationale

Identify which parts of the organisation are no longer viable or required to support trading. Document the commercial reasons - for example, loss of key contracts, a buyer’s request for a narrower scope, or a need to cut fixed costs to keep trading. The clearer your rationale, the easier it is to explain and defend your decisions.

2) Identify At-Risk Roles And Pools

Map affected roles and decide whether you’re removing entire functions or reducing headcount within a team. If you’re selecting from a “pool”, set objective selection criteria (e.g. skills, qualifications, performance, disciplinary record) and apply them consistently. Keep records of scoring and decisions.

3) Consult Properly

For collective redundancy, provide the required information to union reps or elected employee reps, start consultation early, invite alternatives, and keep minutes. For individual consultation, hold meetings, consider any alternatives (redeployment, reduced hours, changes to duties) and confirm outcomes in writing.

4) Consider Alternatives To Dismissal

Examples include redeploying staff, temporary lay-off or short-time working (only if your contracts allow it), or asking for volunteers for redundancy. If you are offering a voluntary option, read up on the differences between voluntary vs forced redundancy to set expectations correctly.

5) Confirm Dismissal, Notice And Pay

Provide clear outcome letters setting out dismissal on grounds of redundancy, the effective date, statutory (or contractual) notice, redundancy pay entitlement and how to claim through the RPS if relevant. If you’re paying in lieu of notice (PILON), check the contract wording and tax treatment. A short checklist for ending employment fairly can help - see this guide to ending an employment contract fairly.

6) Use Settlement Agreements Where Appropriate

In some cases, you may want to resolve all potential claims through a clean break, especially for senior staff. In administration, funding can be tight, but where appropriate, a negotiated settlement documented in a Deed of Settlement can reduce legal risk and give certainty to both sides.

7) Mind Your Data And Records

Keep accurate records of consultation, scoring and decisions. Only collect what you need, restrict access, and store information securely in line with UK GDPR. If you’re unsure how long to keep HR and payroll files post-termination, this employer guide on ex-employee records and GDPR is useful.

What If There’s A Sale Out Of Administration (TUPE)?

Many administrations aim for a going-concern sale, sometimes very quickly (including pre-pack sales). If your business or part of it transfers to a buyer, TUPE may apply, meaning employees assigned to the undertaking usually transfer to the buyer with continuity of employment.

In insolvency situations, TUPE includes some modifications to ease rescue efforts. For example, certain pre-transfer debts can be claimed from the RPS, and buyer-and-seller can agree “permitted variations” to terms in some circumstances. However, the basic principle remains: if TUPE applies, dismissals connected to the transfer are automatically unfair unless for an “economic, technical or organisational” (ETO) reason entailing changes in the workforce, and after a fair process.

It’s also common for buyers to seek a restructured workforce or altered terms. Changes under TUPE are heavily regulated, so plan any proposed variations carefully and get advice early. If you’re fielding buyer questions about changing pay or terms after a transfer, this guide on salary changes under TUPE outlines the guardrails in plain English.

If administration does not lead to a successful rescue or sale and you move to closure, the obligations when a business shuts down still apply - this overview of employee rights when a company closes summarises the key points to keep on your radar.

Common Pitfalls To Avoid

• Skipping or compressing consultation without recording “special circumstances”. Even in administration, you need to show you did what was reasonably practicable.
• Poor selection criteria or inconsistent scoring. This exposes you to unfair dismissal claims.
• No HR1 for 20+ redundancies. Failure to notify can lead to criminal liability for the company and office holders.
• Promising enhanced payments you can’t fund. The RPS covers statutory entitlements, not enhanced packages.
• Overlooking contractual terms. Check notice provisions, PILON clauses and any collective agreements before issuing letters.
• Rushing communications. Employees are anxious; clear, consistent messaging reduces rumours and risk. Keep a written comms plan ready before meetings start.

Essential Documents You’ll Likely Need

Having the right documents prepared - tailored to an administration scenario - will keep the process on track and reduce disputes:

• Business case and board/administrator paper setting out the redundancy rationale and risk assessment.
• Collective consultation information pack and election process for employee reps (where required).
• Selection criteria and scoring matrix, with guidance for managers on consistent application.
• Individual consultation invite letters and scripts to ensure a fair, consistent dialogue.
• Outcome and redundancy dismissal letters, including notice and RPS claim information.
• Settlement terms for specific exits documented in a Deed of Settlement (where appropriate).
• Updated Employment Contract templates for any redeployed staff or new roles post-restructure.

If a buyer is on the horizon, you’ll also want to prepare employee liability information (ELI) for TUPE and coordinate with the administrator on timing and disclosures. If you’re also considering broader restructuring options (for example, trimming benefits or post-transfer variations), comparing severance vs redundancy can help clarify the right legal path.

Step-By-Step Action Plan For Employers

Step 1: Align With The Administrator

Agree objectives, timeframes and the communication plan. Confirm whether continued trading is intended, whether contracts will be adopted, and the likely path (sale vs wind-down).

Step 2: Map Roles And Identify Pools

List roles at risk, define selection pools where needed, and draft objective criteria. Keep it simple, clear and defensible.

Step 3: Start Consultation Early

For 20+ redundancies at one establishment, run the rep election process if there’s no recognised union and open collective consultation. Submit HR1 on time. For smaller numbers, conduct robust individual consultation.

Step 4: Explore Alternatives

Check for suitable alternative employment, redeployment, or voluntary redundancy where feasible. Consider whether short-time working or lay-off is an option under current contracts.

Step 5: Confirm Outcomes And Payments

Issue dismissal letters with notice and redundancy details. Explain the RPS claims process clearly. If you’re offering any enhancements, ensure funding certainty and document any agreements properly.

Step 6: Close Out And Retain Records

Securely store consultation and selection records. Update payroll, benefits and HR systems. Follow UK GDPR retention rules and policies for ex-employee records.

Key Takeaways

• Redundancy in administration is still tightly regulated: consultation, fair selection and proper notice apply even when time is short.
• For 20+ redundancies at one establishment, collective consultation under TULRCA and an HR1 notice are mandatory unless genuinely impracticable - record any “special circumstances.”
• Eligible employees can claim statutory amounts from the Redundancy Payments Service; enhanced or ex gratia payments are generally not covered, so don’t promise what you can’t fund.
• If there’s a sale out of administration, TUPE may apply with insolvency modifications. Plan any workforce changes and communications with TUPE in mind.
• A clear, well-documented process (rationale, selection criteria, consultation notes, outcome letters) is your best defence against unfair dismissal and protective award claims.
• Get your templates and agreements in order - including redundancy letters, consultation packs and, where appropriate, a Deed of Settlement - and keep employee data compliant under UK GDPR.
• If in doubt, get tailored redundancy advice early. It’s far cheaper than dealing with claims later.

If you’d like help planning or running redundancies during administration - or you need tailored letters and agreements - you can reach us on 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.