When managers and HR leaders steer organisations through a period of business change, the immediate priorities usually land on legal safety and strict timelines. While these are vital, they represent just the tip of what makes effective leadership.
If the process ignores the essential human element, the organisation risks destabilising even the most resilient departments. When trust is fractured during a redundancy consultation, the ripple effects can be felt in long-term engagement and brand reputation for years.
The psychological impact of redundancies
Leading a workforce through upheaval effectively requires a blend of emotional intelligence and operational precision. The pressure on HR and management teams to ensure they’re conducting the process in a way that’s a compliant, whilst delivering life-altering news to colleagues, is substantial and can lead to significant strain on the very people responsible for the transition.
But it can also ripple out to the wider workforce. Research published by Worrall, Campbell and Cooper in the Journal of Managerial Psychology suggests that the impact on those who remain is often underestimated:
- Morale among remaining staff can drop by over 70% following a poorly managed restructure.
- Workplace motivation often falls by nearly 60% among those who stay.
- Feelings of job insecurity and resentment lead to a sharp decline in performance.
- The cost of disengagement can impact a balance sheet for years afterwards through increased staff turnover.
If those who stay perceive the exit process as poorly managed, disjointed or unfair, their commitment to the organisation evaporates. This is why high-level change management must account for the psychological contract as much as the legal one.
Evolving employer redundancy rules
Navigating the complexities of employment law during a restructure now requires a much higher level of strategic foresight as the Employment Rights Act will fundamentally alter the risk profile of any workforce transition.
April 2026: heightened penalties and collective scrutiny
The first significant wave of changes include:
- The maximum protective award for failing to conduct proper collective consultation doubles from 90 days’ pay to 180 days’ pay per affected employee.
- New rules require consultations on redundancies that occur across multi-site or multi-establishment locations.
- More groups of employees will be included in the process as firms are more likely to hit the 20-employee threshold for collective consultation.
- The financial penalty for a procedural failure increases significantly, making robust planning and accurate workforce data essential.
October 2026: extended risk windows and contractual limits
October brings a suite of additional changes:
- The time limit for employees to bring claims to an employment tribunal extends from three months to six months.
- The risk of a claim for unfair dismissal or discrimination will persist for a much longer period.
- As redundancies are a form of dismissal, the new unfair dismissal protections apply if an employee feels the redundancy was unfair.
- Dismissing an employee and rehiring them on worse terms – known as “fire and rehire” – becomes an automatically unfair dismissal in most cases.
- Any planned changes to employee terms must be approached through genuine negotiation with dismissal as an absolute last resort.
January 2027: the removal of the safety net
January’s changes significantly reduce the previous safety net employers had around dismissals:
- The qualifying period for an employee to gain protection against unfair dismissal reduces from two years to just six months.
- Anyone with six months’ service on the 1st of January 2027 gains protection immediately.
- The government is removing the financial cap on unfair dismissal pay, which is currently £118,000 or a year’s pay.
- This removal is proceeding without further consultation with unions or employer groups.
- Without a financial ceiling on claims, the cost of a mishandled dismissal or a poorly managed redundancy consultation could be devastating.
This may not immediately be a call for alarm yet, however, as the historic levels for unfair dismissal pay indicate.
Why the removal of the compensation cap may not be an issue
It is worth noting that the removal of the financial cap for unfair dismissal, whilst a significant change, may not be as impactful as many organisations suspect.
Law firm Morton, Fraser and MacRoberts found that in 2023 – 2024, the average unfair dismissal award was £13,749, showing that most claims come nowhere near the compensation cap, and, according to the ONS, the median UK salary in April 2025 was £39,039.
To qualify for the compensation cap, a person would need to be out of work for three years. Given that tribunals usually don’t look favourably on individuals who haven’t attempted to mitigate their losses and secure a job within three years in anticipation of receiving a compensation pay out, it’s unlikely they’d receive it.
The true impact lies in the loss of a bargaining chip. Employers were able to use the cap to settle with high earners by arguing a tribunal wouldn’t provide any more than the offer. Without that cap, individuals earning over £100,000, with strong cases, may choose to test their luck at tribunal.
This is why ensuring that the organisation provides meaningful redundancy support services to outgoing employees is so essential.
Protecting reputation through redundancy support
The way a person leaves an organisation is often the story they will tell most frequently to their professional network. Providing comprehensive redundancy support and outplacement services is a critical component of a responsible exit strategy and an investment that pays off long after the employee has found a new role.
Integrated HR consultancy and support
Navigating complex change can be overwhelming, but having support from external HR experts can simplify the complexity and empower managers and HR leaders to have more effective and empathetic conversations with outgoing employees.
By integrating specialist guidance, tailored for different situations (such as mergers, redundancies or TUPE transfers), organisations benefit from unbiased expertise to help manage through challenging situations. And with legally privileged outsourced advice, organisations gain the security that any conversations they have are protected and out of evidence should cases escalate to an employment tribunal.
This approach minimises the risk of compliance issues, reduces HR burnout and protects the organisation from potentially costly fallout.
Outplacement as a stepping stone
Redundancy may be the end of a chapter, but it shouldn’t be the end of a career story. Meaningful outplacement support shows a real commitment to people beyond their immediate utility to the business:
- Personalised career coaching and job search tools help individuals transition with a sense of momentum.
- CV and interview coaching provide a much-needed bridge to the next opportunity.
- Targeted eLearning and development resources allow people to land on their feet and thrive in new environments.
This support sends a powerful message to the remaining workforce. It demonstrates that the organisation cares about its people even when they are no longer on the payroll. This helps to mitigate the impact of survivor syndrome and maintains the status of the company as a desirable place to work.
Building organisational resilience during redundancies
Sustainable transformation relies on supporting four distinct groups through the transition period. Each group has unique needs that must be met to ensure that redundancies are effective, compliant and enable the organisation to recover quickly:
- Managers need support for their own fatigue and uncertainty while they guide their teams through the new employee rights landscape.
- Employees who remain need a reason to re-engage and the reassurance that the organisation values its people beyond the contract.
- HR Teams require specialist support to manage the emotional and operational burden without burning out.
- Those leaving the organisation require outplacement and career transition support, not only because it’s the right thing to do and provides the person leaving a smooth transition with the tools they need for their next chapter, but also to ensure that the story they tell about the organisation is positive.
High-level business change is inherently difficult, but it doesn’t have to be damaging. When the individual is kept at the centre of the process, organisations emerge stronger and ready to tackle new challenges.
Our expert teams provide tailored support for managers, employees, HR professionals, and those exiting the organisation – get in touch to find out more.
