Before you go… why suitable alternative vacancies matter in redundancy situations

In these uncertain economic times, many employers have the unenviable task of cutting costs. Redundancy is a challenging process for any organisation, and is often a last resort, with employers looking for alternatives to reducing headcount.  

From 1 January 2027, changes introduced by the Employment Rights Act 2025 (ERA 2025) will mean that the potential cost of dismissals could soar, with the reduction in the unfair dismissal qualifying period from two years to six months, and the abolition of the compensation cap. Perhaps, therefore, there is more incentive than ever for employers to look for alternatives to dismissal, such as changing terms and conditions of employment.

However, the crackdown on the practice of ‘fire and rehire’, which will also be introduced by the ERA 2025 next January, will limit an employer’s ability to make any ‘restricted variations’ (relating to pay, hours and holiday) without an employee’s consent, reducing an employer’s options when seeking alternatives to redundancy.

Fair dismissals and suitable alternative employment

Of course, provided that there is a genuine redundancy situation, and a fair procedure has been followed, an employer should be able to defend any unfair dismissal claims. For a redundancy dismissal to be fair, the employer must, amongst other things, comply with the duty to consider suitable alternative employment.

While most people leaders are well versed in the duties of fair selection and consultation, the extent of the duty to consider suitable alternative employment can catch even the most experienced HR professionals off guard.

What makes alternative employment ‘suitable’?

In so-called ‘ordinary’ redundancy cases, ACAS guidance states that ‘suitability’ depends on factors such as:

• similarity to the current role;
• the employee’s skills and abilities;
• pay and benefits (including pension);
• location and commute feasibility;
• other terms and conditions of the role.

For employees within a protected period (pregnancy, maternity, adoption, shared parental or neonatal care leave), regulation 10(3) of the Maternity and Parental Leave Regulations 1999 imposes a somewhat stricter test:

• the new contract must not be substantially less favourable than the previous contract regarding:
  • the capacity in which they are to be employed;
  • the place in which they are to be employed;
  • the other terms and conditions of their employment;
• the work must be suitable and appropriate in relation to the employee and their circumstances. For example, a role with an increased commute is unlikely to be suitable for an employee with a young baby.

The ERA 2025 may extend this protection still further, from an as yet unconfirmed date in 2027. It is proposed that it will become automatically unfair to dismiss a pregnant employee or new mother until she has been back at work for at least six months after giving birth, save for in specific circumstances. There are similar proposals for those who have returned from other statutory leave. Consultation on these proposals closed in January of this year, and it is not yet clear how the proposals will operate in practice.

‘Suitability’ is an objective assessment to be taken by the employer, based on what they know about the employee’s work experience and personal circumstances. There is no legal requirement to engage the employee in this process – although in practice, consultation may help to avoid disputes further down the line.

Rules of thumb to follow include:

• a temporary or fixed-term role is rarely ‘suitable’ for a full-time employee;
• significant relocation is unlikely to be ‘suitable’ unless there is a mobility clause in the contract or the employee welcomes this;
• a promotion requiring significant further training is unlikely to be ‘suitable’;
• a demotion . . .
  • may be ‘suitable’ in ordinary redundancy cases, if the employee has expressed an interest in a demotion or wants to stay employed under any circumstances;
  • cannot be ‘suitable’ for employees within a protected period, given that the terms will be substantially less favourable than their previous contract;
• beware of making assumptions as to what may be suitable, even though it is supposedly an objective assessment; the employee may be willing to accept a demotion or a pay cut and they may have qualifications or experience that you are not aware of.

Refusing suitable alternative employment

If an employee unreasonably refuses an offer of suitable available alternative employment (or unreasonably resigns or gives notice during a trial period), they will be treated as having been dismissed by reason of redundancy, but they will lose their right to a statutory redundancy payment. While the question of whether a role is suitable is an objective one, whether or not an employee’s refusal of suitable alternative employment is reasonable will be assessed subjectively; was that particular employee, taking into account their personal circumstances, being reasonable in refusing the offer? It is fair to say that not many employers try and rely on this to escape liability for redundancy.

How much effort must employers make to find suitable alternative employment?

The 2024 case of Hendy Group v Daniel Kennedy makes it clear that it is not enough to simply inform an at-risk employee that they can apply for vacancies on the employer’s website in the same way as external candidates.

As a bare minimum, employers should:

• speak to at-risk employees to find out where their interests lie and assist in identifying other roles, even if that might mean a demotion;
• make hiring managers aware that an internal candidate is at risk of redundancy.

If the employer is part of a group, they should circulate enquiries to other group companies (unless this is an ordinary redundancy case and the group companies are genuinely autonomous and independent). The tribunal expects extra effort to be made if there is close integration between group companies, such as shared HR and recruitment functions.

How should the application process be handled?

It is often thought that a business making redundancies can safely run an open recruitment process for vacancies that arise. However, employers should not rush to advertise these roles, either internally or externally, until they have satisfied themselves that the role would not be a suitable alternative role for an at-risk candidate, given their transferrable skills and experience.

Instead, the correct order of priority for dealing with vacancies would be:

1. employees in a protected period have the automatic right to be offered suitable vacancies (without needing to interview) before the role is opened to other at-risk candidates, otherwise their dismissal is automatically unfair;
2. other at-risk employees can then be invited to apply for alternative vacancies;
   1. if only one at-risk employee applies and they are deemed ‘suitable’, it would be risky to decline them (even if someone not at-risk would be better at the role), and may lead to unfair dismissal claims;
   2. if multiple at-risk employees apply, the employer is able to choose the best candidate, even where this is done on partly subjective grounds (an interview, for example);
3. after all applications from at-risk candidates have been dealt with, the role can be opened up to other internal or external candidates.

This is where employers often get it wrong. For understandable reasons, such as the need to look at fresh external talent, when a vacancy arises the selection process often includes both at-risk employees and external candidates on the same basis. Only if the vacancy is not suitable alternative employment can such a swift move to an external process take place.

Final thoughts

Offering suitable alternative vacancies during a redundancy process is not solely about compliance with a legal duty. It is often a strategic opportunity to retain talent and organisational knowledge, while demonstrating good practice to a workforce facing uncertainty. By identifying and offering roles that match skills and circumstances, employers can reduce the risk of dismissals, maintain morale, and safeguard critical expertise.

This article was written by Emily Philpott, associate in the employment team.