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The short version
When a construction project ends and there's no more work, that's likely a redundancy -- not just "the job's finished, see you later." If someone is an employee with two or more years' continuous service, they're entitled to statutory redundancy pay, proper notice, and a fair process. If 20 or more employees are being made redundant at one establishment within 90 days, collective consultation obligations kick in -- and from April 2026, the penalty for getting that wrong doubles to 180 days' pay per employee. Construction has a terrible track record on this. Don't be the next case study.
Why this matters in construction
Construction is project-based. Projects start and finish. Teams assemble and disperse. That's the nature of the work.
But "the project's finished" doesn't switch off employment law. If someone was employed by you -- not genuinely self-employed, not an agency worker -- then ending their role when the project ends is a dismissal by reason of redundancy. It comes with legal obligations.
The construction industry routinely gets this wrong. Workers are told on a Friday not to come back on Monday. No consultation. No notice. No redundancy pay. No process. The assumption is that because work is project-based, normal rules don't apply. They do.
The collapse of ISG in 2024 laid this bare -- 1,650 out of 2,400 former employees filed protective award claims alleging the company failed to collectively consult before making them redundant.
What is redundancy?
Under the ERA 1996, a redundancy occurs when a dismissal is wholly or mainly attributable to:
| Situation | Example in construction |
|---|---|
| The employer ceases (or intends to cease) to carry on business | Contractor goes into administration |
| The employer ceases (or intends to cease) to carry on business at a particular place | Site office closes, no further local projects |
| The requirements of the business for employees to carry out work of a particular kind have ceased or diminished | Project completes, no more need for bricklayers/electricians/site managers on that contract |
That third category is the one that hits construction hardest. The project finishes. The work of that kind -- on that site, for that client -- is no longer needed. That's a textbook redundancy.
Who qualifies for statutory redundancy pay
| Requirement | Detail |
|---|---|
| Must be an employee | Not a genuinely self-employed subcontractor. Not an agency worker (the agency is the employer). But remember -- labels don't determine status (see guides 3.1--3.8) |
| Must have 2+ years' continuous service | With the same employer. Continuity isn't broken by moving between sites for the same contractor |
| Must be dismissed by reason of redundancy | Or laid off / kept on short-time for the requisite period |
| Must not have unreasonably refused suitable alternative employment | If the employer offers a suitable alternative role and the employee turns it down without good reason, they lose the right to redundancy pay |
How statutory redundancy pay is calculated
The formula is set out in s.162 ERA 1996:
| Age during each year of service | Entitlement |
|---|---|
| Under 22 | 0.5 week's pay per year |
| 22 to 40 | 1 week's pay per year |
| 41 and over | 1.5 weeks' pay per year |
Caps (from 6 April 2025):
| Cap | Amount |
|---|---|
| Weekly pay cap | £719 |
| Maximum years counted | 20 |
| Maximum statutory redundancy pay | £21,570 |
| Tax-free threshold | £30,000 (under s.403 ITEPA 2003) |
Example: A 45-year-old site manager with 10 years' service.
- 2 years at age 41+ = 3 weeks (1.5 x 2)
- 8 years at age 22--40 = 8 weeks (1 x 8)
- Total = 11 weeks x £719 = £7,909
That's the statutory minimum. Some employers offer enhanced redundancy -- but they can never pay less than statutory.
The process -- what a fair redundancy looks like
A redundancy isn't just about paying people off. If the process is unfair, the dismissal is unfair -- even if the redundancy is genuine.
| Step | What's required |
|---|---|
| 1. Identify the genuine redundancy situation | Document why the roles are at risk. "Project's finished" is fine -- but you need to evidence it |
| 2. Consider alternatives to redundancy | Restrict recruitment, limit overtime, reduce agency staff, offer voluntary redundancy, consider redeployment to other projects |
| 3. Define the selection pool | Who is "at risk"? All employees doing similar work, not just the ones you'd prefer to lose |
| 4. Apply objective selection criteria | Skills, qualifications, performance, attendance, disciplinary record. Not who the foreman gets on with, who's the cheapest, or who raised a complaint last month |
| 5. Consult individually | Meet each at-risk employee. Explain the situation. Listen to their representations. Consider alternatives they suggest |
| 6. Give proper notice | Statutory minimum: 1 week per year of service (up to 12 weeks). Contract may provide more |
| 7. Confirm in writing | Written confirmation of redundancy, redundancy pay calculation, notice period, right of appeal |
| 8. Right of appeal | Must be offered. Must be a genuine reconsideration, not a rubber stamp |
Collective consultation -- the 20+ threshold
Where an employer proposes to dismiss 20 or more employees at one establishment within a 90-day period, collective consultation obligations apply under s.188 TULRCA 1992:
| Number of proposed redundancies | Minimum consultation period |
|---|---|
| 20--99 at one establishment | 30 days before first dismissal |
| 100+ at one establishment | 45 days before first dismissal |
What collective consultation requires:
- Consultation with appropriate representatives -- recognised trade union reps, or elected employee representatives if no union is recognised
- Must begin in good time and before any redundancy notices are issued
- Must include: reasons for redundancies, numbers and descriptions of employees affected, proposed selection method, proposed procedure, proposed method of calculating payments
- Must be undertaken with a view to reaching agreement -- not just going through the motions
- Must notify the Secretary of State (via form HR1) within the same timeframes
What's changing under the ERA 2025
| Change | Detail | When |
|---|---|---|
| Protective award doubles | Maximum increases from 90 days' pay to 180 days' pay per affected employee | 6 April 2026 |
| Organisation-wide threshold | New additional trigger aggregating redundancies across all establishments (not just one site) -- threshold being consulted on (250--1,000 range) | 2027 (date TBC) |
Construction impact: The protective award doubling is immediate and significant. If you're running redundancies across a project and fail to consult -- even by accident, even because things moved fast -- the maximum penalty per person jumps from roughly £13,500 to £27,000. Scale that across 25 affected employees and you're looking at potential exposure of £675,000.
The organisation-wide threshold is equally important. Currently, a contractor making 15 redundancies on Site A and 15 on Site B doesn't trigger collective consultation at either establishment. Under the ERA 2025 changes, those 30 redundancies will be aggregated. If the threshold is set at, say, 20 across the organisation, collective consultation is triggered even though neither site individually hits the number.
Construction-specific traps
1. "They were on a fixed-term contract -- no redundancy rights"
Wrong. Fixed-term employees who are employees with 2+ years' service have redundancy rights. The non-renewal of a fixed-term contract is a dismissal under s.95 ERA 1996. If the reason is redundancy, redundancy pay is owed.
2. "They were self-employed / on CIS"
If the tribunal finds they were actually employees, redundancy rights apply. Employment status is determined by the reality of the working relationship, not the contract label (see guides 3.1--3.8).
3. "The project just finished -- that's not a redundancy"
It almost certainly is. The need for employees to carry out work of a particular kind has ceased or diminished. That's the statutory definition of redundancy.
4. "We offered them work on another site"
Good -- but was it suitable alternative employment? Same role, similar pay, reasonable commute? If so and they refuse without good reason, they may lose redundancy pay. If the alternative isn't suitable (halved pay, 100 miles away, different trade), refusal is reasonable and redundancy pay is still owed.
5. "We didn't have time to consult -- the project ended suddenly"
Not a defence. If you knew the project was winding down, the obligation to consult arose when redundancies were proposed -- which means when they became a realistic prospect, not when the last brick was laid.
6. Discriminatory selection
Selecting for redundancy based on age, disability, pregnancy, union membership, or because someone raised a health and safety concern makes the dismissal automatically unfair and potentially discriminatory. Objective criteria applied consistently across the pool -- every time.
Lay-off and short-time working
Construction workers are often "laid off" -- told there's no work this week, come back when we call you. The ERA 1996 gives employees specific rights here:
| Situation | Definition | Right |
|---|---|---|
| Lay-off | Employee receives no pay for a week because no work is provided | After 4+ consecutive weeks of lay-off, or 6+ weeks in a 13-week period, the employee can claim redundancy pay |
| Short-time working | Employee's pay for a week is less than half a week's normal pay | Same trigger -- 4 consecutive or 6 in 13 |
The employee must give written notice of intention to claim redundancy pay. The employer then has 7 days to issue a counter-notice if they expect work to resume within 4 weeks.
Construction reality: Many operatives are laid off repeatedly without ever being told they can claim redundancy. If you've been sent home with no pay for a month straight, you may have a redundancy claim right now -- even if nobody's formally dismissed you.
What happens if you get it wrong
For the employer:
- Unfair dismissal claim -- if the process was flawed (no consultation, unfair selection, no consideration of alternatives), the redundancy dismissal is unfair. Compensation from January 2027: uncapped
- Protective award -- failure to collectively consult: up to 180 days' pay per employee from April 2026
- Wrongful dismissal -- failure to give proper notice: pay in lieu owed
- Unpaid redundancy pay -- employee can claim through tribunal. If employer is insolvent, claim goes to the government's Redundancy Payments Service
- Discrimination claims -- if selection was tainted by a protected characteristic: uncapped compensation, injury to feelings award
- The ISG precedent -- 1,650 employees filing protective award claims, with potential government payouts exceeding £9 million
For the employee:
- Don't assume you have no rights. If you were employed (not genuinely self-employed), you have rights -- even on a construction project, even on a fixed-term contract
- Time limit: Redundancy pay claims must be brought within 6 months of the relevant date. Unfair dismissal claims within 3 months minus one day
What to do
If you're a contractor winding down a project:
- Start early. As soon as redundancies become a realistic prospect, the clock starts. Don't wait until the last week.
- Count heads. If 20+ employees are at risk across one establishment in 90 days, collective consultation is mandatory. From 2027, count across the whole organisation.
- Follow the process. Individual consultation, objective selection criteria, consideration of alternatives, proper notice, written confirmation, right of appeal. Every time.
- Check employment status. Anyone you're treating as self-employed but who works like an employee may have redundancy rights. Audit now, not when the claim lands.
- Budget for it. Statutory redundancy pay, notice pay, accrued holiday -- these are costs of winding down a project. Build them into your project budgets from the start.
- File form HR1. If collective consultation applies, notify the Insolvency Service. Failure to do so is a criminal offence.
If you're an employee being made redundant:
- Check your service. Two years' continuous service = statutory redundancy pay entitlement.
- Ask for the calculation in writing. Your employer must provide a written statement showing how redundancy pay was calculated.
- Were you consulted? If nobody spoke to you individually about the redundancy, alternatives, or selection -- the process was likely unfair.
- Were you offered alternative work? If suitable alternative employment exists within the organisation and wasn't offered, the redundancy may be unfair.
- Keep records. Pay slips, contracts, emails, any communication about the redundancy. You'll need these for any claim.
- Act quickly. Unfair dismissal: 3 months minus one day. Redundancy pay: 6 months. ACAS Early Conciliation must come first.
- If your employer is insolvent, claim through the government's Redundancy Payments Service -- they'll pay statutory redundancy, notice pay (up to 6 weeks), holiday pay (up to 6 weeks), and arrears of pay (up to 8 weeks).
What to do next
- Check your continuous service length -- two or more years means you're entitled to statutory redundancy pay.
- Ask your employer for the redundancy pay calculation in writing.
- If nobody consulted you individually about the redundancy, selection criteria, or alternatives -- the process may have been unfair.
- If your employer has gone insolvent, claim through the government's Redundancy Payments Service for statutory redundancy, notice pay, holiday pay, and arrears.
- Act quickly -- unfair dismissal claims must be filed within three months minus one day; redundancy pay claims within six months.
Sources
- Employment Rights Act 1996, ss.135--165 (redundancy payments)
- Employment Rights Act 1996, s.95 (definition of dismissal, including non-renewal of fixed-term contracts)
- Employment Rights Act 1996, ss.86--91 (notice periods)
- Trade Union and Labour Relations (Consolidation) Act 1992, s.188 (collective consultation)
- Employment Rights Act 2025 -- protective award doubling, organisation-wide collective consultation threshold
- GOV.UK -- Statutory Redundancy Pay rates (from 6 April 2025: £719/week cap, £21,570 maximum)
- ACAS -- Redundancy Pay
- Herrington Carmichael -- Redundancy or Restructure? Employment Law Trip Hazards in Construction Layoffs
- Construction Management -- How to Handle Redundancies at the End of a Construction Project
- KLG Law -- Redundancy in the Construction Industry
- DLA Piper -- Consultations on the Trigger for Collective Redundancy (ERA 2025)
- DAC Beachcroft -- Government Publishes Consultation on Collective Redundancy Consultation Threshold
- Key HR -- Collective Redundancies: From April 2026, the Protective Award Is Set to Double
- BP Collins -- Changes to Collective Redundancies: What Employers Need to Know
- Harding Evans -- Employment Rights Act 2025: Changes to Collective Redundancy
This guide is for general information only and does not constitute legal, tax, or financial advice. Legislation, case law, and HMRC guidance change frequently. The ERA 2025 provisions on collective consultation thresholds and protective awards are subject to secondary legislation and commencement orders. Redundancy rights depend on employment status and length of service, both of which are fact-specific. Always take professional advice specific to your circumstances before acting on anything in this guide. SiteKiln is not a law firm and accepts no liability for actions taken based on this content.
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