Redundancy is one of the hardest things a small employer ever has to handle. It affects real people, it carries legal risk, and it often comes at a moment when the business is already under strain. Getting the process right matters both for fairness to your team and for protecting your business from claims.
This guide explains, in plain English, how a fair redundancy process tends to work for a small employer. It walks through what redundancy genuinely means, how to select fairly, why consultation matters and how to reduce the risk of an unfair dismissal claim.
This article is general information only and is not legal advice. Employment rules can change, so always confirm the details that apply to you on GOV.UK or speak to a qualified employment adviser.
What genuinely counts as redundancy
Redundancy is a specific legal idea, not a label you can attach to any dismissal you would like to make. In broad terms, a redundancy arises when a role is no longer needed: the business is closing, a particular workplace is closing, or the need for employees to do work of a particular kind has reduced or stopped.
The crucial point is that redundancy is about the job, not the person. If the real reason you want someone to leave is their performance or conduct, that is a different process entirely, and dressing it up as redundancy is risky. Performance and conduct issues belong in the kind of process described in our guide to disciplinary and grievance procedures for small firms.
If there is no genuine reduction in the work to be done, there is no genuine redundancy, and a tribunal will look closely at that.
Fair selection criteria
Where you have more people doing a type of work than you now need, you have to decide who is selected for redundancy. That choice must be made on fair, objective and measurable grounds, applied consistently across everyone in the relevant pool.
Criteria that employers commonly consider include:
- Skills, qualifications and experience relevant to the future of the business.
- Standard of work, where it can be measured objectively and on record.
- Relevant disciplinary record, used carefully and fairly.
- Attendance, excluding absence related to disability, pregnancy or other protected reasons.
Avoid anything subjective or anything that could discriminate, directly or indirectly, on grounds such as age, sex, disability, race, religion or pregnancy. Selecting someone because they are on maternity leave, or because of their age, can turn a redundancy into an unlawful dismissal very quickly. Score each person against the same criteria and keep your reasoning on record.
Consultation
Consultation is not a formality to rush through at the end. It is a genuine, two-way conversation with affected staff before any final decision is made. Done properly, it can change outcomes, surface alternatives and demonstrate that you acted fairly.
For individual redundancies this usually means meeting the employee, explaining the situation honestly, sharing how the pool and criteria work, and listening to their suggestions. Where larger numbers are involved, additional collective consultation duties can apply, and the rules around timing and process become more demanding. Because those thresholds and requirements can change, check the current position on GOV.UK if you are considering more than a handful of roles.
Throughout, keep notes. A clear record of what you discussed and when is one of your best protections if a decision is later challenged.
The idea of statutory redundancy pay
Employees with enough continuous service are generally entitled to statutory redundancy pay when they are made redundant. The amount is worked out using a formula based on factors such as age, length of service and weekly pay, and there are limits on the figures used in that calculation.
Because the rates, caps and qualifying service periods are exactly the kind of numbers that change, this guide will not quote them. Instead, look up the current figures and use the official calculator on GOV.UK before you commit anything in writing. You may also choose to offer enhanced terms above the statutory minimum, but you should be consistent and clear about any policy you apply.
Plan for the cost early. Knowing roughly what redundancy will cost helps you make sound decisions and avoid nasty surprises to your cash flow.
Considering alternatives
A fair process looks for ways to avoid or reduce redundancies before confirming them. Showing that you genuinely explored alternatives strengthens the fairness of any redundancy that does go ahead.
Options worth considering include:
- Reducing or stopping the use of contractors and agency staff first.
- Offering suitable alternative roles within the business where they exist.
- Asking for volunteers for redundancy or early retirement.
- Exploring reduced hours, restructured roles or temporary changes by agreement.
If you offer an alternative role, the employee may have the right to a trial period in it. Document the alternatives you considered and why they were or were not viable, so the reasoning behind your final decision is clear.
Redundancy is about the role disappearing, not the person leaving, and a fair process keeps that distinction visible at every step.
Notice periods and avoiding unfair dismissal claims
When a redundancy is confirmed, the employee is entitled to notice. The minimum notice depends on length of service, and the contract may provide for more, so check both the statutory minimum on GOV.UK and the terms set out in their agreement. Our guide on what to include in employment contracts covers why those written terms matter so much at moments like this.
To reduce the risk of an unfair dismissal claim, the themes running through this guide are your best defence: a genuine redundancy situation, a fair and consistent selection process, meaningful consultation, a real search for alternatives, and proper notice and pay. Keeping good records of each stage shows you acted reasonably.
Redundancy also sits within your wider responsibilities as an employer. Our overview of UK workplace rules for small businesses sets out the broader framework these duties fit into. When in doubt, take advice before acting rather than after.
Frequently asked questions
Can I make someone redundant and then replace them?
Not if the role is essentially the same. Redundancy means the need for that work has reduced or gone. Recruiting for the same job soon after suggests the redundancy was not genuine, which exposes you to a claim. If the work genuinely returns, take advice before re-hiring.
Do I have to consult if only one person is affected?
Yes. Even for a single redundancy, a fair process generally involves consulting the individual before any final decision. Consultation gives them a chance to respond, suggest alternatives and be heard, and skipping it can make the dismissal unfair regardless of how genuine the redundancy is.
What if the employee has not worked here very long?
Qualifying periods affect some rights, such as statutory redundancy pay and certain unfair dismissal protections. However, claims based on discrimination can apply regardless of length of service. Because the rules and thresholds change, confirm the current position on GOV.UK or with an adviser rather than assuming.
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