Knowing how to make staff redundant within the confines of the law matters because redundancy is one of the few situations in which an employer can dismiss an employee who has done nothing wrong, and the law compensates for that by requiring a fair reason and a fair process.
The reason is often easy to establish, since the business either needs fewer people or no longer needs the work done. The process is where many employers go wrong. A redundancy carried out without proper consultation, with a selection method that cannot be justified, or without considering alternatives, will be an unfair dismissal regardless of how sound the underlying business decision was.
GAP HR has guided owner-managed businesses through redundancies since 2003, and with more than 300 clients on retainer, we handle them regularly. Most of the exercises we support involve a small number of roles in a business that has no HR department and an owner who has never had to do this before. Our role is to plan the process, prepare the documents, support the meetings, and make sure that the business ends up where it needs to be fairly and lawfully.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
What Counts As A Redundancy?
A dismissal is by reason of redundancy where the employer has closed, or intends to close, the business or the place where the employee works, or where the employer’s need for employees to do work of a particular kind has ceased or diminished, or is expected to. The focus is on the employer’s requirement for people, not on the amount of work. A business can be busier than ever and still have a redundancy situation if, for example, new systems mean fewer staff are needed to deal with the workload, or if two roles are being merged into one.
A redundancy must be real. Using the label to remove an employee whose performance or conduct is the actual concern, or to dismiss someone who has refused a change to their terms, will not survive scrutiny.
What Process Should An Employer Follow To Make Staff Redundant?
The employer begins by identifying the business reason, considering whether there are ways to avoid redundancy altogether, and working out which roles are affected and how many positions are to go. Affected employees are then told that their roles are at risk and why, and consultation begins.
During consultation, the employer explains the proposal, listens to the employees’ responses, considers any suggestions for avoiding or reducing redundancies, and discusses the selection method and any alternative roles. Only once consultation has concluded does the employer confirm the decision, give notice, and set out the employee’s entitlements in writing.
Throughout the process, every meeting should be documented, and every letter should record what was discussed and decided.
How Should Employees Be Selected For Redundancy?
Where a whole role is disappearing and only one person does it, there is no selection to carry out. Where several people do the same or similar work and fewer are needed, the employer must identify a pool of employees from whom the redundancies will be drawn and then apply selection criteria to that pool. The pool should include everyone doing the work in question, and an employer who draws it narrowly in order to reach a particular individual will struggle to defend the result.
The criteria should be objective and capable of being evidenced, for example, skills, qualifications, performance against recorded measures, and disciplinary record. Length of service may be a factor but should not be the only one. Attendance can be used with care, provided absences connected to disability, pregnancy, or family leave are discounted. Scoring should be carried out by someone who knows the employees’ work, moderated by a second person where possible, and shared with the employee during consultation so that they can challenge it.
When Do Collective Consultation Rules Apply?
Where an employer proposes to dismiss 20 or more employees at one establishment within a period of 90 days or less, additional obligations arise. The employer must consult collectively with recognised trade union representatives or, where there is no union, with employee representatives elected for the purpose. Consultation must begin at least 30 days before the first dismissal takes effect where 20 to 99 redundancies are proposed, and at least 45 days before where 100 or more are proposed. Individual consultation still has to take place alongside the collective process.
Failure to comply allows a tribunal to make a protective award of up to 180 days’ pay per affected employee, a figure that doubled from 90 days for dismissals on or after 6 April 2026. The Employment Rights Act 2025 also provides for a second trigger based on the number of redundancies across the whole organisation rather than at a single site. The Government consulted earlier this year on where that threshold should sit, with a preference for a fixed figure somewhere between 250 and 1,000, and the regulations are expected in 2027. Few owner-managed businesses will be affected by it, but the point to remember is that the 20-employee threshold is counted across all proposed dismissals at the site, not only those that are finally made.
What Is An Employee Entitled To On Redundancy?
An employee with at least two years’ continuous service is entitled to a statutory redundancy payment. The payment is calculated by reference to age, length of service, and pay. That pay is half a week’s pay for each complete year of service under the age of 22, one week’s pay for each year between 22 and 40, and one and a half weeks’ pay for each year at 41 or over. Service is capped at 20 years, and a week’s pay is capped at £751 for dismissals on or after 6 April 2026, giving a maximum statutory payment of £22,530. Many employers pay more than the statutory minimum, either because the contract provides for it or as part of an agreed exit, and payments up to £30,000 can usually be made free of tax.
Employees are also entitled to notice, which is the longer of their contractual notice and the statutory minimum of one week for each complete year of service up to 12 weeks. The employer may require the employee to work the notice, place them on garden leave, or make a payment in lieu where the contract permits. Accrued but untaken holiday must be paid on termination. Employees with two years’ service who have been given notice of redundancy are entitled to reasonable paid time off to look for work or arrange training. Where an alternative role is offered, the employee is entitled to a four-week trial period in it without losing their right to a redundancy payment if the role proves unsuitable.
Which Employees Have Special Protection?
Employees who are pregnant, on maternity, adoption, or shared parental leave, or who have recently returned from that leave, have the right to be offered any suitable alternative vacancy that exists ahead of other employees at risk. This is a priority right to available roles rather than a bar on redundancy. For a pregnant employee, the protection runs from the point at which the employer is told of the pregnancy, continues through maternity leave, and ends 18 months after the child’s birth, or 18 months from the start of the expected week of childbirth if the employer has not been told the actual date. Adoption leave carries the same 18 months from placement. Shared parental leave carries it after return only where at least six consecutive weeks of that leave have been taken, and the employee has not already taken maternity or adoption leave. Failing to honour the right makes the dismissal automatically unfair, and will usually also amount to discrimination, for which compensation is uncapped.
The Employment Rights Act 2025 goes further and gives the Government power to restrict the circumstances in which pregnant women, employees on maternity leave, and mothers for at least six months after their return can be dismissed at all, not only for redundancy. A consultation on the detail closed in January 2026. Among the options it floated were confining redundancy dismissals in this group to cases of severe financial difficulty, closure or insolvency where no viable alternative role exists, and extending the protection to those returning from adoption or shared parental leave. None of this is yet settled and the Government’s formal response is still awaited. The new rules are expected to take effect in 2027.
Employees selected because of a protected characteristic, trade union membership, whistleblowing, asserting a statutory right or similar reasons are also protected regardless of length of service. Selection on a protected characteristic is discrimination under the Equality Act 2010; the others are automatically unfair dismissals under the Employment Rights Act 1996 and the trade union legislation. A tribunal will look closely at any selection that happens to fall on such an employee. From 1 January 2027, the qualifying period for ordinary unfair dismissal falls from two years to six months, so the distinction will matter less, though it will still matter for employees with shorter service.
What Are The Most Common Mistakes Employers Make When Making Staff Redundant?
One of the most common mistakes made by employers is deciding first and consulting afterwards. Consultation that takes place after the names have been chosen and the letters drafted is not consultation, and tribunals are adept at recognising it. The second is a selection method that cannot be explained, whether because the pool was drawn to suit the outcome, the criteria were subjective, or the scores were not recorded. The third is failing to consider alternatives, such as vacancies elsewhere in the business, reduced hours, or voluntary redundancy, and failing to document that they were considered. The fourth is getting the money wrong, usually by miscalculating service or notice, or by overlooking accrued holiday.
Each of these is avoidable with proper planning, and the time to plan is before anything is said to staff.
How Can GAP HR Help With Redundancies?
We plan and manage redundancy exercises for owner-managed businesses from the first discussion to the final letter. That includes identifying the business case and the affected roles, designing a defensible selection process, preparing every letter and meeting script, supporting managers through the consultation meetings, calculating entitlements, and advising on settlement agreements where an agreed exit is preferred. Where collective consultation applies, we manage the representative election and the statutory timetable.
There is no charge for an initial discussion and no obligation to take matters further. Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
