Protecting your business during the redundancy process

As financial pressures mount for small businesses across the UK, it has become increasingly important to proactively assess and refine redundancy processes. With rising operational costs, including the recent increase in National Insurance contributions in April 2025, many employers may find themselves needing to make difficult workforce decisions to remain financially viable. Ensuring that redundancy procedures are legally sound, transparent, and strategically managed not only helps mitigate legal risks but also supports business resilience during challenging economic times. Getting redundancy wrong could cause more issues than had been anticipated, including potential employment tribunal proceedings.

Here, we speak to Head of Employment Law at Banner Jones Solicitors, Katie Ash, who discusses what employers in small businesses must do to make sure they manage the redundancy process properly and avoid potential legal action further down the line.

 

Key points to note in order to protect your small business during the redundancy process

 

Point 1 – What you need to know about redundancy from the start

Firstly, it is really important to clarify that when a business is making a redundancy, it is not the ‘person’ that is being made redundant, but rather the role.

To that end, as an employer you must be able to clearly show that the employee’s role will no longer exist. Employers need to ensure that there is a genuine redundancy which means the reason for redundancy cannot in any way be for a different reason such as poor performance or due to a clash of personalities. This is an area where many business owners come unstuck, so it is an important point to address upfront.

Secondly, employers should be aware that they must follow a fair redundancy process regardless of the employee’s length of service, even though they are ONLY entitled to a redundancy payment after they have been employed for two years or more.

The amount that they receive as a redundancy payment under employment law is based on a calculation including factors such as an employee’s weekly gross pay, age and length of service.

If you have reached the point where compulsory redundancies are necessary – be that due to the relocation of the business, a reduction in the work required, or the closure of certain departments or divisions – you are no doubt already under substantial pressure, and it can be easy to make mistakes, which could leave you vulnerable from a legal perspective.

 

Point 2 - Communicate redundancies at an early stage

To protect your business, it is vital that a fair process is followed, and this includes communicatingwith staff at an early stage that redundancies may have to take place. This ensures that employees have plenty of warning that they could be made redundant and gives them an opportunity to put forward any suggestions that they may have. Employers should not forget to notify those staff members who are absent from the workplace, such as those on furlough or on maternity leave.  This can be done verbally or in writing if face-to-face is not possible. If there are more than 20 proposed redundancies, then there will be more onerous obligations to inform and consult on a collective basis. This article, does not deal with this scenario and is based on there being less than 20 employees.

 

Point 3 – Identify the correct selection pool

On the basis that there are less than 20 proposed redundancies, the next step is to ensure that the correct selection pool is identified and that objective and measurable selection criteria are put in place. This consists of compiling a list of roles which could be affected based on the areas of your business that you are reducing, and then agreeing a system by which you identify and log the skills required for the business going forward; and ultimately how you will select who will made redundant.

This may seem impersonal, but as the main objective is to remain impartial and non-discriminatory, that is actually a good thing during the redundancy process.

 

Point 4 – The Consultation Period

Once you have started the redundancy process, you will need to enter into what is known as a consultation period with the employees. This consists of setting up a two-way dialogue with you and the employees who carry out the roles that you have selected for potential redundancy. This is an opportunity to look at the possibility of avoiding the redundancy, for example,by reallocating an employee to a different role. This would usually consist of at least two meetings.

At the first meeting, you will explain why the employee has been selected for redundancy and invite them to discuss their options. For example, they could be willing to job share in order to keep working.

If no alternative to redundancy can be identified, then you will usually be required to have a second meeting with the employee to discuss your decision and what happens next, including any entitlements the employee has.  These meetings can take place over the phone if the employee is unable to have a face-to-face meeting.

Finally, formal notice of the redundancy must be sent in writing to the employee and they should be offered the right to appeal the decision. Although if the process has been followed correctly, there may be little grounds for them to do so.

It can be a tough process for all concerned – with redundancies inevitably causing some upset amongst the workforce, and a wider sense of uncertainty across the business.

 

Point 5 - Exhaust other options

In an ideal world, you would look to avoid the scenario altogether by considering other options – such as seeking applicants for voluntary redundancy and early retirement; offering existing staff reduced hours of flexible working; reducing or putting a halt on overtime hours; retraining or redeploying existing employees to carry out new or different roles.

However, if you have explored every other avenue and are left with little choice but to make redundancies, having the correct processes and policies in place beforehand can help to ensure that you are legally compliant and protected from any potential claims.

 

Just remember, making someone redundant is not a quick and easy way of dismissing a problematic employee. If you cannot demonstrate that the role itself is a genuine redundancy, you could find yourself facing legal proceedings for unfair dismissal, which can be costly, time consuming and potentially damaging to the business’ reputation.

 

Our expert Employment Law team are on hand to discuss any employment or redundancy-based queries. Email them on employment@bannerjones.co.uk or call the team directly on 01246 605 132.

We offer flexible appointments either face-to-face, by phone or video call as well as evening appointments if required.

 

If your business needs any advice on the redundancy process, please do not hesitate to get in touch with our Employment Law team.  Appointments can be done over the phone for your convenience.