Making One Person Redundant In The UK

Needing to make one person redundant is never easy - especially in a small business where every team member matters. But if the role genuinely isn’t needed anymore, UK law allows you to proceed, provided you follow a fair and lawful process.

In this guide, we’ll walk you through when redundancy applies, how to run a compliant process when making one person redundant in the UK, and the key steps to reduce risk. We’ll also cover pay, notice and common pitfalls so you can move forward with clarity and confidence.

What Counts As Redundancy In The UK?

Redundancy is a specific legal reason for dismissal under the Employment Rights Act 1996. In plain English, it’s about the job disappearing - not concerns about the employee’s performance or conduct.

Situations that typically count as redundancy include:

• Your business closes entirely or relocates outside the employee’s reasonable commuting distance.
• You need fewer employees doing certain work (for example, due to a downturn, automation, or restructuring).
• The work has stopped or diminished, or you’re reorganising to remove a role or combine responsibilities.

Redundancy is different to severance for other reasons (for example, settlement agreements following disputes). If you’re weighing up these paths, it helps to understand the differences between redundancy and severance and the knock-on legal obligations.

Redundancy must be genuine. If the real reason is performance or misconduct, use the appropriate fair process (e.g. capability or disciplinary) instead of labelling it as redundancy.

Can You Make One Person Redundant In A Small Business?

Yes - you can make one person redundant in a small business if the reason is genuine and you follow a fair procedure. There’s no minimum number for redundancy to apply. The law focuses on the process you follow and whether the decision is substantively and procedurally fair.

Key legal points to keep in mind:

• No collective consultation threshold: Collective consultation rules (under the Trade Union and Labour Relations (Consolidation) Act 1992) kick in if you propose 20+ redundancies at one establishment within 90 days. For a single redundancy, those collective rules won’t apply - but you still must consult individually.
• Individual consultation and fairness: You are required to warn and consult the employee, consider alternatives, and use fair selection where there’s a pool (more on this below).
• Equality and discrimination: Decisions must comply with the Equality Act 2010. Avoid criteria that might directly or indirectly discriminate (for example, penalising someone for disability-related absence or shared parental leave).

In very small teams, the “selection pool” may be just one role - sometimes only one person does that work. That’s acceptable, but you still need to show the role is genuinely redundant and demonstrate that you considered alternatives (such as redeployment or changes by agreement).

How To Run A Fair, Lawful Process Step-By-Step

The heart of a fair redundancy is consultation, transparency and reasoned decision-making. Here’s a step-by-step process that aligns with UK law and ACAS good practice.

1) Prepare Your Business Case

Document the reason for redundancy and the change you’re proposing. This might include reduced revenue, loss of a client, new systems that automate tasks, or a restructuring to remove duplicated responsibilities. Keep evidence (forecasts, board notes, restructure plans) in case the decision is later scrutinised.

2) Identify The Pool And Fair Selection Criteria

If only one role is affected and there’s just one person doing that role, your pool may be that single position. If other employees do similar work, you’ll usually need to create a pool and use fair, objective selection criteria such as:

• Skills, qualifications and experience relevant to future needs
• Performance indicators (supported by records)
• Disciplinary record (fact-based, not trivial)
• Attendance records (excluding pregnancy, maternity, disability-related, or other legally protected absences)

Avoid subjective criteria or anything linked to protected characteristics. Where you’re reorganising roles, consider whether selection should look across a broader team rather than one job title.

3) Start Consultation (At Least Two Meetings)

Invite the employee to an initial consultation meeting in writing. Explain the business case, the roles at risk, your draft selection criteria (if relevant), and your proposed timeline. Make clear this is a proposal and you’ve not made a final decision.

In consultation, you should:

• Listen to feedback and consider alternatives to redundancy (retraining, redeployment, reduced hours by agreement, job sharing, short-term cost measures).
• Share how you’ll apply any selection criteria and invite comments or evidence from the employee.
• Confirm the employee can be accompanied (usually by a colleague or trade union representative, as a matter of good practice).

Hold at least one follow-up meeting to discuss responses and any changes. If you’re proposing variations to terms (like reduced hours or pay) as an alternative, remember that changing an Employment Contract generally requires the employee’s consent and a fair process.

4) Consider Suitable Alternative Employment

You must take reasonable steps to look for suitable alternative roles within your business (and any associated companies). Suitability involves similar terms, status, skills and location. If an offer is suitable and the employee unreasonably refuses it, they could lose entitlement to statutory redundancy pay.

Women on maternity leave have priority for suitable alternative roles. Handle redeployment decisions carefully to avoid discrimination risks.

5) Apply Criteria, Decide, And Confirm In Writing

If a pool applies, score employees against your objective criteria, keep notes, check for hidden bias, and have scores reviewed by a second manager if possible. After consultation closes, make your decision and write to the employee:

• Summarise your business case and the consultation steps you took
• Explain the selection and the reasons for the outcome
• Set out notice, redundancy pay, holiday pay, and final pay details
• Offer a right of appeal and explain the process

6) Appeal And Exit

Hear any appeal with a fresh decision-maker if you can. If the decision stands, manage the exit professionally: confirm final pay in writing, retrieve company property, and communicate the change with care to the rest of the team.

If you’ve agreed to a settlement to wrap things up cleanly (for instance, to resolve disputes around process or pay), ensure the terms are clearly documented and the statutory requirements for a valid settlement agreement are met. When you’re planning exits more broadly, it helps to have your Employment Contract and policies aligned to your business’ approach to notice, PILON, garden leave and post-termination obligations.

Redundancy Pay, Notice And Final Pay

Once redundancy is confirmed, you’ll need to calculate the employee’s entitlements and issue the correct payments on time.

Statutory Redundancy Pay

Employees with at least two years’ continuous service are usually entitled to statutory redundancy pay based on age, length of service (capped), and a weekly pay limit set by the government each year. You’ll need to apply the current caps at the time of dismissal.

Some employers also offer additional (contractual) redundancy pay. If you’ve previously applied a practice of paying more, consider whether a “custom and practice” expectation has arisen. Where you’re considering going above the statutory minimum, understand how enhanced redundancy pay might apply and how to document it.

Notice, PILON And Holiday Pay

Employees are entitled to notice (statutory minimum or contractual if higher). You can either:

• Have them work their notice; or
• Pay in lieu of notice (PILON) if permitted under the contract.

You’ll also need to pay any accrued but untaken holiday. Check your contract terms on garden leave, confidentiality and return of property. A clear exit checklist helps - see this practical overview on ending an employment contract fairly.

Tax Treatment

Statutory redundancy pay can be tax free up to the £30,000 threshold (subject to HMRC rules). Notice pay and holiday pay are taxable as earnings. If you’re offering an ex gratia amount, make sure you’re applying the correct tax treatment and documenting the breakdown clearly in your letter.

Post-Termination Restrictions

Redundancy does not automatically void contractual restrictions. Reasonable, well-drafted restraints (for example, non-solicitation of clients) may still apply, depending on the facts. If restrictive covenants are important to your business, get advice on scope and enforceability - particularly around periods of 6–12 months - and ensure your contracts reflect best practice for non-compete clauses.

Mistakes To Avoid And Small Business FAQs

It can be tempting to “keep it informal” in a small business. But skipping steps is what most often leads to claims. Here are common pitfalls - and how to avoid them.

Common Pitfalls

• Deciding first, consulting later: Consultation must be genuine and meaningful. If the employee can show the decision was predetermined, the dismissal risks being unfair.
• Using redundancy to fix performance issues: If capability is the real reason, use a fair process (such as support and review) rather than a redundancy label.
• Flawed selection: Subjective or discriminatory criteria, or scores without evidence, are red flags. Use objective, documented criteria and keep notes.
• Missing alternatives: Always explore redeployment and reasonable adjustments. If you propose contractual changes to avoid redundancy, follow a fair process for changing terms by consent.
• Incomplete paperwork: Missing letters, unclear calculations, or inconsistent messaging undermines your position. Align your Employment Contract and policy documents so exits follow a consistent, defensible approach.

Plenty of businesses lose claims not because the reason was invalid, but because the process fell short. A quick skim of the main reasons employers lose employment tribunals is a useful reminder to stick closely to a fair script.

Do I Need A Selection Pool If Only One Person Does The Work?

Not always. If the role is unique, your pool can be that single role. Still, check whether similar work is carried out elsewhere and, if so, consider whether a wider pool is appropriate. Document your reasoning either way.

What If The Employee Volunteers For Redundancy?

You can consider voluntary redundancy, but don’t feel obliged to accept it if it doesn’t fit your needs. The same fairness and payment rules typically apply, and you should still consult and confirm terms clearly in writing.

Can We Offer Alternatives Like Reduced Hours Instead?

Yes - and it’s good practice to explore them. However, alternatives that change terms (hours, pay, duties) generally require agreement. A fair process for varying contracts can help you avoid claims and maintain trust.

Should We Use A Settlement Agreement?

Sometimes, where there’s a dispute over process or you want additional protections (like confidentiality or a waiver of claims), settlement agreements are sensible. They have strict legal requirements (including independent advice for the employee). If you’re weighing up redundancy versus a negotiated exit, it’s worth revisiting the differences between severance and redundancy to choose the right path for your situation.

What Internal Documents Should We Update?

Ensure your contracts and policies align with how you manage restructuring, consultation, notice and exit processes. Many SMEs adopt a clear Staff Handbook so managers follow a consistent process and employees know what to expect. Keeping your Employment Contract up to date reduces ambiguity on notice, PILON, garden leave and confidentiality.

How Do We Announce The Change To The Team?

Be transparent, keep it factual and avoid discussing personal details. Thank the departing team member (where appropriate) and explain how responsibilities will be managed. Clear messaging helps culture and reduces rumours during a sensitive time.

What If The Business Circumstances Change?

If the business recovers part-way through consultation and the role is still needed, you can pause or withdraw the proposal and explore alternatives. Where resignation and notice periods create a moving picture, handle communications carefully - and remember issues like retracting a resignation can add complexity and should be managed consistently with your contracts and policies.

Key Takeaways

• Redundancy is about the role genuinely disappearing - not performance - and requires a fair, transparent process under the Employment Rights Act 1996.
• You can lawfully make one person redundant in a small business, but you still need meaningful consultation, fair selection (if a pool applies), and compliance with equality laws.
• Follow a clear sequence: prepare your business case, identify the pool and objective criteria, consult, explore alternatives (including redeployment or contractual changes by agreement), decide with evidence, confirm in writing and offer a right of appeal.
• Pay the right entitlements: statutory redundancy pay (if eligible), notice or PILON, accrued holiday, and any contractual enhancements. Keep tax treatment in mind and set out calculations clearly.
• Avoid common pitfalls that lead to claims - predetermined decisions, subjective scoring, and poor documentation. Staying aligned with tribunal-proof processes significantly reduces risk.
• Make sure your foundational documents support you: a robust Employment Contract, sensible post-termination protections, and a practical Staff Handbook make restructuring smoother.
• When you’re going beyond the statutory minimum or considering alternatives, review enhanced redundancy pay, settlement options and the differences between redundancy and severance to choose the right approach.

If you’d like help planning a fair, low-risk process for making one person redundant in the UK, you can reach us on 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.