UK Redundancy Process: Step-by-Step Guide for Employers

Redundancy is one of those business decisions no one really wants to make - but sometimes it’s the most responsible option to keep your business sustainable.

Still, the redundancy process isn’t just an operational exercise. In the UK, it’s a legal process with rules around fairness, consultation, selection, notice, and payments. If you don’t follow the right steps, you can quickly end up facing unfair dismissal claims, discrimination allegations, protective awards (in collective redundancy situations), or long-running disputes that drain time and money.

This guide breaks down the UK redundancy process in a clear, employer-focused way, so you can manage redundancies lawfully and respectfully - while protecting your business.

Step 1: Confirm It’s A Genuine Redundancy (And Not Something Else)

Before you start any redundancy process, you need to be confident that the reason for dismissal is genuinely redundancy.

In plain English, redundancy usually means the role is no longer needed, for example because:

• your business is closing (or a specific site is closing)
• your business is relocating and the employee can’t reasonably move
• there’s a reduced need for employees to do work of a particular kind (often due to downturn, restructuring, automation, lost contracts, or consolidation)

If the real issue is the individual’s performance, conduct, or long-term health, redundancy is usually the wrong route and can create extra risk.

For example:

• If you’re struggling with underperformance, you may need a performance management process (often including a Performance Improvement Plan).
• If the concern is long-term sickness or capability, you may need a capability route rather than redundancy.
• If you’re changing your business model and staff are transferring to a new employer, TUPE may apply (and redundancy can become a very different exercise). A TUPE transfer checklist is a good starting point when a service or business is changing hands.

Practical tip: Write down the business case for redundancy early (even if it’s just a short internal note). If the decision is challenged later, your documentation matters.

Step 2: Plan The Redundancy Process (And Your Timeline)

Once you’ve confirmed redundancy is the right legal category, the next step is planning. Small businesses often rush this stage - but good planning is where you reduce risk.

What Should You Plan For?

• Which roles are affected (and how many employees)
• Whether it’s an individual redundancy or multiple redundancies
• Whether collective consultation rules apply
• A fair selection method (if you’re selecting from a pool)
• Consultation meetings and who will lead them
• Whether there are suitable alternative roles to explore
• Budget for notice pay, redundancy pay, accrued holiday, and any enhanced payments

Do You Need A Collective Redundancy Process?

Collective consultation obligations can be triggered if you are proposing to dismiss as redundant 20 or more employees at one establishment within 90 days.

This is where timeframes and formalities become stricter. You’ll likely need to consult employee representatives (or a trade union if recognised) and follow specific minimum consultation periods. If you’re unsure where you sit, it’s worth reading up on redundancy consultation periods so you can build a compliant timeline.

Why this matters: Getting collective redundancy wrong can lead to significant financial exposure (for example, a protective award).

Step 3: Choose A Fair Selection Pool And Selection Criteria

If you’re removing a role entirely and there’s only one person doing it, selection may be straightforward.

But in many small businesses, redundancy is about reducing headcount in a team - meaning you have to select who stays and who goes. That’s where risk increases, because selection must be fair and not discriminatory.

How Do You Identify The Selection Pool?

A “selection pool” is the group of employees who are at risk of redundancy and from which you’ll select. Common approaches include:

• all employees doing the same role
• employees doing similar roles (with interchangeable skills)
• employees within a particular business unit, project team, or location

Selection pools can get tricky in small teams where job titles don’t reflect reality. The key is to think about the work being done and whether roles are interchangeable.

What Selection Criteria Should You Use?

Criteria should be as objective as possible. Common examples include:

• skills, qualifications, and role-critical competencies
• performance records (based on evidence, not gut feel)
• disciplinary record (where relevant and consistently applied)
• attendance record (with care - disability and pregnancy-related absence must be handled lawfully)

Avoid criteria that could be indirectly discriminatory unless you can objectively justify them. Also be cautious about using “last in, first out” - it can disadvantage younger workers and can be risky if relied on heavily.

Many employers use a structured approach like a scoring matrix to support fairness and transparency. If you need a framework, a redundancy scoring matrix can help you apply consistent criteria and keep records of how decisions were reached.

Practical tip: Have more than one manager review scoring where possible. It reduces bias and strengthens the evidence that the process was fair.

Step 4: Consult Properly (Individual And/Or Collective)

Consultation is the heart of the redundancy process. It’s not just a “tick box” meeting - it’s a genuine chance for employees to understand what’s happening and to respond, suggest alternatives, and raise concerns.

What Does “Genuine Consultation” Look Like?

While every business is different, good consultation usually includes:

• explaining the business reasons for proposed redundancies
• explaining the selection pool and criteria (where relevant)
• sharing an employee’s provisional selection scoring (if applicable)
• inviting feedback and considering alternatives (reduced hours, redeployment, restructuring)
• allowing a reasonable period for the employee to respond
• holding at least one follow-up meeting before making a final decision

It’s also good practice to confirm key points in writing after meetings.

Be Careful With “Alternatives To Redundancy”

During consultation, you should actively consider whether redundancy can be avoided, for example by:

• recruitment freezes
• reducing overtime
• reducing non-essential spend
• offering voluntary redundancy (with a clear process)
• reducing hours (with agreement)
• redeployment into other roles

Where you have vacancies, you should explore “suitable alternative employment.” This is particularly important for employees with additional legal protections. For example, where a suitable alternative vacancy exists, employees on maternity leave, adoption leave, or shared parental leave generally have priority to be offered it ahead of others. From 6 April 2024, this priority protection is also extended to certain redundancy situations during pregnancy (once the employee has informed you) and for a period after they return to work.

How Many Consultation Meetings Do You Need?

There’s no single number that fits all scenarios, but one meeting is rarely enough if the employee is provisionally selected from a pool. Typically, employers run:

• Meeting 1: at-risk meeting (explain situation, propose redundancy, invite input)
• Meeting 2: follow-up (discuss responses, alternatives, scores, and next steps)
• Meeting 3 (if needed): final decision meeting and/or appeal

Practical tip: If the employee raises something new (for example, a scoring challenge or a proposed alternative), pause and properly consider it. Rushing to a decision is a common reason redundancy dismissals are challenged.

Step 5: Confirm Redundancy, Issue Notice, And Calculate Final Payments

If consultation concludes and redundancy is confirmed, you move into the “dismissal and payments” stage.

Issue The Redundancy Outcome In Writing

You should provide a redundancy dismissal letter confirming:

• the reason for dismissal (redundancy)
• the termination date
• notice period (or pay in lieu, if applicable and lawful under the contract)
• redundancy pay (if eligible) and how it’s calculated
• any other final payments (holiday, commission, expenses)
• the right of appeal and how to submit it

This is also where good paperwork helps protect your business. If you don’t already have robust employment documentation in place, it’s worth tightening things up in future with an Employment Contract and clear policies.

What Notice Are You Required To Give?

Employees are generally entitled to at least statutory notice, and possibly more if their contract provides for it. Your obligations will depend on their length of service and their contract terms.

To avoid missteps, it helps to cross-check redundancy notice periods and ensure you’re paying correctly (especially if you’re considering pay in lieu of notice).

What Payments Might Be Due?

Depending on the situation, final payments can include:

• Statutory redundancy pay (for eligible employees, usually those with 2+ years’ continuous service)
• Contractual redundancy pay (if your contract or policy provides more than the statutory minimum)
• Notice pay (worked or paid in lieu)
• Accrued but untaken holiday pay
• Any outstanding wages/commission/bonuses depending on contractual terms

If you’ve offered more than the legal minimum, you may be dealing with enhanced redundancy pay - which should be documented clearly and applied consistently to avoid grievances or discrimination risk.

Practical tip: Keep redundancy calculations in writing and double-check them. Payment disputes are one of the easiest ways for a redundancy to escalate.

Key Takeaways

• The redundancy process should start with a clear business rationale and confirmation that redundancy is the right legal reason (not performance, conduct, or capability).
• Plan your timeline early, especially if collective consultation rules may apply, because mistakes in process can lead to significant legal exposure.
• If you’re selecting from a group, use a fair selection pool and objective selection criteria, supported by written evidence and consistent scoring.
• Consultation must be genuine - you should explain the situation, share relevant information, listen to feedback, and properly consider alternatives and redeployment.
• When redundancy is confirmed, issue a clear written outcome, provide the correct notice, and calculate redundancy pay and final payments carefully.
• Well-drafted contracts and clear documentation reduce confusion and help protect your business if the decision is challenged later.

If you’d like help running a fair redundancy process or sense-checking your redundancy letters, consultation plan, or payment calculations, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.