Trade has dropped for two quarters, the wage bill is the biggest number on the page, and you have decided you need one fewer person in the workshop. You also know which one. That last part is where most redundancy claims begin.
Redundancy law is not complicated, but it is procedural, and tribunals look at the procedure as closely as the decision. An employer who reaches a defensible outcome by an indefensible route loses.
Redundancy is about the job, not the person
Section 139 of the Employment Rights Act 1996 defines redundancy narrowly. It is a dismissal wholly or mainly attributable to the business closing, the workplace closing, or a reduced requirement for employees to do work of a particular kind.
That last limb is the one small employers use, and it means the requirement for the work has fallen. It does not mean the person is slow, difficult or the one you would miss least. If the job still exists and you want a different person doing it, that is a performance or conduct matter with its own process, and dressing it as redundancy is how employers end up defending an unfair dismissal claim they were always going to lose.
The test is real. If you make someone redundant and advertise their job three weeks later, the redundancy was not genuine and the tribunal will say so.
Consultation happens before the decision, not after it
Consultation that begins after you have decided is not consultation. It is an announcement, and tribunals recognise the difference.
For small numbers, there is no fixed statutory timetable, but individual consultation must be meaningful. That means telling the employee the business reason, explaining the pool and the selection criteria, giving them the scores or reasoning applied to them, hearing what they say about it, and genuinely considering alternatives to dismissal including any suitable alternative vacancy anywhere in the business.
Where twenty or more redundancies are proposed at one establishment within ninety days, collective consultation obligations apply. Consultation must begin at least thirty days before the first dismissal takes effect, rising to forty-five days where a hundred or more are proposed, and it must be with recognised trade union or elected employee representatives. An employer proposing twenty or more must also notify the Secretary of State in advance using form HR1. Failure to do so is a criminal offence, and failure to consult collectively can produce a protective award of up to ninety days' pay per affected employee.
Hold at least two meetings with each individual, in writing, with the right to be accompanied, and confirm each stage in a letter. The paperwork is the evidence.
Selection criteria must be objective and written down before you score
If more than one person does the work, you need a pool and you need criteria.
Reasonable criteria are measurable and evidenced: skills and qualifications actually required, relevant experience, disciplinary record within a stated period, and attendance excluding absence that relates to disability, pregnancy or family leave. Last in, first out can form part of a matrix but should not be the whole of it on its own, because length of service correlates with age.
The criteria you cannot use are the ones that map onto protected characteristics under the Equality Act 2010. Scoring someone down for the period they were on maternity leave, for disability-related absence, for part-time hours or for age is discrimination, and discrimination claims have no statutory cap on compensation and no two-year qualifying period.
Score against the criteria, write down the evidence for each score, and let the employee see and challenge their own scores. Then check the outcome for patterns. If the process has selected the two oldest people in the pool, that may be a coincidence, but you will be asked about it and the answer needs to be better than that it is a coincidence.
Statutory redundancy pay is a formula, and it is a minimum
An employee with two years' continuous service is entitled to statutory redundancy pay, calculated on age and completed years:
- Half a week's pay for each complete year of service in which they were under 22.
- One week's pay for each complete year aged 22 to 40.
- One and a half weeks' pay for each complete year aged 41 and over.
Service counts up to a maximum of twenty years, and a week's pay is capped at a figure reviewed each April. The cap was £719 from April 2025, having been £700 the previous year, and it is uprated by order, so check the current figure rather than the one you remember. Statutory redundancy pay is free of income tax and National Insurance, as is the rest of a genuine redundancy package up to £30,000.
On top of that, the employee is entitled to notice or pay in lieu, statutory notice being one week per complete year of service to a maximum of twelve weeks, and payment for accrued untaken holiday. Any contractual enhancement in the employment contract or a custom and practice in your business applies as well.
Shortcuts are what tribunals award compensation for
The cheap version of this process looks like a conversation on a Friday and a payment on the following Tuesday. It usually costs more.
Unfair dismissal compensation is a basic award, mirroring the statutory redundancy calculation, plus a compensatory award for actual loss, capped at the lower of a year's pay or a figure reviewed annually. Failure to follow a fair procedure can also produce an uplift of up to 25% where the Acas Code applies. Acas offers early conciliation before any claim, and it is free, and it settles a great many cases before they get near a hearing.
There is an alternative that is entirely legitimate: a settlement agreement, where the employee waives claims in return for an agreed payment, having taken independent legal advice that you usually pay a contribution towards. It is a clean way to end an employment relationship, but it is not a substitute for a fair process when you are making several people redundant. Note that the qualifying period for ordinary unfair dismissal has been two years, and the government has legislated to reform that, so the position on qualifying service is one to check at the time rather than assume.
Where this shows up in the game
Business Baron makes redundancy a cost with a tail. Statutory pay comes out of cash immediately, notice runs alongside it, the remaining staff notice what happened, and a process taken at speed can come back as a claim months later. A career can start in any year from 1930, so the employment rules around you change while you are running the business, which is roughly how it feels in reality.