How do I make an employee redundant?

If your business needs a smaller workforce, and your employees are not at fault, you need to go through the redundancy process. But what exactly is it and what does it involve?

Meeting room with an empty desk in the middle

What is redundancy?

If an employees position is no longer required through no fault of the employee, the business can use a form of dismissal known as a redundancy.

Reasons to use a redundancy can include: changes in how the business is run, automated processes taking the place of employees, incoming work slowing down, and too many employees for the level of work required.

If it sounds like your business needs to make redundancies, there are certain steps you must follow as a business. And, there are also certain rights the employee is entitled to which you must be aware of and adhere to.

Redundancy Consultation

Before making anything final, your business needs to carry out a redundancy consultation.

This is where you inform the employees of what will be happening and why. You will need to give them information on why the redundancy is necessary and if there are any alternatives for the employee. The consultation can either be done on an individual basis or to the workforce as a collective.

The right to collective consultation

If you are making 20 or more employees redundant in one business over the course of 90 days or less, you have the right to carry out a collective consultation. Once the collective consultation has taken place, you should also individually consult with the employees. If you do not individually consult them, an employment tribunal may find it unfair that they were notified as a collective.

Collective redundancy good practice

When you are using a collective redundancy, it is good practice to consult with trade union or workplace representatives, so you can come to an agreement for when the commencement of the consultation will be. You will also need to agree on the duration of the procedure. Employers are required to consult with any appropriate representatives for the employees who are being affected by the proposed dismissals, whether this is directly or indirectly.

Consultation must be undertaken by the employer with a view to reaching an agreement with the appropriate representatives on ways of avoiding dismissals or reducing the number of staff that will be dismissed, even if the employees are volunteers. If you fail to comply with the consultation requirement you could face a claim for compensation.

When does the consultation need to begin?

When doing collective consultations, the consultation needs to begin at least:

30 days before the first dismissal takes place, when 20-99 employees are being made redundant
45 days before the first dismissal takes place, when 100 or more employees are being made redundant

What needs to be discussed with employees?

Man looking at a pinboard on a wall

When discussing the dismissals with employee representatives you will need to disclose certain information in writing. Such as:

Reasons for the proposed redundancies
Numbers and descriptions of employees affected
The proposed method of selecting the employees who are to be dismissed
The proposed method of carrying out the dismissals
How redundancy payments, apart from the legal minimum, are to be calculated

How can you avoid making redundancies?

Its possible that redundancy was the first thought that crossed your mind, but it may not always be the best course of action. For example, you could:

Retrain employees for redeployment in other areas of the business.
Reduce or eliminate overtime (this could be a form of cost-cutting if the issue is monetary)
Look at the age of your employees and ask if they would take early retirement.

How do you select the employees you're dismissing?

Employers should consult with any affected employees regarding the selection criteria for dismissal.

Examples of selection criteria are:

Attendance record: any employee who is regularly late for work or taking short-notice and unexplained absences should be considered for selection
Disciplinary record: if you have had to give formal warning to any employees, this could be a reason for dismissing them (if the warning was for a severe enough reason)
Skills or experience: having highly skilled employees is good for the business, but having lower skilled employees could mean you can adapt them to the role, a fine line to tread when looking at dismissals.
Standard of work performance: employees who give a low standard of work are less valuable to the business than other employees who produce good work.

Employers also need to develop and implement an appeals procedure for use where employees feel as though they have been unfairly selected.

Redundancy Notice

A blank notepad on a desk

Once you have selected the employees that are to be made redundant, you will need to give them a notice period before the employment ends. The statutory periods of notice are:

At least one week of notice if the employee has been with the business for between one month and 2 years
One week of notice for each year the employee has been with the business, between 2 and 12 years
12 weeks of notice if they have been with the business 12 years or more.

Redundancy Payments

Employees are entitled to statutory redundancy payments if they have been employed by the business for at least 2 continuous years.

However, you can also have a separate policy in place outlining any additional payments if you wish.

The statutory payments are:

0.5 weeks pay for each full year of service while they were aged under 22
1 weeks pay for each full year of service while they were aged 22-41
1.5 weeks pay for each full year of service while they were aged 41 or older.

Employees can only count a maximum of 20 years of service and the 'weekly pay' is subject to an upper limit, capped at £700.

If you want help finding out how much your employees are entitled to, use the online calculator from HMRC.

All references to current legislation are correct at the time of writing (March 2025), and should only be used as a guide. We recommend seeking professional advice before acting on the information in this article.

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