Almost every small employer who gets a redundancy badly wrong does so for the same reason: they treat it as a conversation rather than a process. The decision has been agonised over for weeks, the money has been worked out on the back of an envelope, and then it is delivered in one meeting on a Friday afternoon because dragging it out felt crueller than getting it over with.
The instinct is decent and the execution is where the liability sits. Redundancy is one of the five potentially fair reasons for dismissal in UK law, but the reason being fair is only half of it — the process has to be fair too, and a tribunal will look at the steps you took and the order you took them in. The payments are usually the cheapest part of a redundancy. The process is what determines whether it costs you that, or that plus a claim.
Redundancy means the job goes, not the person
Start here, because this is where sham redundancies are born. A redundancy exists where the work has genuinely diminished, the workplace is closing, or the business no longer needs that role done. It does not exist because someone is underperforming, difficult, or the wrong fit. Those are conduct and capability issues with their own process — a written warning done properly is the route there, not redundancy.
The test a tribunal applies is whether the role disappeared, not whether the person was struggling. If you make someone redundant and advertise a near-identical role three weeks later, you have handed over the evidence yourself.
Selection has to be done on paper, not in your head
If more than one person does the work you are cutting, you need a selection pool and objective criteria. In a firm of eight that feels absurdly bureaucratic, and it is still the single thing that most often decides a claim.
Define the pool: everyone doing substantially the same role. Then score against criteria you can evidence — skills and qualifications held, breadth of experience, disciplinary record, attendance excluding pregnancy-related, disability-related and statutory family leave absence. Write the scores down before you tell anybody anything.
Criteria that are never safe: age, length of service used on its own, part-time status, union membership, pregnancy or family leave, and anything that sounds like attitude. Last-in-first-out on its own is age discrimination waiting to happen. Keep the scoresheet — if it is ever challenged, the sheet is your defence, and a sheet written after the event reads exactly like a sheet written after the event.
Statutory redundancy pay, and what it actually comes to
An employee with two years' continuous service or more is entitled to statutory redundancy pay: half a week's pay for each complete year worked while under 22, one week for each year from 22 to 40, and a week and a half for each year aged 41 or over. It is capped at 20 years of service, and a week's pay is capped too — from 6 April 2026 the weekly cap is £751, up from £719, which puts the maximum statutory payment at £22,530.
A worked example, with illustrative figures. Take an employee aged 48 with nine complete years' service, earning £820 a week. Two of those years were served before they turned 41 and seven after, so the calculation is (2 × 1 week) + (7 × 1.5 weeks) = 12.5 weeks. Their actual pay is above the cap, so each week counts at £751, not £820. Statutory redundancy pay is 12.5 × £751 = £9,387.50.
That is not the whole bill. On top sits notice: the statutory minimum is one week per complete year of service up to twelve weeks, so nine weeks here, paid at actual salary — £7,380 — unless their contract is more generous, in which case the contract wins. Add any accrued untaken holiday. The redundancy payment itself is tax-free up to £30,000; notice pay and holiday pay are taxable and subject to National Insurance in the normal way.
The payments in a redundancy are predictable and budgetable. The unpredictable cost is the claim you invite by compressing a three-week process into one meeting.
The consultation nobody thinks applies to them
Individual consultation is required in every redundancy, including a redundancy of one. It means telling the employee the role is at risk and why, giving them the selection criteria and their scores, and giving them a genuine opportunity to respond before the decision is final. Genuine means the decision is capable of changing — consultation after the fact is not consultation, and a tribunal can spot the difference in the dates on your own letters.
Collective consultation is the separate regime, and it bites at 20 or more proposed redundancies at one establishment within 90 days. Most small employers never reach it. It is worth knowing that the penalty for getting collective consultation wrong doubled on 6 April 2026: the maximum protective award rose from 90 days' pay per affected employee to 180 days' pay. The Employment Rights Act 2025 also adds an organisation-wide trigger alongside the existing per-establishment one, with the level still being consulted on — the Government's preferred approach is a single fixed number somewhere between 250 and 1,000 proposed redundancies across the whole organisation, which leaves small firms outside it.
Suitable alternative employment, and the four-week trial
Before confirming a redundancy you have to consider whether there is any suitable alternative role in the business. In a small firm the honest answer is often no, and recording that you looked is still part of the process. Where a suitable alternative does exist, offer it — and note that an employee who unreasonably refuses a genuinely suitable offer can lose their statutory redundancy pay, while an employee who accepts is entitled to a four-week trial period without prejudice to that pay.
One category needs specific care: an employee on maternity, adoption or shared parental leave has a priority right to be offered a suitable alternative vacancy ahead of other candidates, and that protection extends beyond the leave itself. Getting this wrong turns an ordinary redundancy into a discrimination claim.
What changes on 1 January 2027
Two changes worth planning for now. From 1 January 2027 the qualifying period for ordinary unfair dismissal protection falls from two years to six months, with no transition period — so anyone hired on or before 1 July 2026 already has enough service to be protected on day one of the new regime. At the same time the statutory cap on the compensatory award for unfair dismissal, currently the lower of 52 weeks' gross pay or £123,543, is abolished. And from 1 October 2026 the time limit for bringing most tribunal claims doubles from three months to six.
The practical read-across for a small employer is simple: the population of staff who can bring a claim gets much larger, the window for bringing one gets longer, and the ceiling on what it can cost comes off. Process discipline stops being a nicety. There is more on what that means day to day in six months, not two years.
The shape of a small redundancy, week by week
Week one: do the analysis and the arithmetic. Define the pool, agree the criteria, score them, and cost the whole thing including notice and holiday. Decide before you speak to anyone whether the numbers actually solve the problem.
Week two: hold the at-risk meeting. Explain the business reason, hand over the criteria and the individual's scores, tell them they can respond and ask questions, and confirm it all in writing the same day. Tell them they may bring a colleague — there is no statutory right to be accompanied at a redundancy consultation meeting, and refusing looks like something to hide.
Week three: hold a second meeting. Deal with anything they raised, confirm whether alternatives exist, and only then confirm the decision in writing with the calculation set out line by line and the right of appeal stated. Hear any appeal, and hear it with someone who was not involved in the original decision if you possibly can.
Then handle the last day properly, because the way someone leaves is what the rest of your team will remember. Agree what will be said internally, agree a reference position, and pay everything owed on the normal pay date rather than making them ask. Where the situation is messier than a clean redundancy — a role that is half-gone, a dispute already running — a settlement agreement is the mechanism that draws a line under it, and it needs independent legal advice for the employee before it binds them. The conversation itself is the part nobody prepares you for, and it is worth reading what that actually feels like before you walk into the room.
Common questions
How much statutory redundancy pay is due in 2026/27?
Statutory redundancy pay requires two years' continuous service and is calculated as half a week's pay for each complete year served under age 22, one week for each year from 22 to 40, and one and a half weeks for each year aged 41 or over, capped at 20 years of service. From 6 April 2026 a week's pay is capped at £751, giving a maximum statutory payment of £22,530. So an employee aged 48 with nine years' service earning above the cap receives 12.5 weeks at £751, or £9,387.50. Notice pay and accrued holiday sit on top, and the redundancy payment itself is tax-free up to £30,000.
Do I have to consult if I am only making one person redundant?
Yes. Individual consultation applies to every redundancy, however small. That means telling the employee their role is at risk and explaining why, sharing the selection criteria and their own scores, giving them a real opportunity to respond, and only confirming the decision afterwards. Collective consultation is a different regime that only applies at 20 or more proposed redundancies at one establishment within 90 days, and the penalty for breaching it doubled on 6 April 2026 to a maximum protective award of 180 days' pay per affected employee. Most small employers never reach the collective threshold, but none are exempt from consulting individually.
Can I make someone redundant and then recruit for a similar role?
It is one of the fastest ways to lose an unfair dismissal claim. Redundancy requires the work itself to have diminished or the role to no longer be needed, so advertising a near-identical position shortly afterwards is direct evidence that the role had not actually gone. If the truth is that the person was not performing, use the capability or conduct process instead, with warnings and a chance to improve. Where a genuinely different role exists at the time of the redundancy, you must consider it as suitable alternative employment, offer it, and allow a four-week trial period without the employee losing their statutory redundancy pay.
What changes for small employers on 1 January 2027?
The qualifying period for ordinary unfair dismissal protection drops from two years to six months, with no transition period, so anyone hired on or before 1 July 2026 will already have the service needed when the change lands. The statutory cap on the unfair dismissal compensatory award — currently the lower of 52 weeks' gross pay or £123,543 — is abolished at the same time. Separately, from 1 October 2026 the time limit for bringing most tribunal claims doubles from three months to six. Together those changes widen who can claim, lengthen the window for claiming, and remove the ceiling on cost.
