Redundancy process for employers: step-by-step guide to a fair process

Redundancies are an unavoidable part of running a business, particularly during periods of change or financial pressure. Getting the process wrong, however, can expose employers to costly unfair dismissal claims, reputational damage, and operational disruption.

A well-structured redundancy process helps reduce risk while ensuring employees are treated fairly. Employers who follow a clear and consistent approach are far better placed to defend their decisions if challenged.

Taking professional employment law advice at an early stage can make a significant difference, particularly as questions around consultation, selection criteria, or alternative roles often arise. For a broader overview of redundancy situations and legal risk, see our related guide.

When is a redundancy genuine

Understanding whether a redundancy situation exists is the starting point for any fair process. Redundancy is not simply a convenient way to remove an employee; it must be based on genuine business reasons.

A redundancy situation may arise where:

• There is a reduced need for employees to perform work of a particular kind.
• A particular workplace closes or relocates.
• The business closes completely.

Employers should be clear on the business rationale from the outset, as this will underpin every stage of the process.

Employer responsibilities during redundancy

Employers must follow a fair and reasonable process to minimise legal risk. Even where a genuine redundancy situation exists, a failure to follow a proper procedure can still result in claims.

Key responsibilities include:

• Consulting meaningfully with affected employees on proposed redundancies before decisions are finalised.
• Applying fair and objective selection criteria where there is a pool of employees.
• Carrying out a fair scoring process against selection criteria where appropriate.
• Considering suitable alternative employment within the organisation.
• Providing appropriate notice and redundancy pay where applicable.

Carrying out a fair process is often as important as establishing it is a genuine redundancy situation.

Redundancy process for employers: step by step

A structured process helps demonstrate fairness and reduces the risk of claims. While each situation will differ, most redundancy processes follow a similar framework.

• Identify the redundancy situation and business rationale.
• Begin consultation with affected employees and invite feedback on the proposed redundancy.
• Determine the appropriate pool of employees for selection.
• Apply clear and objective selection criteria and fair scoring.
• Explore alternatives to redundancy, including redeployment or, in some cases, agreeing exits through settlement agreements.
• Confirm decisions and issue written notice.

Keeping clear records at each stage is essential, particularly where decisions may later be scrutinised.

Redundancy vs performance dismissal: getting the distinction right

Confusing redundancy with performance issues is a common mistake. Redundancy relates to the role no longer being required, whereas performance concerns relate to how well an employee performs in their role. 

Where performance is the real issue, employers should follow a capability process. Disguising it as a redundancy situation can backfire, as it would not be the real reason for dismissal, thereby increasing the risk of an unfair dismissal claim.

Common redundancy mistakes employers should avoid

Many tribunal claims arise from avoidable errors in the process rather than the decision itself.

Common mistakes include:

• Reaching a decision before consultation has taken place.
• Using subjective or inconsistent selection criteria.
• Failing to consider suitable alternative roles.

Errors of this nature often form the basis of claims, including unfair dismissal, even where a genuine redundancy situation exists.

Timescales and practical considerations

Planning the timing of a redundancy process is just as important as getting the steps right. Rushed processes often lead to mistakes, while overly prolonged processes can create uncertainty within the business.

Points to consider include:

• Whether collective consultation obligations apply when a larger number of employees are affected.
• Contractual and statutory notice periods.
• Maintaining business continuity during the process.

Careful planning helps ensure the process runs smoothly and reduces disruption to day-to-day operations.

FAQs about managing redundancies

Common questions employers ask when managing redundancies are set out below.

1. When does collective consultation apply?
   
   Collective consultation is required when an employer proposes to make 20 or more employees redundant within a 90-day period. Minimum consultation periods apply, and failure to comply can result in significant financial penalties.
    
2. What is a fair selection pool?
   
   A fair selection pool usually includes employees carrying out the same or similar roles. Employers should consider whether establishing a pool of employees is appropriate and be able to justify how the pool has been defined, as this is often closely examined in tribunal claims.
    
3. Do employers have to offer alternative roles?
   
   Employers must consider whether suitable alternative roles are available for employees whose roles have been made redundant.  A failure to do so, and in some cases to offer these roles to employees, may render a dismissal unfair, even where the redundancy situation itself is genuine.
    
4. Can employees appeal redundancy decisions?
   
   It is usually best practice to give employees the opportunity to appeal redundancy decisions. Including an appeal stage will help to demonstrate fairness and reduce the risk of a successful claim.

Guidance from our employment solicitors

Redundancy processes can become complex quickly, particularly where multiple employees are involved or where there is a risk of challenge.

Matthew Irvine, head of employment, comments:

“A fair redundancy process is about more than simply identifying a business need. Employers must be able to demonstrate they engaged in meaningful consultation before any firm decision is taken.  Taking advice early can help avoid costly mistakes and ensure the whole process stands up to scrutiny.”

Careful planning and a structured approach can make all the difference, particularly where redundancies form part of wider business change. For employers managing ongoing staffing issues, regular legal support can help ensure processes are handled consistently and in line with current employment law requirements.

Our team advises businesses large and small, from owner-managed companies to larger employers with more complex workforce needs.

Get in touch to speak with our employment solicitors.