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Writing a Business Case for Redundancy
Written by Danielle Scott (Updated on 8th April 2026)
Terminating employment contracts is a complex issue and businesses like yours may be concerned about making a strong business case for redundancy in the UK. To help you understand and manage the situation, read the below expert guide as provided by our team of experience employment law and HR specialists.
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How to make a business case for redundancy
When contemplating making redundancies, the first item on the agenda for your business should be to give thorough consideration to the practicality, viability, and necessity of it. When many businesses are facing financial hardship, and redundancy may seem like the only viable way forward, this is still a consideration that should always take place.
Outsourcing your business redundancy needs is one step, as you can quickly access expert advice from professional employment lawyers. It’s vital to remember every situation should start with a plan. You must consider:
- Necessity
- What alternatives have been considered or implemented
- How many redundancies are needed
- Where will they come from
- How people will be selected for redundancy
- What the timeline is
Many of these points may well be flexible and, as part of a proper consultation process, may be liable to change following discussion with employees. That said, it is still vital to start with some kind of plan of what you are trying to achieve and why.
As employment lawyers, we will always want to see a client’s redundancy rationale as a first port of call to make sure their business case is robust, and to better understand what they are trying to achieve.
While a costly employment tribunal won’t look behind the decision to make redundancies or judge whether or not they were commercially sound (instead being concerned about the process, the consultation, the pooling, the selection criteria and the search for alternatives), having a sound business case is still important for your own planning requirements, as well as to explain the ‘why’ to your workforce. The latter will be crucial to avoiding disputes.
When is redundancy an option?
Under the Employment Rights Act 1996, there are three situations in which an employee may be dismissed due to redundancy. These are:
- If the employer has ceased, or intends to cease, trading (i.e a total business closure)
- If the employer has closed, or intends to close, a particular site
- If there is a reduced requirement for employees to carry out work of a particular kind
To legitimately issue a redundancy, one of these scenarios must apply. In other words, terminating contracts can’t be used as a way to evade a problem or as a convenient workaround to get rid of a troublesome or underperforming employee. These situations must be dealt with through the correct route (i.e. via the disciplinary or performance management procedure).
You should always view this as a last resort, so consider our guide to strategies that avoid business redundancies to consider alternate routes.
Total versus temporary closures
When writing a business case for redundancy, the ‘total closure’ scenario is self-explanatory. If a business is due to close completely, then that will amount to a redundancy situation. Here there’s no issue about pooling, selection, or alternative employment, as it’s likely everyone will be made redundant.
However, this can include temporary closures too, which is where it gets complicated. A common example of this would be if the site was closed for refurbishment. Whether this sort of situation would provide grounds for redundancy would be fact-specific and determined on a case-by-case basis.
When it appears that the employer is replacing one business with another, a Tribunal may have to decide whether the new business is sufficiently different in nature from the original one. If so, the dismissal of the employer’s original employees will be for redundancy. Again, this will come down to a question of fact.
A site or workplace closure is, again, relatively self-explanatory. For instance, if a company owns a series of factories and closes one of them, then that is likely to be a redundancy situation.
One caveat that often arises is the question of which site the employee actually works at and if they should even be affected at all. The general consensus here is that the tribunal will largely ignore what the contract says and instead look at the reality of the situation.
When considering this type, the starting point is the requirements of the business. This implies a commercial judgement, on the employer’s part, about the priorities of the business and about which kind of work has become surplus to requirement.
When to consider TUPE
When it comes to a business closure, you must be mindful of the Transfer of Undertakings (Protection of Employment) Regulations, also known as TUPE (the transfer of two businesses).
With business closures, especially those being instigated as part of a pre-pack administration, TUPE will apply and the workforce will transfer to the new owner rather than being made redundant.
These situations can be very fact specific, so you always want to run any sales/takeovers past your legal advisers to be sure that you don’t accidentally make employees redundant, when they are legally entitled to something else.
Ensure compliant staff contact terminations
From determining whether your organisation is in a genuine redundancy situation to understanding pay and settlement agreements, we assign named experts who will help you transform complex legislation into a series of manageable steps.
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