How to Make Someone Redundant in a Small Business

Redundancy legal advice for small business owners

Below we cover the core points you need to keep in mind. Remember, every business situation is different and you’ll need to consider how to ensure you follow a legally compliant process. Otherwise, in the worst case scenario, you may face employment tribunal claims from staff.

Understanding the criteria for redundancy

Small business redundancy is the same as for organisations of any other size. There are three main reasons you’ll need to make a staff member redundant:

1. Your business is closing down

2. The employee’s specific role has diminished or is no longer needed

3. Your business is relocating (although not every relocation will result in staff redundancies)

You can’t pick staff at random and make them redundant, there’s a careful process you need to follow for legal compliance. In the UK, employees have certain protections under the Employment Rights Act 1996. To make sure your process is fair under the Act, follow these five steps.

Protecting your small business from unfair dismissals

It’s vital for any redundancy you can show a genuine need to carry out the process. If you can’t, this is when an employee may pursue an unfair dismissal claim. These can be very damaging for any employer as they can lead to a tribunal.

You can’t use redundancy as a way to dismiss an employee. For example, if their performance is poor, or they have bad conduct, or they’re being passive-aggressive.

To make sure you don’t face legal proceedings, penalties, and damage to your reputation, always look to follow a fair process driven by a genuine need to downsize your workforce.

A five-step process for fair redundancies

Follow the guidelines below to gain an understanding of the steps to take. Remember, it’s crucial through all of this to document notes, communicate clearly, and be fair in your reasoning.

1. Define your pool of candidates and your selection criteria

You’ll likely already have knowledge of which roles are at risk, so identify them clearly and then apply an objective approach to ensure a non-discriminatory selection process. Use data such as:

• Measurable performance metrics

• Skills

• Qualifications

• Relevance of the role

These will be used to select the employees you’ll need to let go.

2. Hold consultations with affected employees

You should communicate your plans to make redundancies from an early stage. The sooner the better, as this provides your employees with open communication and allows them to raise questions.

The employee redundancy consultation period is an opportunity to explore other opportunities within your business. You must hold these individually, or as a collective consultation if you’re making 20 or more staff members redundant.

3. Explore alternative employment opportunities

It’s good business practice to document all your business’ efforts to prevent job loss. Consider offering vacant roles, consider retraining opportunities, or reducing overtime. You should make this a concerted effort to keep staff in your business, rather than a box ticking exercise as part of the process.

4. Issue a formal written notice

If you’ve exhausted all other options, then you’ll need to push on and issue a formal written notice. Include essential conformation details in this letter, such as the notice period, final day of employment, and your final pay calculations.

5. Calculate entitlements and statutory pay

If the employee you’re making redundant after has over two or more years with your business, then you must offer the correct pay. You can calculate this using the staff members age, weekly pay rate, and their length of service.

Best practices for handling the human element

The process isn’t enjoyable for anyone and may prove upsetting or stressful for your affected employees. To effectively manage the situation, you can approach the process with two clear strategies:

1. Offer total transparency: Offer clear communication and be honest about your reasons, which provides staff with dignity and respect.

2. Reassure your workforce: Your remaining employees may have rightful concerns and be anxious about their future in your organisation. You can reduce any tension by reassuring them with open communication about your reasons, alongside providing an outline of your future plans.

It’s important to take these steps, as difficult as they may seem, to maintain business morale. If your remaining employees are anxious and lacking in morale, your workplace productive may be affected.

Get expert support with your redundancy process

At WorkNest, we have specialist redundancy advice for UK employers alongside experienced, dedicated employment lawyers ready to help. It’s good business practice to get expert external insights to ensure your process is fully compliant. Contact us today for a free, no obligation consultation about your situation.