Redundancy in a Small Business: How to Get the Process Right (And Why It Matters More Than Ever)

Redundancy is one of the most stressful things a small business owner can navigate. The decision is often financially driven and urgent. The process, however, has to be careful, methodical, and documented — and the stakes just got higher.

From 6 April 2026, the maximum protective award for failure to properly consult in collective redundancy doubled — now 180 days' pay per employee, up from 90 days'. Acas That change applies to situations involving 20 or more redundancies, but the general principle — that procedural failures in redundancy cost money — applies at any scale.

What a compliant redundancy process looks like

A fair redundancy process has several non-negotiable elements regardless of business size.

A genuine business reason. Redundancy must be real. It isn't a tool for removing a difficult employee. If the role is genuinely redundant — meaning the requirement for the work has diminished or ceased — that needs to be documentable.

Meaningful consultation. Employees at risk of redundancy must be informed and consulted before any decision is made. Consultation means a real conversation, not a notification. How long it needs to last depends on the number of roles at risk — individual consultation for fewer than 20 redundancies; collective consultation (a minimum of 30 days) for 20 or more.

Fair selection. If you're selecting from a pool, the criteria must be objective, consistently applied, and documented. Selection based on subjective management opinion is vulnerable to challenge — particularly where protected characteristics could be a factor.

Consideration of alternatives. Before confirming redundancy, you must genuinely explore whether alternative roles exist. Even if nothing suitable is available, the fact that you looked matters.

Proper notice and pay. Statutory redundancy pay is calculated based on age, length of service, and weekly pay. Contractual entitlements may be higher. Getting this wrong creates a straightforward claim.

The appeal right. Employees must be given the opportunity to appeal a redundancy decision. It's easy to overlook in a small business context. Don't.

The 2027 horizon

The qualifying period for unfair dismissal is being reduced from two years to six months from January 2027, which means the risk of a successful challenge to a poorly run redundancy process will increase significantly. Employees who have been with you for more than six months will have the right to claim unfair dismissal if the process wasn't followed correctly.

If you're contemplating redundancies now or in the coming year, the quality of your process matters more than it has in years.