How Much Does an Employment Tribunal Cost a Small Business?

This is one of the most common questions I get from founders and MDs. They want someone to leave. The relationship has broken down, or the person's been underperforming, or the team would work better without them. And redundancy feels like the cleanest, least confrontational route.

The problem is that redundancy has a specific legal definition. And if the role still exists, being done by someone else or being filled after the person leaves, it isn't redundancy. It's something else. And calling it redundancy when it isn't creates serious legal exposure.

What redundancy actually means

Redundancy applies when the employer's need for employees to carry out work of a particular kind has ceased or diminished, or is expected to. In plain terms: the role is going away, or fewer people are needed to do it. The business is closing, or a particular function is being removed, or work has reduced to the point where the current headcount isn't justified.

Crucially, it's the role that's redundant, not the person. If you're selecting an individual because you want them specifically to leave, that's not redundancy. That's a dismissal dressed up as a restructure.

The "sham redundancy" problem

Tribunals are experienced at spotting sham redundancies. The indicators are familiar. The person is told they're at risk of redundancy. A consultation process runs. They're selected. And then someone else is hired into a role that looks remarkably similar to the one that was supposedly redundant.

Or the redundancy process is announced and only one person is put at risk, when other people are doing similar work. Or the selection criteria are designed in a way that was always going to produce one outcome.

A tribunal that finds a redundancy was a sham won't treat it as a redundancy at all. It'll treat it as an unfair dismissal. And because the employer was dishonest about the reason, the chance of defending it successfully is close to zero. Any goodwill that might have existed around a genuine process failure disappears when the tribunal concludes you manufactured the situation.

What you should do instead

If the real issue is performance, manage it as a performance issue. Set expectations, give feedback, follow a capability process. It takes longer than a redundancy, but it's legally sound and it's honest.

If the real issue is conduct, address it through a disciplinary process. Investigate, hold a hearing, make a decision.

If the relationship has broken down and both parties would benefit from a clean exit, consider a without prejudice conversation and a settlement agreement. This is the proper mechanism for negotiated exits, and it's specifically designed for situations where the employment relationship isn't working but there isn't a clear-cut reason for dismissal. It protects both parties.

If the role genuinely is redundant, by all means follow a redundancy process. But make sure the business case stacks up. Can you demonstrate that the need for this work has reduced? Have you considered alternatives like redeployment? Is the selection process fair and based on objective criteria? Is the consultation meaningful?

When it gets complicated

Some situations are genuinely borderline. You're restructuring and some roles are changing significantly enough that the old role is arguably redundant even though a similar role exists in the new structure. This can be a genuine redundancy if the role has changed to the point where it's substantially different work. But the distinction between "the role has evolved" and "I've renamed the same job to avoid a capability process" is one that tribunals examine carefully.

If you're in this territory, get advice before you start the process. The difference between a defensible restructure and an indefensible sham often comes down to how the process was designed and documented from the outset.

The bottom line

Redundancy is a legitimate business tool. Used properly, it allows organisations to reshape their workforce in response to genuine changes. Used as a shortcut to remove someone you don't want, it's one of the most expensive mistakes a small business can make.

If you're thinking about a redundancy and you're not entirely sure the business case is watertight, a conversation before you start is the most valuable thing you can do.

Book a free discovery call with King HR Advisory.