How to make someone redundant in a small business

The redundancy process is different depending on the size of the business and the number of employees that are being made redundant. Making staff redundant in small and micro businesses (eg businesses between 1 and 50 employees with a turnover below £10 million) is not an easy task, but might be necessary for the survival of the business. To handle small-scale redundancies properly and to avoid unfair dismissal claims, read this Quick Guide and create a fair and consistent redundancy policy.

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Handling redundancies in small businesses

Staff selection

If after considering alternative employment solutions, redundancy appears to be the only way forward, the redundant staff must be selected carefully and fairly. A redundancy pool is usually not relevant in small and micro businesses, as employees often perform their role individually so there is no element of selection among employees performing similar roles.  

Staff information

Once the selection is made, you should advise all potentially affected staff that they are at risk of redundancy, by sending them an at-risk of redundancy letter. This letter need not be used when making just one employee redundant who is in a unique role.

Employee consultation

Even in small or micro businesses, it is legally required to consult individually with each employee who is at risk of redundancy. You should inform your staff about this consultation using a redundancy consultation letter. The letter can be used as the first step in the redundancy process when you are making just one employee redundant with no pooling.

A one-to-one consultation will help managers find alternative employment options and shows a continued effort to keep the employee informed of the situation.

Redundancy notice

Once consultations are completed, you need to inform staff that they are being made redundant. You should first inform the employee through a formal meeting, then confirm it in writing using a dismissal for redundancy letter.  

Data protection

Throughout the redundancy process, employers will collect data that comes within the 'special categories of personal data' (ie sensitive personal data) about employees who are at risk of redundancy. You must ensure that the information is processed in accordance with your Data protection policy and employee privacy notice - a statement describing how you collect, use, retain and disclose personal information.

Redundancy entitlements

Just like in large businesses, employees who are dismissed on grounds of redundancy after at least two years of continuous employment are entitled to:

  • Statutory pay according to their pay, age and length of service; and

  • Time-off to look for work or make arrangements for training.

Appeal

It is good practice - although not compulsory - to offer the employee the possibility to appeal their selection for redundancy. Doing so:

  • demonstrates that the redundancy process is conducted fairly; and

  • reduces the likelihood of a future claim before an Employment Tribunal.

The appeal meeting should ideally be conducted by someone different than the person who conducted the consultation. If however only one person is handling the redundancy process, that person should be as impartial as possible during the appeal meeting.

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