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Guide for business owners

Redundancy in a Small Business: How to Do It Fairly

Redundancy is one of the hardest things an owner has to do, and one of the easiest to get legally wrong, because the business case can feel so obvious that the process gets rushed. A genuine redundancy handled properly is perfectly lawful. Here is how to keep it fair.

Written by Samantha Newton FCIPD, Chartered Fellow CIPD · 6 min read · Last reviewed June 2026

Samantha writes a weekly HR column for Health & Wellbeing Magazine.

Make sure it is a genuine redundancy

Redundancy has a specific meaning: the role, not the person, is no longer needed, because the business is closing, a workplace is closing, or the need for that kind of work has reduced.

It must never be a convenient label for getting rid of someone you have a problem with. If the real issue is conduct or performance, that is a different process entirely, and dressing it up as redundancy is where employers come unstuck.

First move

Be honest with yourself about whether the role is genuinely going, or whether this is really a performance issue.

Redundancy and restructure support →

Fair selection and genuine consultation

Where more than one person does similar work, you need a fair, objective way to select who is at risk, based on criteria you can justify, not gut feeling. And you must consult: meaningfully, before any final decision, giving people a real chance to respond.

Consultation is not a formality to rush through. It is where alternatives get explored and where a fair process is built. Skipping or rushing it is the most common reason redundancies become claims.

First move

Decide your selection criteria before you look at the people, and plan genuine consultation meetings.

Alternatives, notice and the details

A fair process means looking for suitable alternative roles where they exist, and getting the practical details right: notice, any redundancy pay due, and how you communicate it with dignity.

Handled well, even a redundancy can leave someone feeling fairly treated. Handled badly, it can cost far more than the role ever saved.

First move

Map out the full process and timeline before you tell anyone, so nothing is missed.

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Key takeaways

  • Redundancy means the role is going, not that you have a problem with the person.
  • Use fair, objective selection criteria and consult genuinely before any decision.
  • Look for alternatives and get notice and pay right.
  • Planning a redundancy or restructure? Take the free Situation Check, or get advice before you start.

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