How to Make an Employee Redundant: A Fair & Legal Guide

A single procedural oversight during a redundancy process could cost your business up to £123,543 in unfair dismissal compensation. When faced with necessary organisational change, the question “How do I make an employee redundant?” often brings a wave of anxiety, mixing the fear of employment tribunals with the genuine emotional weight of letting loyal staff go. We understand that you want to protect your company’s future whilst treating your people with the dignity they deserve; it is a delicate balance that requires both technical precision and a human touch.

This guide provides the clarity you need to navigate UK redundancy law with total confidence. We’ll show you how to build a legally bulletproof process that minimises disruption and ensures every calculation, from the £751 weekly pay cap to statutory notice periods, is accurate. You’ll gain a clear understanding of the 2026 regulatory landscape, allowing you to manage costs and timelines effectively whilst maintaining the trust of your remaining team.

Establishing a Genuine Redundancy Situation

Under the Employment Rights Act 1996, redundancy is a specific form of dismissal that arises when a business needs to reduce its workforce. It’s a strategic decision rather than a disciplinary one. The most critical distinction to make is that the role itself must be redundant, not the person filling it. If you’re asking “How do I make an employee redundant?”, you must first confirm that the position no longer fits the operational needs of the company.

There are three primary legal triggers for this process. These include the total closure of the business, the closure of a specific site or workplace, or a diminished requirement for employees to perform work of a particular kind. Misusing this framework to ‘fire’ a poor performer is a significant legal risk. Such actions often lead to expensive employment tribunal claims because the dismissal lacks a genuine underlying cause.

Valid Business Reasons for Restructuring

Structural changes are often driven by the need for long-term stability. Technological advancements, such as automation or new software, can suddenly make manual administrative roles unnecessary. Similarly, economic shifts or internal reorganisations might force a headcount reduction to protect the remaining enterprise. A genuine redundancy is defined by the cessation or diminution of the employer’s requirement for employees to carry out work of a particular kind.

Exploring Alternatives to Compulsory Redundancy

Before proceeding with dismissals, you have a legal obligation to consider ways to avoid them. This demonstrates that you’ve acted fairly and reasonably, which is a cornerstone of UK redundancy law. When considering how do I make an employee redundant, you should first explore these alternatives:

• Freezing all new recruitment across the organisation.
• Reducing or eliminating overtime for the affected department.
• Offering voluntary redundancy packages with enhanced terms.
• Identifying “suitable alternative employment” in other areas of the business.

Seeking specialist redundancy advice early on helps you identify these opportunities. This proactive approach doesn’t just protect you legally; it also preserves your reputation as a compassionate employer who values their team’s security.

The Redundancy Consultation and Selection Process

Consultation is the cornerstone of a fair dismissal. It’s a period of meaningful dialogue where you and your staff explore ways to mitigate the impact of the proposed changes. When you’re working through the question of how do I make an employee redundant, the process starts with a formal ‘at-risk’ notification. This isn’t just about delivering bad news; it’s about providing a transparent explanation of the business challenges and inviting employee feedback. Handling this initial meeting with a balance of authority and empathy helps maintain team morale during a period of high anxiety.

Individual vs Collective Consultation Rules

The legal requirements for consultation depend on how many roles are affected within a 90-day period. For collective redundancies involving 20 to 99 employees, the consultation must last at least 30 days. If you’re dismissing 100 or more people, this increases to 45 days. You must also issue a Section 188 notice to employee representatives or trade unions. The stakes are high; since April 2026, the protective award for failing to consult properly has doubled to 180 days’ pay. This process is distinct from disciplinary procedures, as the focus is entirely on the role’s viability rather than the individual’s behaviour.

Creating a Fair Selection Matrix

A robust selection matrix protects your organisation from claims of bias or discrimination. When determining how do I make an employee redundant within a specific department, defining the selection pool correctly is vital. This pool should include everyone doing the same or similar work. Once the pool is set, you apply objective criteria to decide who stays. Effective criteria often include:

• Specific technical skills and qualifications.
• Standard of work and performance records.
• Attendance records (whilst carefully excluding pregnancy or disability-related absences).
• Disciplinary history.

Avoid using ‘last in, first out’ (LIFO) as your only measure, as this can lead to age discrimination claims. Following the official government guidance on redundancy ensures your selection process remains transparent and defensible. If you need assistance building a compliant framework, our redundancy management team provides the expert oversight needed to manage these complexities with total security.

Notice, Redundancy Pay, and Finalising the Process

Once you’ve concluded the consultation period, the focus shifts to the final administrative and financial obligations. This stage is where many businesses stumble, yet it’s vital for maintaining the integrity of the process. When considering how do I make an employee redundant, you must provide a formal redundancy letter that clearly outlines the reasons for dismissal, the notice period, and the final payment breakdown. Offering a robust appeals process is not just a courtesy; it’s a procedural necessity that can prevent a situation from escalating to a tribunal. It provides a final internal opportunity to rectify any perceived unfairness before the employment relationship ends.

Calculating Statutory Redundancy Pay in 2026

For redundancies occurring on or after 6 April 2026, the statutory limit on a week’s pay is £751. To qualify for this payment, an employee must have at least two years of continuous service. The calculation uses an age-weighted multiplier: half a week’s pay for each year of service under 22, one week’s pay for years between 22 and 40, and one and a half weeks’ pay for each year from age 41 onwards. The maximum statutory redundancy payment is currently capped at £22,530. We recommend using our Redundancy Calculator Guide to ensure these figures are applied accurately to your specific payroll.

Garden Leave and Pay in Lieu of Notice (PILON)

Deciding how an employee spends their notice period is a strategic choice. Pay in Lieu of Notice (PILON) allows for an immediate termination of the contract, which can be advantageous if you need to quickly restructure or if the presence of the departing staff member might affect team morale. Alternatively, Garden Leave keeps the employee on the payroll but away from the workplace. When determining how do I make an employee redundant whilst protecting your intellectual property, Garden Leave is often the preferred route as it keeps post-termination restrictions in force for longer.

Whilst the legalities are paramount, don’t overlook the psychological impact on the remaining workforce. Clear communication and visible support during the final handover help alleviate the anxiety that often follows a redundancy exercise. Following an Acas guide to handling redundancy can help you strike this balance between technical compliance and human-centric management. Remember that the first £30,000 of a redundancy payment is generally tax-free, which can be a small but helpful point of reassurance for departing staff.

Ensure your redundancy process is fair and compliant with our expert HR support

Protecting Your Business with Expert HR Support

Managing a workforce reduction is one of the most challenging tasks a leader faces. Whilst it often feels like an ending, a well-executed restructuring serves as a vital catalyst for long-term stability and organisational growth. Relying on generic templates often leaves businesses exposed to significant risks. This is why bespoke redundancy advice is essential for SMEs; it provides a tailored safety net that generic documents simply cannot offer. Our approach strikes a sophisticated balance between corporate authority and human-centric empathy, ensuring your business remains a stabilizing force for its members.

The Risks of Procedural Errors

One of the most common traps for employers is the “pre-determined outcome”. If a tribunal suspects you decided on the dismissal before the consultation ended, the process is deemed unfair regardless of the business case. Beyond the financial sting of a potential £123,543 award, the reputational damage can be profound. It affects your ability to attract future talent and erodes the trust of your remaining team. Staying informed through resources like our guide to UK Employment Law 2026 helps you identify these pitfalls before they become costly liabilities.

How Altum HR Streamlines Restructuring

We act as a knowledgeable guide, providing what we call “outsourced empathy”. Our team manages the difficult conversations, ensuring they’re handled with technical precision and a composed, professional demeanour. When you find yourself asking “How do I make an employee redundant?”, the answer involves more than just a checklist. It requires a proactive, documented approach that protects the business whilst honouring the individual’s contribution. We provide on-site support during consultation meetings and utilise integrated HR software to track every timeline and document securely.

This methodical rhythm ensures you meet every regulatory hurdle whilst supporting the individuals within your organisation. Our clients benefit from 24/7 expert employment law access, giving you total security during periods of transition. By addressing the root causes of organisational friction rather than just surface-level symptoms, we help you protect the enterprise and its members simultaneously. When leaders ask “How do I make an employee redundant?”, we provide the strategy that turns a difficult necessity into a foundation for future success.

Strengthening Your Organisation for the Path Ahead

Navigating a redundancy exercise requires a delicate blend of legal rigour and human compassion. By ensuring you’ve established a genuine business case and followed a transparent selection process, you protect your organisation from the significant financial and reputational risks of an employment tribunal. We’ve explored how a methodical approach to consultation and accurate statutory calculations provides the security your business needs during times of transition.

When you’re faced with the difficult question, “How do I make an employee redundant?”, remember that you don’t have to manage the complexity alone. Our bespoke HR strategy for UK SMEs offers a stabilising force, providing 24/7 employment law advice and on-site support for consultations. This level of thoroughness ensures that your restructuring becomes a vital catalyst for long-term stability rather than a source of organisational friction.

Secure your business with expert redundancy advice from Altum HR

We’re here to help you move forward with confidence, ensuring your team feels supported and your business remains legally bulletproof.

Frequently Asked Questions

How much notice do I have to give an employee made redundant?

Statutory notice periods are determined by an employee’s length of service; specifically, it’s one week for service between one month and two years, followed by one week for every year worked up to a maximum of 12 weeks. You should always check the individual’s contract, as contractual notice may exceed these statutory minimums. Providing the correct notice is a fundamental step when you consider how do I make an employee redundant fairly.

Can I make an employee redundant if they have less than two years of service?

You can make an employee with less than two years of service redundant, though they generally won’t qualify for statutory redundancy pay. Whilst the two-year rule currently protects against most unfair dismissal claims, you must still follow a transparent process to prevent allegations of discrimination or automatic unfair dismissal. Following a structured approach ensures your business remains protected from potential legal challenges regardless of the individual’s tenure.

What is the difference between voluntary and compulsory redundancy?

Voluntary redundancy occurs when an employee chooses to leave in exchange for a financial incentive, whereas compulsory redundancy is a decision made solely by the employer. Offering a voluntary option can often preserve morale and reduce the need for difficult selection matrices. It’s a strategic tool that allows for a more collaborative transition, provided the terms are clearly documented and agreed upon by both parties during the restructuring.

Do I have to offer an alternative role if one is available?

You are legally required to offer suitable alternative employment if a vacant role exists within your organisation or a connected business. If you fail to offer a suitable role that the employee is capable of doing, any subsequent dismissal could be ruled unfair by a tribunal. This duty remains active throughout the entire consultation period, acting as a vital safeguard for both the individual and the enterprise.

What happens if an employee refuses to accept their redundancy?

An employee cannot technically refuse a redundancy if the role no longer exists, but they can challenge the fairness of the selection or the procedure. If an individual feels the process was flawed, they have the right to lodge a formal appeal or pursue a claim for unfair dismissal. When asking how do I make an employee redundant, ensuring the process is documented and objective is your best defence against such disputes.

Is redundancy pay taxable for the employee?

The first £30,000 of a redundancy payment is usually tax-free for the employee. However, this exemption only applies to the redundancy pay itself and not to other elements like holiday pay or pay in lieu of notice (PILON), which are taxed as normal earnings. It’s essential to provide a clear breakdown in the final redundancy letter to ensure the individual understands exactly how their final payment has been calculated.

Article by

Josephine Broadstock

Josephine Broadstock is the Founder of Altum HR and a recognised thought leader in HR strategy and operational delivery. With a career grounded in employment law and hands-on business support, Josie has built a reputation for helping organisations move beyond transactional HR into truly strategic, commercially aligned people management.

At the core of Josie’s approach is a belief that HR should not sit in isolation—it should actively drive business performance. She works closely with business owners and leadership teams to understand how their organisations function in practice, not just on paper, enabling the design and implementation of people strategies that are both legally robust and operationally effective.

Josie specialises in translating complex employment law and HR challenges into clear, practical solutions that support growth, reduce risk, and improve organisational efficiency. Her work often focuses on bridging the gap between policy and execution—ensuring that processes are not only compliant but also embedded into day-to-day operations in a way that adds measurable value.

Through Altum HR, Josephine leads a team of highly qualified consultants who share her commitment to quality, personalisation, and commercial impact. She is particularly passionate about raising standards within the HR industry, advocating for a more consultative, expert-led approach that prioritises long-term business outcomes over quick fixes.

As an author, Josie shares insights on employment law developments, operational best practice, and real-world HR challenges, offering business leaders practical guidance they can apply immediately. Her content is designed to cut through complexity and provide clarity in an ever-evolving workplace landscape.