Redundancy: How to Make the Tough Decisions
Posted on May 14, 2026
We recently supported a small Business that faced an unexpected business challenge. They’d recruited multiple people into similar roles as the business expanded, but market conditions have shifted. Now they needed to reduce headcount, but they’d never done a redundancy before, and they knew they would need to let at least one person go.
Sound familiar? If you’re running a small business, this moment might be coming for you too.
Why This Matters (And Why It’s Harder Than You Think)
Most SME owners assume redundancy is straightforward: identify who to let go, give notice, done. But redundancy is one of the highest-risk HR decisions you’ll make. Get it wrong, and you’re facing:
- Unfair dismissal claims (even if the redundancy itself is genuine)
- Discrimination claims (if your selection process isn’t defensible)
- Reputational damage (word spreads in small teams)
- Morale collapse & Survivor Syndrome (surviving staff lose trust)
- Legal costs (easily £5k–£15k+ if challenged)
The irony? Most of these risks are avoidable with the right process.
The Challenge: Pooling & Fair Selection
In this case, the business had multiple people doing similar roles. This created a specific challenge: how do you fairly decide who stays and who goes?
Here’s where many SMEs stumble. And here’s where we got it right.
The Pitfall: “We’ll just pick the person we like least”
This is the silent killer. Even if you have a genuine business need to reduce headcount, how you select who leaves matters enormously. If your selection process isn’t documented, objective, and defensible, you’re vulnerable to claims that the real reason was:
- Personal preference
- Age discrimination
- Gender discrimination
- Disability discrimination
- Or any other protected characteristic
What We Did: Structured Interviews for Fair Selection
We worked with the Business Owner on how to score candidates on paper with a matrix of skills and experience. But we quickly realised that a paper based scoring matrix wasn’t the most appropriate. Here’s why:
Paper-based scoring is risky. It’s easy to bias, hard to defend, and doesn’t capture the full picture. If someone challenges the decision later, you’re stuck explaining why your spreadsheet was fair. Instead, we ran structured interviews.
Each person in the selection pool was interviewed against the same criteria:
- Technical skills: Could they do the remaining role effectively?
- Flexibility & adaptability: How would they respond to the new structure?
- Team fit: Who works well with the remaining team?
Every candidate was asked the same questions, in the same order. Responses were scored consistently. The process was documented step-by-step. We gave the affected audience time to prepare and ensured that the job description was made available to them.
Why this matters: Interviews are harder to bias than paper scoring. They give candidates a voice and the ability to showcase their work, especially in a creative field. If challenged, you can say, “We interviewed everyone fairly, asked the same questions, and scored consistently.”
So what did we do to help?
The Business Owner and SME HR Consultancy took time to meet and develop a joint plan, with timescales and clear areas of responsibility, with SME HR Consultancy being at the heart of the design and implementation of the redundancy process. Some of the highlights being:
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Selection Criteria Fairness: Interviews Done Right
We helped the business:
- Define the selection pool precisely: Which roles were genuinely similar enough to be pooled? We were clear and documented it.
- Create objective interview criteria: No vague gut feelings. Specific, measurable, job-relevant questions.
- Run the interviews professionally: Consistent questions, consistent scoring, documented outcomes.
- Review for bias: Before the final decision, we checked: Does this disproportionately affect anyone from a protected group? If so, is there a solid business reason?
The result: A selection process the business owner felt confident about, and one that would hold up if challenged.
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Consultation Process Timing & Documentation
This is where the law gets specific. You can’t just announce a redundancy. You have to consult with the affected employee(s).
We managed:
- Formal consultation meeting: Explained the business reason, the selection process, and the outcome.
- Time for response : The employee had a chance to ask questions, raise concerns, or suggest alternatives.
- Clear documentation: Every conversation, every decision, every piece of information shared was recorded.
- True Consultation: Helped the Business Owner to listen to the feedback, and indeed act on some ideas that were generated.
Why it matters: If you skip consultation or rush it, you’ve broken the law, even if the redundancy itself is genuine. That’s an automatic unfair dismissal claim. Timeline consideration: We built in 2-3 weeks for proper consultation. Rushing this is a red flag.
The documentation: We created a clear record of:
- The business reason for redundancy
- The selection criteria and scoring
- Consultation meeting notes
- The employee’s response and any concerns raised
- The final decision and rationale
- Statutory pay calculations
- Notice period and next steps
If a claim ever came, this documentation would be the business’s defense.
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Avoiding Unfair Dismissal Claims
Unfair dismissal claims happen when the process is unfair, not because the redundancy isn’t genuine. We made sure the process was bulletproof:
- Genuine business reason: Documented and clear
- Fair selection: Objective criteria, consistent application, no discrimination
- Proper consultation: Time, transparency, dialogue
- Correct statutory pay: Calculated by law, not guesswork
- Clear communication: To the individual and the team
We also flagged potential vulnerabilities early:
- Was there any risk of age discrimination? (No, the selection was skills-based)
- Was there any risk of gender discrimination? (No, the criteria were neutral)
- Was there any risk of disability discrimination? (We checked, the business had disclosed no disabilities, but we made sure the selection criteria didn’t inadvertently disadvantage anyone)
The result: A process that was defensible at every stage.
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Communication Throughout & Offers of Support
Here’s what often gets missed in redundancies: how you communicate matters as much as what you decide.
We helped the business:
- Communicate with the affected individual: Clear, compassionate, honest. We prepared the business owner for the conversation and helped them explain the decision clearly.
- Offer support to the departing employee:This isn’t just kind; it reduces the risk of a claim.
- Communicate with the remaining team: After the affected person had left, we helped the business hold a team meeting to explain what happened and reassure remaining staff about their roles.
Why it matters: Silence breeds anxiety. Remaining staff will assume the worst, productivity drops, and you risk losing good people. Transparency (within appropriate boundaries) helps.
We also helped the business think about:
- What to say in references – Clear, factual, non-emotional
- How to handle questions from remaining staff – Honest but professional
- How to support the team through the transition – Acknowledging the difficulty, reassuring about the future
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Communication Strategy – Before, During & After
This was the thread that ran through everything. We helped the business think about:
Before the redundancy:
- Who needs to know? Just the affected individual initially, then the team after
- What’s the narrative? Business need, not performance or personality
- How do we prepare the business owner? They were anxious; we coached them through it, wrote a script and attended all the sessions for support)
During the redundancy:
- How do we have the conversation? Compassionate but clear
- What do we say if they ask why? Stick to the business reason; don’t get defensive
- What support do we offer? References, transition time, etc.
After the redundancy:
- How do we communicate with the team? Honest, reassuring, forward-looking
- How do we maintain morale? Acknowledge the difficulty; reinforce the business’s direction
- How do we move forward? Clear next steps, no lingering uncertainty
The result: A redundancy that felt fair, was handled professionally, in what is always a difficult situation.
What Went Right
This redundancy was handled fairly and legally. The affected individual understood the decision, received their statutory entitlements, and left on reasonable terms. The remaining team understood why it happened and felt reassured about their own roles.
But here’s the thing: this didn’t happen by accident. It happened because:
- The business owner got professional guidance early. They didn’t try to wing it.
- The selection process was objective and defensible. Structured interviews, consistent criteria, documented outcomes.
- Consultation was done properly. Time, transparency, dialogue.
- Communication was thoughtful. To the individual, to the team, at every stage.
- Everything was documented. If a claim ever came, the business had a clear record of a fair process.
If You’re Facing a Redundancy
If you’re a small business owner reading this and thinking, “That could be us,” here’s what to do:
- Get advice early. Before you make any announcements or decisions, talk to an HR professional. The cost of advice is tiny compared to the cost of getting it wrong (£5k–£20k+ in claims and legal fees).
- Use a structure for fair selection. Don’t rely on gut feeling. Interview and score everyone against the same criteria, score consistently, document everything.
- Build in time for consultation. Redundancy is a process, not a moment. Give yourself 2-3 weeks to do it properly.
- Communicate thoughtfully. To the individual, to the team, at every stage. Transparency builds trust, even in difficult situations.
- Document everything. From the moment you identify a business need to reduce headcount, document your thinking, decisions, and actions.
- Think about support. References, transition time, outplacement support if appropriate. It’s not just kind; it reduces risk and maintains your reputation.
The Bottom Line
Redundancy is never easy. But it doesn’t have to be a legal minefield. With the right process, professional guidance, and thoughtful communication, you can make a difficult decision fairly, legally, and with minimal risk.
This SME did it right. And their team came out the other side intact, trusting that the business had made a fair decision.
If you’d like support in a redundancy exercise, however big or small, then please reach out:
