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Last updated: 04.06.18

How to manage redundancy for SMEs

While redundancy is naturally a very difficult process for most people, it’s also generally a situation that any business and its HR department wishes to avoid too. Unfortunately, it’s still sometimes an essential and unavoidable aspect of business management, so it always pays to have an understanding of how best to traverse this difficult subject. In this article, we’re going to go through some of the high-level considerations you need to make if you’re managing a programme of redundancy for your business, whether you are a business owner, member of management, or HR employee. The better equipped the business, the more smoothly redundancy plan will go.


The first thing that you need to do is plan. Never allow the news of redundancies to spread before a sound plan has been put in place for what you need to do, why, and how you’re going to do it. Better structure to the redundancy programme will reduce the negative impacts of the redundancies, and also ensure that you stay on the right side of the law. Even as a small business making one or two redundancies you can do this. However, you shouldn’t allow this process to drag on; employees do need to be made aware as soon as possible if they’re at risk. Always remember that redundant employees will value additional time to sort out their affairs just as much as redundancy pay.


Once a plan is in place, it is time to go through a period of collective consultation. In this article, we’re not going to cover the selection process, as this is a complex business decision, but in most cases you’re likely to have a group of people that are candidates for redundancy rather than just one or two. This should be a meaningful discussion on why the redundancies are taking place, who is at risk, how the process will proceed, and how pay will be calculated. Under UK law, there is an obligation for a formal consultation process to take place if there are 20 or more employees being made redundant in a 90-day period, and there must be a 30-day period between notification and the first dismissal. This is fairly unlikely for SMEs however. Either way, this consultation process should always occur to avoid the risks of being taken to a tribunal. It’s a good idea to get unions involved if there are any, and speak with any designated representatives.

Individual consultation should take place too – remember that as with a great many things in life and business, good communication is the key to the process running smoothly. If employees understand why the redundancies are happening, and they feel that they’ve been sufficiently informed as to what is going on, they’re far less likely to cause issues. Many good HR managers and businesses in general will have an appeal system in place if there are multiple redundancies to ensure that employees know that they’re being listened to, and to ensure that the correct employees have been chosen for redundancy.

It’s always very wise to open up the floor to potential voluntary redundancies at this stage, as this significantly reduces the difficulty in making people redundant. In order for this to be successful, you will usually need to have a good redundancy package in place, which will need to exceed statutory redundancy pay. For more information about what this minimum is, then consult the government’s website.


Once the consultations have concluded, and it’s been decided and agreed who is to be made redundant, it’s a case of making sure that everyone understands what the process is, when they’ll be made redundant, and what their pay will be. Again, constant and effective communication is the best way of ensuring that the process goes smoothly, that you don’t fall foul of the law, and that you maintain good relationships where possible. For training on redundancy management, consider taking the Virtual College course on the subject, which can be found here.