Making your first hire redundant is a different kind of hard than making your first hire. There's no cap table logic to lean on and no investor update that makes it easier, just a legal process you need to get right, first time, with no HR department to catch your mistakes.
Getting the redundancy process for employers wrong doesn't just cost money; it can turn a defensible business decision into a tribunal claim that follows your company for years.
This guide sets out what founders need to know: what counts as genuine redundancy, when consultation kicks in, what redundancy notice period you owe, how to select fairly, and where the whole thing can tip into legal risk.
What Counts as a Genuine Redundancy (and What Doesn't)
A redundancy is only genuine if a role has stopped being needed not because you want a specific person gone. Under section 139 of the Employment Rights Act 1996, a dismissal counts as redundancy if the business or workplace is closing, or if the employer's need for employees to do a particular kind of work has ceased or diminished.
That third category is where most founders get caught out: the leading case, Safeway Stores plc v Burrell [1997] ICR 523, set the test tribunals still use to check whether a dismissal is genuinely about the role, not the person. It doesn't matter if the workload itself hasn't dropped, what matters is whether the business genuinely needs fewer people doing it.
A team needing two engineers instead of three, because you've automated part of the workflow, is still a genuine redundancy. Get this first step wrong, and the rest of the redundancy process for employers rests on shaky legal ground.
Consultation Requirements for Small Teams (Individual vs Collective)
You must consult before making anyone redundant, but the redundancy consultation UK rules are far lighter for small teams than most founders assume. For fewer than 20 redundancies, there are no statutory rules governing the length or format of individual consultation, but employers should still consult affected employees genuinely and meaningfully before making a final decision. Collective consultation becomes a legal requirement when 20 or more redundancies are proposed at one establishment within a 90-day period.
Good practice for a small team usually means: telling the affected employee they're at risk, holding at least one (ideally two) consultation meetings, exploring alternatives like redeployment, and confirming the outcome in writing with a right to appeal.
Once you cross the 20-employee threshold, the redundancy consultation UK framework shifts automatically into collective consultation: 30 days' minimum for 20–99 redundancies, 45 days for 100 or more, plus a duty to consult employee representatives. Get the timing wrong and the stakes have grown sharply. The Employment Rights Act 2025 doubled the maximum protective award for failing to collectively consult properly, from 90 to 180 days' pay per employee, in force from 6 April 2026. Skipping this step is the single most common way founders derail an otherwise sound redundancy process for employers.
Statutory Notice Periods and Pay in Lieu of Notice
Every employee is entitled to at least one week's notice for every year worked, up to a legal cap of 12 weeks. The exact redundancy notice period under the Employment Rights Act 1996 is: one week's notice if employed between one month and two years, then one week per full year of service between two and 12 years, capped at 12 weeks for anyone with 12 or more years behind them.
Your contract can offer more than this, it just can't offer less. Notice should only start once you've finished consultation and made a final decision in writing; starting the clock too early, before the process has genuinely concluded, risks the whole dismissal being found unfair. If you need someone to leave sooner, you have two main options: pay in lieu of notice (PILON), ending employment immediately while paying out the full notice period, or garden leave, keeping them employed and paid but off active duty.
Getting these numbers right is non-negotiable in any redundancy process for employers underpaying notice is one of the easiest mistakes to make, and one of the easiest for an employee to prove.
Fair Selection Criteria: Avoiding Discrimination Risk
Fair selection starts with defining the right pool, not the right person. Begin by identifying the roles not the individuals that are genuinely at risk, then score everyone in that pool against objective, business-relevant criteria: skills, qualifications, documented performance, and (carefully handled) attendance.
Most employers build a simple scoring matrix, weighting criteria that matter most to the business going forward, and ideally have more than one manager score independently to avoid bias creeping in. Certain shortcuts carry real legal exposure. "Last in, first out" can indirectly discriminate against younger staff if used as the sole criterion, and any criteria touching protected characteristics age, disability, pregnancy and maternity, race, religion, sex, sexual orientation must never enter the matrix at all.
Sickness-related scoring must exclude disability-related absence, maternity leave, and family leave. If a tribunal later finds that a "genuine" redundancy is actually related to a protected characteristic, compensation is uncapped, a very different risk profile from a standard unfair dismissal redundancy claim, which currently carries a compensation ceiling. Keep the matrix and the scores on file; they're your primary evidence that the selection stage of the redundancy process for employers was objective, if anyone challenges it later.
Where Redundancy Tips Into Unfair Dismissal
Redundancy becomes unfair dismissal when the process breaks down, not when the business case does. Employment law treats redundancy as one of five potentially fair reasons for dismissal, but that status only holds if you can show a genuine redundancy situation and a properly run process; skip consultation, apply discriminatory selection criteria, or fail to consider alternatives, and a perfectly legitimate redundancy can still result in an unfair dismissal redundancy claim at tribunal.
The financial exposure has grown sharply. From 6 April 2026, the maximum statutory redundancy payment rose to £22,530 (a £751 weekly pay cap), the unfair dismissal basic award moved in line with it, and the compensatory award cap increased to £123,543 or 52 weeks' gross pay, whichever is lower. Most employees currently need two years' service to bring an ordinary unfair dismissal claim, but the Employment Rights Act 2025 has already legislated to cut that to six months and scrap the compensatory cap entirely, expected from January 2027 so the direction of travel is towards more claims, not fewer.
Certain dismissals, including redundancy connected to pregnancy or whistleblowing, are automatically unfair with no qualifying period at all. This is exactly where an otherwise well-run redundancy process for employers can quietly turn into a costly liability.
A Simple Redundancy Checklist for First-Time Founders
Running the redundancy process for employers well, especially the first time, comes down to sequence rather than paperwork volume. Use this order as a working checklist:
Founders who follow this sequence, rather than jumping straight to a termination letter, are the ones who keep a straightforward redundancy from turning into an unfair dismissal redundancy claim.
FAQ
1. How much notice do I need to give for redundancy?
The statutory minimum is one week's notice for employment between one month and two years, then one week per full year of service up to 12 years, capping at 12 weeks. Your contract may specify more, but it can't offer less than this redundancy notice period.
2. What makes a redundancy consultation fair?
A fair redundancy consultation UK process means genuinely explaining the reasons for redundancy, exploring real alternatives, and giving the employee a proper chance to respond before any final decision is made. For teams under 20, there's no fixed format, but skipping consultation entirely is a common route to a tribunal claim.
3. Can redundancy be classed as unfair dismissal?
Yes, redundancy is only a fair reason for dismissal if the underlying redundancy is genuine and the process is handled properly. Poor consultation, discriminatory selection, or failing to consider alternatives can turn even a legitimate redundancy into an unfair dismissal redundancy claim at tribunal.
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Sources: Data and legal thresholds drawn from GOV.UK's redundancy guidance, the Employment Rights Act 1996 (legislation.gov.uk), the Employment Rights Act 2025, and the Employment Rights (Increase of Limits) Order 2026 (S.I. 2026/310). Case law reference: Safeway Stores plc v Burrell [1997] ICR 523. Figures reflect the most recent available data at the time of writing.
The EP+ Editorial Desk covers UK startups, founder stories, and venture capital. All editorial content is independently produced and human-reviewed before publication.
