When a small business faces the prospect of redundancy, it can feel overwhelming. You want to act quickly to steady the business, but you also need to follow the law and treat people fairly. One area that often causes confusion is consultation – what you’re legally required to do when making redundancies.
Handled properly, consultation not only helps you stay compliant, it can also reduce conflict, build trust, and sometimes even reveal ways to avoid redundancies altogether. This article explains the essentials for small employers.
What does “consultation” mean in redundancy?
Consultation is a process of talking to employees before decisions are finalised. It’s not just informing them that redundancies will happen – it’s about explaining the situation, listening to their views, and considering alternatives.
In practice, this means you must:
- Explain the reasons for potential redundancies,
- Discuss how employees were selected (if a pool is involved),
- Explore alternatives to redundancy, and
- Consider any ideas or objections employees raise.
Even if you’re confident that redundancies are unavoidable, you still have to go through consultation properly. Skipping or rushing it could make dismissals legally unfair.
Who must you consult with?
For small businesses, the legal duty usually falls on individual consultation – speaking directly with each employee at risk.
You need to consult with every employee whose role is at risk of redundancy, whether that’s one person or several, and should also talk to employees who might be affected indirectly (for example, if workload is redistributed).
It’s best practice to give employees the right to be accompanied at consultation meetings by a colleague or trade union representative.
When does consultation start?
You must consult before final decisions are made. If you’ve already chosen who will go and are simply informing them, that’s not consultation – and could expose you to an unfair dismissal claim.
A good rule of thumb is to:
- Announce that redundancies are a possibility,
- Share the business reasons,
- Set out the selection pool and proposed criteria, and
- Invite feedback before making a final decision.
For small-scale redundancies, there’s no fixed minimum consultation period, but it should be meaningful. That usually means at least one meeting (often more), plus time for employees to reflect and respond.
The step-by-step process for individual consultation
Here’s how consultation normally works in small businesses:
- Placing employees at-risk– It’s best practice to communicate this in person, explaining the business case and reasons, and giving the employees a letter confirming what was said, giving more detail, and inviting them to a consultation meeting.
- First consultation meeting – Allow the employee to ask questions about the information they were given at their at-risk meeting. They’ll have had a chance to digest and consider any alternatives they want to suggest, queries they may have, or concerns they want to raise.
- Consideration period – Take time to genuinely reflect on suggestions raised. This could include redeployment, reduced hours, or voluntary redundancy.
- Follow-up meeting(s) – If needed, hold further discussions to explore options or provide updates.
- Decision – Once consultation is complete, confirm the outcome in writing – whether the employee is being made redundant or retained.
Keep notes of all meetings. They demonstrate that you followed a fair process if your decisions are ever challenged.
What about collective consultation?
Collective consultation applies if you’re proposing 20 or more redundancies within 90 days at a single site. In that case, you must consult with employee representatives, follow minimum consultation periods, and notify the government.
For most small businesses, this threshold is unlikely to be met, so individual consultation is the main legal requirement. But it’s worth being aware of the rule in case your business grows or circumstances change.
Why consultation matters
Even when you’re making just one role redundant, consultation is vital because:
- It’s a legal requirement – skipping it can make the dismissal automatically unfair.
- It builds fairness – employees feel they’ve had a voice in the process, even if the outcome is the same.
- It protects your reputation – how you handle redundancies sends a message to remaining staff and future hires.
- It can uncover alternatives – staff may suggest creative ways to save costs or redeploy skills.
Common pitfalls to avoid
Small employers often trip up by:
- Treating consultation as a formality rather than a genuine two-way process,
- Making decisions before consultation starts,
- Failing to explain the selection criteria clearly,
- Not allowing enough time for employees to respond, and
- Forgetting to offer the right to be accompanied at meetings.
Avoiding these mistakes goes a long way to ensuring the process is fair and legally sound.
Practical tips for small employers
- Be open and honest – share the business challenges clearly.
- Use plain language – avoid jargon or legalese when explaining the situation.
- Give time – don’t rush employees into immediate responses.
- Document everything – letters, meeting notes, scoring sheets – to show fairness.
Final thoughts
Consultation during redundancy isn’t just a box to tick – it’s a legal duty and a vital step in treating employees fairly. For small businesses, that usually means sitting down with each affected employee, explaining the reasons, and genuinely listening to their views before making a decision.
By taking consultation seriously, you not only reduce legal risk, you also show your team that even in tough times, you value transparency and respect.
If you would like any further advice on legal requirements for consultation during redundancy, do get in touch.