Restructuring before January: the redundancy process that holds when someone challenges it

The two names have been in the top drawer since the middle of August. The managing director wrote them on the back of a management accounts page during a bad Thursday, and nothing since has changed his mind. Turnover is down eleven per cent on the year. The business carries forty-one people, and he has worked out that it can carry thirty-eight into the spring. He knows which two go. He has a fair idea about the third.

What he wants from me is a process that arrives at those names. He asks how long it takes and what the paperwork looks like, and both are fair questions from a man who has been awake since four.

They are also the wrong two questions. The commercial case for this restructure is sound, and the accounts carry it, so the problem is not the decision he has reached. But what gets examined eighteen months later is the sequence in which the decision and the process happened, and in that drawer the sequence has already gone wrong.

The order is the thing that gets tested

A tribunal reading a redundancy file does not begin with the accounts. It begins with dates. And dates are the one part of a restructure nobody can reconstruct afterwards.

The Employment Appeal Tribunal put the principle plainly in 2022. In Mogane v Bradford Teaching Hospitals NHS Foundation Trust, His Honour Judge Beard held that consultation "should occur at a stage when what an employee advances at that consultation can be considered and has the potential to affect the outcome". The trust had already fixed on a criterion that produced a pool of one, and it did that before it spoke to anybody. So the consultation that followed could change nothing, and the dismissal was unfair.

The tribunal's test is narrower than people expect: whether anything was actually left to consult about by the time you got there.

The second thing it reads is the file. Here small businesses are exposed in a way larger ones are not. In Osborn v Mothercare Global Brand Ltd, a tribunal found there had been no genuine redundancy at all, and that a manager had been managed out of the business while she was on maternity leave. The paperwork said this: "We have been provided with no contemporaneous emails or other documentation dealing with how it was that the decision to make [her] role redundant was arrived at. We find this extraordinary." The award came to £67,801.88. Nobody had created those documents, because nobody imagined anyone would ask for them.

Businesses of forty do not keep board minutes of the conversation where they decided on a restructure. That conversation happens in a car on the way back from a customer. The only record of it is two names on the back of a management accounts page.

What actually changes on 1 January, and what does not

Three changes matter to a restructure in a business this size. The one that has had most of the coverage barely matters at all.

From 1 January 2027, the qualifying period for ordinary unfair dismissal falls from two years to six months. Anyone already holding six months' service on that date is protected immediately. So it reaches the people you hired in the summer of 2026, and not only the ones you hire afterwards. Redundancy stays a potentially fair reason for dismissal. Nothing here stops you making anybody redundant, and what changes is who can ask a tribunal to look at how you did it. From January that is almost everyone on your payroll. The mechanics are set out in what the six-month rule means for the staff already on your payroll. That includes the way statutory notice can push a December dismissal date into January.

On the same date the cap on compensation for ordinary unfair dismissal disappears. Until now the compensatory award has been limited to £123,543 or a year's gross pay, whichever is lower. That ceiling is what has kept the risk arithmetic bearable for a lot of owners. From January a tribunal can award the employee's actual financial loss. For a well-paid manager in a thin local market, that is a materially different number from the one the cap used to guarantee. The basic award, calculated like statutory redundancy pay, stays capped.

Before either of those, on 1 October 2026, the time limit for bringing most tribunal claims doubles from three months to six. Add Acas early conciliation and a claim can arrive nearly a year after the dismissal. By then the manager who ran the scoring has often left. And the volumes are moving. In the quarter to June 2026 the tribunals took 14,000 single claim receipts, twenty-eight per cent up on the same quarter a year earlier. Seventy thousand single claims are open.

Then there is the protective award. It doubled from ninety to a hundred and eighty days' pay per affected employee on 6 April 2026. It has been the headline in most redundancy coverage this year. But it only bites at twenty or more redundancies at one establishment in ninety days. The organisation-wide threshold now under consultation is pitched somewhere between two hundred and fifty and a thousand redundancies. None of the options on the table reaches a firm of forty.

But there is one way an SME walks into it without noticing, and it has nothing to do with cutting headcount. Dismissing people and re-engaging them on changed terms counts towards the twenty. So a business moving thirty staff onto new contracts is in collective consultation territory without having made a single person redundant. That route narrows in January. Dismissing someone for refusing a change to pay, hours or pension becomes automatically unfair in most cases.

None of this is an argument for getting a restructure done before Christmas, and I want to be clear about why. Discrimination claims have never needed any qualifying service. And discrimination is where redundancy scoring comes apart in a small business. The two-year rule was always thinner cover than owners believed it to be, and it has been leaking quietly for years.

The pool is where the outcome is quietly settled

Before anyone is scored, somebody decides who is in the group being scored. That decision usually determines the result, and it is the part owners think about least.

The temptation in a business of forty is to draw the pool tightly around the roles you have already decided to lose. One warehouse supervisor, one pool of one, one conversation. Courts have not banned pools of one, and there are structures where a role genuinely stands alone. But the employer has to show it applied a genuine mind to the question. Where a pool of one is the product of a criterion fixed before anybody was consulted, that is close to what the EAT found unfair in Mogane.

The test is interchangeability. If two people could do a reasonable portion of each other's work with a fortnight's handover, a tribunal will want to know why only one of them was in the frame. Owner-managed businesses often find the defensible pool is wider than the one they had drawn. And in a forty-person firm almost everybody covers for somebody.

There is a harder version of the same question, and it comes up in nearly every SME restructure I am brought into. The role going is an administrator. The weakest performer in the business is a different administrator, on a different team. Widening the pool to include both can be entirely legitimate, provided the reason is genuine interchangeability and not the name you already had in mind. Fit the pool to that name rather than the role, and it becomes a sham. What separates the two is visible in the dates, and in whether the criteria were written before or after you knew the names.

That is the decision I would want a second pair of eyes on. It matters most in a restructure that has to survive a tribunal, and an independent read costs least before anything is announced.

Scoring people you have known for nine years

Selection criteria in a small business carry a problem the guidance written for large employers ignores. In a firm of forty, the person doing the scoring knows every candidate personally. He has done for years. And he cannot pretend otherwise.

The principle from Williams v Compair Maxam [1982] ICR 156 still governs. Criteria should "so far as possible" not depend solely on the opinion of the person making the selection. So each one needs something behind it that exists independently of the scorer's memory. Appraisal records, qualifications actually held, disciplinary records, output figures the business already produces. Where a criterion rests on judgement, and some always will, a second manager scoring the same people separately is the cheapest protection available.

Criteria fail in a second way, because a criterion applied identically to everyone can still discriminate. In Norman v Lidl a tribunal found the retailer's "knowledge" criterion indirectly age-discriminatory. It credited a university degree, and workers in their sixties were less likely to hold one than workers in their thirties. Mr Norman scored seventeen out of twenty against a colleague's eighteen. The award was £50,926.78, on top of the redundancy payment already paid.

Note the margin. One point, decided by a criterion nobody in that room thought was contentious. Attendance scoring carries the same exposure where absence is disability-related or pregnancy-related, and length of service weighted heavily carries it on age.

Consultation that could still change something

Below twenty proposed redundancies, there is no collective consultation duty, no statutory minimum period and no form HR1. Small employers read that as meaning consultation is optional. It means something harder. The structure that would have told you what good looks like is absent, and a tribunal will still measure what you did against what a reasonable employer would have done, with nothing for you to point at.

Meaningful individual consultation in a business of forty takes three steps. A first meeting where you explain the commercial position, set out the pool and the criteria, and say plainly that no decision has been taken about individuals. A second meeting where the person sees their own scores and can argue with them. Then, whatever time in between, they need to come back with something, including ideas about their own job that you have not had. Each point they raise gets a written response, and that response is your evidence that the consultation was capable of changing the outcome.

Owners worry this drags on for weeks. In a small restructure it usually runs two to three weeks from first meeting to decision. But those weeks buy the only thing that answers the Mogane question.

One more point costs businesses money every year. Someone in the pool who is pregnant, on maternity, adoption or shared parental leave, or within eighteen months of the birth, has priority. They must be offered any suitable alternative vacancy ahead of other candidates, whether or not they score highest. It has been the position since 6 April 2024, and it is not discretionary.

The alternatives you have to be able to show you considered

A dated written record of that reasoning is what protects you when the file is read later, not your memory of the meeting where it was discussed.

Acas expects an employer to look at ways of reducing or avoiding redundancies first. Voluntary redundancy, reduced hours, ending overtime, releasing agency and contract staff, freezing recruitment, redeployment. In a forty-person business, these are decided in an afternoon, and half of them will not be available at all. But each one still needs a line saying it was looked at and why it was rejected, written in October and not reconstructed in 2028.

Suitable alternative employment is a legal duty, not a courtesy. So where a vacancy exists, it has to be offered. The employee is entitled to a four-week trial period in the new role without losing the right to their redundancy pay. An offer that amounts to a clear demotion is not suitable. Group vacancies count too. So does bumping, where a more senior employee whose role is going moves into a post held by someone less senior. That one is uncomfortable, and occasionally it is the right answer.

Where the real problem is one person's performance and not the shape of the business, redundancy is the wrong instrument. It is also an expensive one. Whether that is a capability or a conduct question decides which process you run, and either one is slower and far more defensible than a restructure built around a single name.

October under the old rules, February under the new ones

Take the same restructure, the same forty-one people, the same eleven per cent, and run it twice.

In October 2026 the two people leaving have three and seven years' service. Both can already claim unfair dismissal, so the qualifying period changes nothing for them. The compensatory award is capped. And any claim has to arrive within three months, so by February the matter is closed one way or the other.

In February 2027 those two can still claim, and so can the warehouse administrator hired in August 2026 who was also in the pool. And the award is uncapped, measured by actual loss. The claim can arrive up to six months after the dismissal, and with early conciliation on top, the first you hear of it might be October. What has not changed is the standard it is judged against, settled since 1982.

So look at that comparison, and the conclusion is not to go faster. A restructure rushed through November to beat a date produces exactly the file that loses: criteria written after the names, and consultation squeezed into the week before Christmas. It does nothing about the discrimination exposure, which never needed qualifying service. The case for starting now is simpler. A restructure done carefully takes six to eight weeks from first thought to last day, and that is the reason to begin in September.

What the file has to contain on the day you announce

Before the first meeting, five things should already exist in writing, and each of them should carry a date. First, the commercial case, with the numbers under it. Second, the pool itself, with the reasoning that drew its boundary where it did. Third, the criteria and their weightings, written down and agreed before a single person was scored, because that is the document a tribunal asks to see first. Fourth, the alternatives you considered and why each was rejected. Fifth, a note of who made each of those decisions, and on what day.

Two hours of work. That file is also the whole of your defence, because everything created after the announcement is arguable and nothing created before it is. A restructure is decided in October and judged in 2028, and the only part of it that survives the gap intact is what you wrote down before anybody knew.

The managing director with the two names in his drawer has done nothing wrong. Every restructure starts with somebody's judgement about where the business has to get to. The work is putting that judgement back where it belongs, as the commercial case at the top of the file. Then a process he has not pre-cooked can tell him the names.

If there is a restructure in your head that has not yet reached paper, a short message gets a direct read on whether the reasoning would hold up and what the sequence should be. It comes back from me or someone in the team, usually the same day.

Common questions

Do I have to consult if only one person is affected?

Yes. The collective consultation rules apply only at twenty or more proposed redundancies at one establishment in ninety days, but individual consultation is part of what makes any redundancy dismissal fair, however small the business. It has to happen before the decision is final, and the employee has to be able to influence the outcome. That is what the Employment Appeal Tribunal held in Mogane in 2022. A dismissal where consultation began after the decision was made is likely to be unfair even where the redundancy itself was genuine.

Can I make someone redundant who has less than two years' service?

You can. Until 1 January 2027 they cannot usually bring an ordinary unfair dismissal claim without two years' service. From that date the qualifying period drops to six months, and anyone who already has six months' service on 1 January 2027 is covered immediately. Two things are worth knowing whatever the date. Statutory redundancy pay still requires two years' service, so a shorter-serving employee can have a claim without ever having been entitled to a payment. And discrimination claims have never required any qualifying period at all.

How long does a redundancy process take in a small business?

Where fewer than twenty roles are affected there is no statutory minimum period, so the answer is however long it takes to consult in a way that could still change the outcome. In our experience that is two to three weeks from the first consultation meeting to the decision, on top of the preparation done before anything is announced. Allowing six to eight weeks from the first commercial decision to the final working day is a realistic plan for a business of twenty-five to a hundred and fifty staff.