Can You Make Someone Redundant for Poor Performance?
You've got an employee who isn't pulling their weight. The work is suffering, you've perhaps had a go at raising it, and someone (a manager, a friend, or a vague memory of some advice) has suggested the tidy solution: just make the role redundant. It feels cleaner than another difficult conversation.
Here is the honest answer, and it is the one that saves employers the most money: almost always, no. If the job still needs doing, it is a performance problem wearing a disguise, and an employment tribunal will see straight through it.
The short answer, and why it matters
Redundancy is a specific legal event: the role itself must be disappearing. If the work still needs doing and the real problem is the person's performance, that is not redundancy but a capability issue, and dismissing it as redundancy is likely to be an unfair dismissal.
Redundancy and poor performance are two completely different problems with two completely different solutions. Using one to fix the other is among the most common and most expensive mistakes we see business owners make.
Redundancy is about the role disappearing. Poor performance is about the person. You can't use one to solve the other, and dressing up a performance problem as 'redundancy' is a sham redundancy, one of the clearest routes to an unfair dismissal claim.
The reason it matters so much is timing. The moment you are tempted to reach for redundancy to move someone on is exactly the moment to get advice, because the wrong choice here is very hard to undo once notice has been given.
Redundancy vs capability: the real difference
A genuine redundancy has a specific legal meaning. Under section 139 of the Employment Rights Act 1996, it broadly means the work that person does has stopped or is shrinking, so the role is going, not the person. Poor performance is a capability issue: the role still exists and still needs doing, but the individual isn't meeting the required standard. Those two situations demand different processes, different paperwork and different payments.
Redundancy | Capability (poor performance) | |
Why | The role is no longer needed | The person isn't meeting the required standard |
Legal test | A genuine section 139 situation | A fair reason, followed by a fair process (ACAS Code) |
Process | Pool, selection, consultation, alternatives | Concerns in writing, support/PIP, hearing, appeal |
Payment | Statutory redundancy pay (2+ years' service) | No redundancy pay; notice pay still applies |
Main risk | A 'sham' pool of one / the role still exists | A rushed or undocumented process |
Get the category right and everything else follows. Get it wrong and you have picked the wrong process from the very first step. If it is a genuine redundancy, the steps are different again, and we walk through them in our guide on how to make an employee redundant.
What a 'sham redundancy' looks like (and why it's dangerous)
A sham redundancy is a performance or conduct exit dressed up as a role that is disappearing. Tribunals are well practised at spotting them, and there are a few classic tells:
A 'pool of one' built around a single named individual, where the selection was really about who, not what.
Recruiting for the same role (or something suspiciously similar) not long after the 'redundancy'.
A decision that was clearly made before any genuine consultation took place.
Where a redundancy is challenged, a tribunal looks at the real reason for the dismissal, not the label on the letter. If the real reason was performance and the process didn't match, that is an unfair dismissal.
Because a fair process carries real weight here, an unreasonable failure to follow the ACAS Code can add an uplift of up to 25% to any compensation awarded. In one case, an employer dressed a dismissal up as redundancy and a tribunal saw straight through it, calling the process a 'total sham' and adding the full 25% to the award (Rentplus v Coulson).
Worth knowing: the ACAS Code doesn't apply to genuine redundancies at all, which is rather the point. It applies to the capability process you should have run instead.
The right way to handle poor performance without going for redundancy
If the issue is genuinely performance, the right route is a capability procedure: supportive, structured and documented. In practice that means:
Setting out your concerns clearly and in writing, so the employee knows exactly what needs to improve.
Giving a fair, realistic chance to get there, usually a performance improvement plan (PIP) with objectives, support and a sensible timescale.
Holding a proper meeting, with the employee's right to be accompanied.
Offering a right of appeal.
The aim is genuine improvement, not a paper trail to a dismissal. But the documentation matters, because if things don't improve and it ends in a capability dismissal, that record is exactly what protects you.
When a settlement agreement is the honest route
Sometimes both sides quietly agree it isn't working, and a clean break is the sensible outcome. That is perfectly legitimate, but the lawful way to get there is a protected conversation followed by a settlement agreement, not a manufactured redundancy. A settlement agreement gives both parties certainty and closes off the risk of a later claim. It is the honest version of what a sham redundancy is trying to fake. Do take advice before you open that conversation, though. Get the 'protected' part wrong and it stops being protected.
Why this gets riskier from 2027
The stakes on getting this right are about to rise sharply.
From 1 January 2027, the qualifying period for ordinary unfair dismissal drops from two years to six months, and the cap on unfair dismissal compensation is removed entirely. That is a double shift: far more of your people can bring a claim, and there is no longer a ceiling on what a badly handled exit could cost. The change applies to existing staff too: anyone with six months' service on that date is covered straight away.
Separately, from 1 October 2026 the time limit for bringing most tribunal claims doubles from three months to six, so a questionable exit stays 'live' for longer before you know whether it has turned into a claim. The practical takeaway is simple, and it hasn't changed: pick the right process, run it fairly, and keep your records.
How Precision HR can help
We'll tell you honestly whether you are looking at a redundancy or a capability issue, then run the right process with you, so it is fair, documented and far harder to challenge. No jargon, no drama, just a clear path through.
Book a free consultation with no obligation and we'll talk it through. For ongoing support, our HR Flex Support and HR Partnership Plan give you expert HR on hand exactly when you need it.
Frequently asked questions
Is it illegal to make someone redundant for poor performance?
It isn't 'illegal' in itself, but if the role still exists it isn't a genuine redundancy but a sham, and dismissing on that basis is very likely to be an unfair dismissal. Poor performance should be handled through a capability procedure, which gives the employee a fair chance to improve before any decision is taken.
How do I show a redundancy is genuine and not a 'sham'?
Document the real business reason at the time (the reduced or disappearing need for the role) and keep those records. A genuine redundancy shows a proper pool and selection, real consultation, and that alternatives were considered. Tribunals look hardest at whether the decision was made before consultation, and whether the role quietly reappears afterwards.
Can I make a role redundant and then rehire for it?
Rarely, and never quickly. Recruiting for the same role shortly after a 'redundancy' is strong evidence that the redundancy was never genuine, which exposes you to an unfair dismissal claim. If the work still needs doing, treat it as a performance or restructuring question, not a redundancy.
How many warnings do I need to give before dismissing for poor performance?
There's no fixed statutory number, but a fair capability process is normally staged: concerns raised, a genuine chance to improve on a PIP, and at least one formal warning before any dismissal. Tribunals expect dismissal to be a last resort after real support; moving straight to it after a single failed PIP is rarely fair.
How long should a performance improvement plan (PIP) last?
There's no legal minimum or maximum. It simply has to be a reasonable time to improve. In practice, four to twelve weeks is common, set proportionately to the role and the size of the gap: a straightforward, measurable target needs less time than a complex senior role. The key test is that the opportunity to improve was genuine.
What is a PIP, and is it a disciplinary?
A performance improvement plan (PIP) sets clear objectives, support and a timescale for an employee who isn't meeting the standard. It sits within a capability process rather than being a disciplinary for misconduct, though both should follow a fair, documented procedure, with the right to be accompanied and to appeal.
Can I use a settlement agreement instead of redundancy?
Yes. Where both sides want a clean, agreed exit, a protected conversation followed by a settlement agreement is the lawful route. It's the honest alternative to manufacturing a redundancy, and it gives both parties certainty. It's worth taking advice before you open the conversation, as the protection can be lost if it's handled incorrectly.
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