Redundancy process; can anyone help me with the legalities?

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I'm on the committee for a preschool. We're a registered charity.
We've made losses for four months.
Totalling £2500. Total loss for the year so far £1450.
Projected loss for next fourteen months £10,000.
We sadly need to lose a member of staff.
We've looked at all members of staff and looking at appraisals, attendance, last in first out, and financial aspect it all comes down to one employee.
We agreed in a meeting yesterday that we would tell her on Monday morning (tomorrow) but the Chair us concerned we might be unintentionally doing something unfair/incorrect in the eyes of the law.
We have two other full time members of staff both of which are required to stay due to NVQ levels. We have two other part time members but losing both if them would only mean half the saving of losing the ft employee.
Can anyone give me some advice please?

Bump

Start by reading this - it's the ACAS website on redundancy.

I've read all the blurb. I'm confused mainly regarding consultation periods.
They all take about 20+ employees or 'collective redundancies'.
Does this apply when we only have 3 FT and 2PT members of staff in total??

No, if there are less than 20 affected individuals then there is no need for collective consultation, but you will still need to do individual consultation.

What does that mean in reality?
Sitting them down and saying what?
"We're considering you for redundancy..."
"We're considering making redundancies soon..."
Any ideas?