First, you need to be signed up for another season. They don't want you having an effect on future seasons if you're not going to be around. Once you have that, there will be a Redshirt option for all eligible players right on your team home page.
You'll then get a response from the player (responses come every three hours, just like recruiting responses) letting you know how they feel about the RS, though what's more important is the RS's impact on their work ethic. If it kills their work ethic, it's generally better to remove the redshirt (upon which the player will gain back the lost work ethic). If they don't lose any work ethic, you're goldne.