Essential FAQs on Restructuring and Redundancy

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Emilene LucasLegal Assessment Team Supervisor
Updated on 30th June 2024
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When businesses evolve or the economic landscape changes it is often necessary to restructure teams and processes. Redundancy processes, for example, allow businesses to stay competitive and adapt to change including downturns, acquisitions, and other external factors. 

However, there are many legal pitfalls to avoid during restructuring and redundancy. Employers must follow specific procedures or face legal and financial consequences.

This article aims to provide concise yet comprehensive answers to key questions surrounding restructuring and redundancy in the UK. We'll address common queries around these corporate management terms.

We’ll outline what constitutes restructuring and redundancy in the context of UK employment law to guide employers on their obligations, explain the legal pitfalls of non-compliance, and address employee rights to offer clarity to employers, HR professionals, employees, and individuals affected by restructuring processes.

Table of Contents

What is the difference between restructuring and redundancy?

Restructuring involves reorganising the structure of a company to improve efficiency, reduce costs and adapt to market changes. This can include making changes to departments, roles, processes, or the overall business strategy.

Redundancy is when an employer decides that certain roles are no longer needed because of reduced demand, cost-cutting, business closures, or technological changes, resulting in the termination of the employment of those in those roles.

The key difference between the two is that restructuring may not always lead to job losses, whereas redundancy does. In restructuring, employees may be moved to new roles instead of laid off.

That said, redundancies may be made as part of the restructuring process.

When considering redundancies, employers have to make sure the process if fair, transparent, and compliant with employment law.

This includes:

  • Using fair and objective criteria for selecting employees for redundancy;

  • Consulting with affected employees individually or engaging in collective consultation if 20 or more employees are being made redundant;

  • Giving appropriate notice of redundancy;

  • Making reasonable efforts to find alternative employment in the organisation for those facing redundancy;

  • Paying employees with at least two years of continuous service statutory redundancy pay;

  • Allowing employees to appeal the redundancy decision.

Much like in redundancy situations, employers must consult with employees who are affected by restructuring. This involves explaining the reasons for the restructuring, the proposed changes, and how these changes will impact the employee.

Furthermore, if the restructuring involves changes to roles, the selection process must be based on fair and objective criteria, such as skills, experience, and performance not protected characteristics like age, gender, race, or disability.

Affected employees should be given appropriate notice of changes to their roles and terms of employment and employees should have the opportunity to appeal decisions related to restructuring, such as role changes.

How should employers select employees for redundancy?

The legal framework for restructuring and redundancy processes includes consultation requirements, selection criteria, and redundancy payment rules that employers must follow.

Positions and roles for redundancy must be selected by employers fairly and objectively. 

When considering selection employers often use the following methods:

  • Last in, first out – employees with the shortest length of service are considered first

  • Voluntary – employers ask for volunteers, this is known as self-selection

  • Disciplinary records – employees with poor disciplinary records may be considered first

  • Self-appraisal markings – employee skills, qualifications and experience.

There are exceptions to the selection process requirement. An employer can make someone redundant without having to follow a selection process when:

  • They are closing down a whole operation within the company and making all the employees that work in it redundant

  • Someone is the only employee in that part of the business.

When a new role is available in the business, your employer may consider if you are a good fit for it. If an employer uses the first in, last out selection process they must avoid discrimination.

During the selection process, employees may be asked to reapply for their jobs to help an employer decide which employees to select. Employees are still considered employed if they fail in their application, or do not apply, until the point an employer makes them redundant. 

What rights do employees have during a redundancy process?

Employees have the right to be treated fairly and not be discriminated against, this is covered by the Equality Act 2010

Redundancy can be considered unfair dismissal – which you can take legal action against – if you are selected for the following reasons:

  • Sex

  • Gender reassignment

  • Marital status 

  • Sexual orientation 

  • Race 

  • Disability 

  • Religion or disability

  • Age 

  • Membership or non-membership of a trade union

  • Health and safety activity

  • Taking action for health and safety reasons

  • Working pattern, e.g. part-time or fixed-term employees

  • Maternity leave, birth, or pregnancy 

  • Paternity leave, parental or dependant’s leave

  • When you’re exercising your statutory rights

  • Whistleblowing

  • Taking part in lawful industrial action that lasts 12 weeks or fewer

  • Jury service

  • Acting as a trustee of a company pension scheme.

The notice period given to employees selected for redundancy must be at least the same as those outlined in employment contracts or company policies.

When there is no specific clause for a notice period in redundancy processes, employers must give employees ‘reasonable notice’. 

Is consultation with employees required before making redundancies?

Employee consultation is a crucial right for employees during a redundancy process.

The consultation process gives employees a chance to understand what is happening, ask questions they have, and raise any objections. 

Employers’ obligations during redundancy processes include:

  • Considering alternatives to redundancy

  • Attempting to reduce the number of redundancies

  • Thinking about ways to reduce the impact on employees.

During the consultation process, employers should listen to employees, discuss the selection criteria with them, and attempt to agree on actions. 

According to Acas employers should discuss the following:

  • The required changes, what they are planning, and why

  • Ways they are attempting to minimise the number of redundancies

  • The skills and experience required to achieve their future aims

  • The criteria for selecting employees for redundancy

  • Employee concerns

  • Support mechanisms for employees – time off work to job hunt, update their CVs, and seek training.

The exact process that employers have to follow depends on the number of redundancies that they plan to make.

If an employer doesn’t hold meaningful consultations with you before finalising affected employees can claim unfair dismissal at an employment tribunal.

What is collective consultation, and when is it necessary?

There are two different types of redundancy processes: individual consultation, which we have described, and collective consultation where an employer consults with a recognised trade union or elected employee representatives before consulting affected employees. 

When employees are not registered with a recognised trade union, or the union they’re members of is not recognised by the employer, employers must consult with employee representatives.

This form of consultation is used when a company plans to make 20 or more redundancies within 90 days at a single organisation. 

Trade union and employee representatives represent the interests of affected staff within the process, by: 

  • Outlining the redundancy proposal to affected employees and sharing information about their plans

  • Asking for employees' views and suggestions and answering any questions they have

  • Canvassing representatives to determine a collective response

  • Meeting with the employer to discuss the employee response

  • Holding open discussions to iron out problems and reach agreements

  • Informing employees of the consultation outcomes

Like individual consultations, the process must consider ways to avoid redundancies, how to limit the number of redundancies, and how to limit the effects of redundancy on the employees involved, including retraining. 

After a collective consultation, each individual must be consulted what was discussed collectively doesn’t necessarily apply to each case. 

It is good practice to hold collective consultations when planned redundancies don’t fulfill all the requirements for collective consultation, such as the redundancies being over a longer period than 90 days or fewer than 20 roles are up for redundancy.

What redundancy payments are employees entitled to receive?

When you are being made redundant you may be entitled to redundancy pay if your redundancy is classed as a ‘genuine redundancy’. 

You can check whether your redundancy is genuine when you have been working for your employer for at least two years when your job ends.

A redundancy is genuine when:

  • Your employer doesn’t require you to do your job anymore

  • Your workplace is closing

  • Your employer is going out of business or has reduced demand for its services, it is going insolvent, the business is being taken over

  • Your employer was the only owner of the business and they die

The legal minimum you can receive is statutory redundancy pay. Your employer cannot pay you less than this. 

If your contract entitles you to more you may be paid more than the statutory amount. Or, you may get a payout even if you have worked for your employer for less than two years. 

Are there alternatives to redundancy that employers can explore?

Before going ahead with redundancies, employers should evaluate their situation and consider options to preserve employee’s jobs.

Employers can review their operational efficiency and look for areas where costs can be cut, without employees being let go. It may be necessary to renegotiate contracts, reduce costs, and find more efficient ways to operate. 

Temporary conditions can be implemented to cut costs without losing staff. These can include asking staff to take voluntary pay cuts, offering unpaid leave, or utlising short-term workforce strategies such as flexible working arrangements, including part-time work, work from home, and reduced hours. 

If businesses opt to utilise these methods it is crucial to remain open and transparent. Staff are more likely to accept changes to their pay and benefits if a company is upfront about the challenges it faces, they explain why pay cuts are necessary and outline why staff accepting the changes helps them be part of a solution that will return things to normal. 

Redeployment to other areas of the business is another option employers can turn to as a tactic to retain employees while making cost savings. This may be supported by retraining when employees don’t have the necessary skill set to be redeployed immediately. 

How can employers support employees affected by redundancy or restructuring?

Support for employees should be laid out in the employee agreement or policies. 

Support should be offered to:

  • Employees at risk of redundancy

  • Managers informing employees of their selection

  • Those leading consultations

  • Employee representatives

  • Employees not selected

Support can include:

  • Counselling

  • Additional meetings

  • Financial advice

  • Future planning

  • Time off to look for new jobs and training 

Employers should give employees who have worked at the company for more than two years, including the notice period, reasonable time to look for a new job or to take training.

Employees should be paid 40% of a week’s pay to look for new work or training opportunities during their notice period, unless a higher amount is stated in their employment contract, or employers choose to pay a higher rate.

What are the risks associated with redundancies, and how can employers mitigate them?

A key risk is an employee claiming unfair dismissal to an employment tribunal. 

An employee can challenge the decision and take their employer to a tribunal when they:

  • Didn’t need to make redundancies

  • Chose them for an ‘automatically unfair’ reason

  • Didn’t use the right redundancy process

  • Didn’t offer them other available work

It is important that employers consider these criteria when selecting employees for redundancy, or they could face penalties.

When an employer hasn’t followed a fair redundancy process or they don't want to go through the process, they can ask employees to sign a redundancy settlement agreement.

However, employees aren't obligated to accept a settlement agreement and should always be allowed to seek independent legal advice so they can make an informed decision.

How should employers communicate the reasons for restructuring?

Clear communication is essential during a restructuring. It reassures employees and supports them during a difficult time. 

Two-way communication allows employees to ask questions and ask for support if they need it.

Restructuring is an uncertain time for employees and they may feel uncertain, distressed, and anxious.

By providing clear and consistent communication, employers can help employees understand the reasoning behind the restructuring and inform them of what will happen to them.

This can help build trust and employee cooperation with the restructure which in turn can boost the success of the process, improve morale, and reduce stress which can be costly in terms of employee absence and reduced productivity.

How can Lawhive help?

Our expert network of employment lawyers is here to support employees and employers through restructuring and redundancy.

Whether you think your employer has not followed a fair process when selecting you for redundancy or you want advice on how to carry out a fair redundancy process we can help.

Contact our Legal Assessment Team for a free case evaluation with one of our specialists, and learn how our network of employment lawyers can support you with timely, affordable, accessible legal advice.

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