Restructuring risks

Patrick Whelan

July 21 2020

With most businesses now back open, many business owners are assessing how best to respond to the ongoing challenges posed by COVID-19. As trading conditions remain uncertain, restructuring is one option that many business owners will need to consider.

While restructuring could be a good option for your business, there are some risks to consider.

What is restructuring?

Restructuring in the context of HR is a term used to describe an internal change in a business to respond to evolving circumstances. It typically involves the reallocation of human resources or a reduction in headcount or both.

Restructuring may be necessary for two main reasons:

  • Internal pressures such as an aging workforce.
  • External pressures such as the COVID-19 pandemic and the associated lockdown measures.

Focus on the business case

The first step to take is to ensure that you are crystal clear on why the business needs to restructure. This involves examining the reasons why the business needs to change and the options that will allow the business to adapt to the evolving pressures. This could involve upskilling staff, recruiting more experienced staff or reducing headcount in certain parts of your business.  

Redundancy risks

Redundancies may be unavoidable as part of a restructure. We strongly recommend that employers considering redundancies take professional advice before confirming any dismissals. Employees enjoy strong protections under redundancy legislation and there are multiple redundancy-related risks that could lead to an unfair dismissal claim.

Constructive dismissal risk

A contract of employment can only be changed by agreement with the employee. You should never change an employee’s contract without first consulting them or seeking their consent. If you unilaterally change the employment contract, you risk suffering an unfair or constructive dismissal claim.

Discrimination risks

You also have a legal duty to avoid discrimination under the Employment Equality Acts 1998 -2015. You will need to bear this in mind during a restructure as any decisions you take with regard to reallocation of staff or termination of employment must not favour one cohort of employees over another.

The nine grounds of discrimination should be borne in mind to ensure that decisions in relation to the restructure are neither directly or indirectly discriminatory.

Post-restructure challenges

The business risks of a restructure are far-reaching and can have an impact long after the new work roles are allocated. The morale and motivation of staff who continue on with your business are likely to dip if the restructure process is not handled in a fair and transparent manner.

Effective communication during what can be a stressful transition is vital and providing relevant supports to staff who leave under a restructure should be part of your reorganisation planning. Your employees who continue on with your business may even suffer from “survivor” guilt.

Need our help?

For further complimentary advice on restructuring from an expert, call us any time day or night on 0818 923 923 or request a callback here.

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