Redundancies Due to Restructuring

  • Redundancy
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Peninsula Group, HR and Health & Safety Experts

(Last updated )

Redundancies can come about due to a restructuring of your business. What are the legal considerations during this time? We explain where your business stands.

Redundancy can come about due to a number of reasons. One of the most common is a major change in the way a business will operate.

In these difficult times during the coronavirus pandemic, you may need to consider a number of ways to cut costs. And one option is restructuring.

This is a big undertaking and requires careful consideration of current UK employment law.

Read this guide and discover the essential steps you’ll need to take. For additional advice, there’s a detailed redundancy process walkthrough for a step-by-step analysis.

The reasons for making a position redundant by restructuring

There’s a variety of motives behind the decision. For example, your business may need to restructure to stimulate growth. Or if you’re struggling financially. Whatever the reason, the decision usually leads to redundancies.

Whether your business is having difficulties or looking to gain a competitive advantage, it’s often the only option.

For example, you may find after merging teams that you have too many employees in a department. Or a job role isn’t needed with your new focus, so is a waste of resources.

The reasons for going ahead with restructuring are often to:

  • Reduce costs.
  • Merge with another company.
  • Decrease or consolidate debt.
  • Introduce a new product or service.

However, what’s important is not the reason why—but how you handle the situation. Not all of these reasons require staff to leave your business. But there are conditions where a company restructure leads to redundancy.

However, in most instances, it’s through the need to save your business money.

Redundancy by restructuring—a fair process

Before you start considering which positions to end, you need to plan your restructure carefully and ensure you complete the process fairly and legally.

If, due to your reorganisation, staff have to face dismissal, you must keep in mind their rights.

Employees who have two years’ service or more have the right to avoid unfair dismissal. As well as the right to statutory redundancy pay.

A redundancy restructuring with a fair procedure is essential. And to do that you need to:

  • Provide a strong business case for your need to dismiss staff.
  • Look for alternative roles in the business for staff facing dismissal.
  • Hold two consultations if there are over 19 employees facing redundancy—a legal requirement (if it's lower, it's still good business practice to have at least one).
  • Use a fair selection criteria to pick staff for dismissal.
  • Provide a notice of redundancy in writing.
  • Ensure they receive the correct redundancy pay.

Your staff also have the right to appeal your decision. So, it’s important to maintain records of your decisions and procedures.

You may need to prove you were fair and objective in your reasoning.

How company restructures affect redundancy

This is often a complex undertaking and one many businesses can find daunting.

However, if you follow a restructure and redundancy process then it makes the task ahead easier to manage. The first thing you should do is refer to your company organisation chart.

That’ll outline all the roles and positions held by staff in your company. If you don’t have this, you should create one.   

With this document, it’ll help you to identify all of the key roles and accountabilities throughout the organisation.

And help you to identify areas where there are overlaps or staff shortages.

After considering this layout, you should look into the departments you wish to restructure and the staff that’ll potentially face dismissal.

This is where your redundancy restructuring legal requirements come in.  It involves considering ways you can minimise the need for redundancies—the fair process we outline above.

For example, can you reduce overtime, reorganise work, or lessen the use of temporary workers?

From here, it’s time to meet with the affected employees and discuss the changes with them—your consultations. Consider their thoughts on how you can avoid redundancy and change your proposals if you think they’re viable.

Remember, if you’re proposing to make more than 19 members of staff redundant, you’ll need to follow collective redundancy procedures.

This involves consulting with employee representatives over the situation and considering alternatives to the redundancy. These should take place:

  • Within a period of 90 days or less where you are proposing to dismiss 100 or more employees, at least 45 days before issuing notice.
  • At least 30 days before issuing notice where between 20 and 99 redundancies are occurring.

However, these periods are a minimum. The statute states, “consultation shall begin in good time.”

Once you make the final decision, provide staff facing redundancy with their notice.

Complete this by issuing of a final letter and inviting them to a meeting to discuss the situation. Provide them with the right to appeal this decision.

Ensure you give them adequate notice and confirm when they’ll receive their final payment. Always remain open to contact and discussion throughout the process.

How to manage TUPE redundancy and restructuring

TUPE is a tricky area of law and is likely to apply in any situation where a UK business (or part of a business) is to transfer to a new employer.

Or an organisation changes the way in which it delivers its services, such as by outsourcing to a contractor.

TUPE transfers can result in staff facing dismissal by way of redundancy. That’s if you want to scale down numbers and cut costs. However, you’ll need to proceed carefully.

The aim of TUPE law is to preserve the continuity, terms, and conditions of employees facing a transfer to a new employer.

So, if making staff redundant is an option you want to consider following the transfer, you will need to follow appropriate procedures.

If more than 19 members of staff are to face dismissal, this’ll involve collective consultation.

If your company is the transferee (the company acquiring the old one and its staff), you may wish to carry out a pre-transfer collective consultation before the transfer takes place.

For example, you may identify over 19 members of staff in roles you don’t believe are necessary when you acquire the new business. So, you implement restructuring plans.

Starting collective redundancy consultation in this situation is possible. However, it’s important you get the agreement of the old company (the transferor) before doing so.

You’ll also need to show you’re the employer of the transferring employees by demonstrating:

  • There’s a relevant transfer for the purposes of TUPE—or likely to be one.
  • The transferee (you) is proposing to dismiss as redundant 20 or more employees within 90 days.
  • The individuals facing transfer (or likely to) include one or more staff member who may face the effects of the proposed dismissals.

The transferor isn’t legally obliged to provide assistance to the redundancy procedure, which could make complying with the law surrounding collective procedures difficult.

To give another example, representatives consulting on behalf of the affected staff will need access to the transferring individuals. That may prove difficult without the transferor’s help.

In this situation, it’s advisable to postpone the redundancy until after the transfer.

Need our help?

Following the right dismissal process is complex and daunting. We can guide you through it so you remain compliant with UK employment laws.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.

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