Restructure and redundancy are terms often used interchangeably but they are different.
A redundancy situation arises when a business needs to reduce its workforce. This may happen for a number of reasons, such as financial pressures, a reduction in a certain type of work, or the closure of a business premises.
Whilst a restructure may involve a redundancy situation arising, a restructure can also involve a change in the distribution of work between the same number of employees, which may often mean redeploying employees into other roles.
Once it is identified that a role within your business is potentially redundant, employers will need to use a selection pool to determine which employees will be at risk, whilst remaining as fair and impartial as possible.
A ‘selection pool’ will typically include employees who perform the same or similar roles and those with the same or similar skills. Issues can often arise when an employer uses a selection pool that is either too broad or too narrow.
As part of the redundancy consultation process, employers would need to apply objective selection criteria to the employees in each selection pool. There is no prescribed list of what criteria should be used, however, it may include options such as length of service, skills, qualifications and experience, and disciplinary record.
You must consult all employees who could be affected by redundancy and, depending on the number of redundancies you are proposing to make, there are different procedures to follow to ensure that you are not acting unlawfully.
If you are planning redundancy for fewer than 20 employees within a 90-day period, there are no set timescales or rules for consulting with your affected individuals. However, you must still follow a number of steps to ensure that the redundancy is fair.
These steps include:
Having regular and honest two-way communication throughout.
Conducting a series of meetings and encouraging the employee to comment on the proposal, prior to a final decision being made.
Ensuring that you take the time to explain why there is a need for redundancy to occur.
Employees must be given the right to be accompanied to any meetings - even if these are done remotely.
Dealing with feedback and giving consideration to any comments or suggestions made by the employee and responding appropriately.
Considering alternatives to a redundancy dismissal.
If you are planning to make 20 or more of your employees redundant within a 90-day period, the rules are slightly different.
There is a legal requirement for collective consultation with the affected individuals, and during the process, you must:
Consult with any recognised trade unions - or if there isn’t one, then any elected representatives in the business’ workforce.
Begin the consultation process in good time - at least 30–45 days before the first dismissal is planned to take place. No dismissals can take place before this time period has lapsed. When 20–99 employees are being made redundant, you need to allow 30 days. For over 100 employees, the minimum is 45 days.
Disclose all information concerning the dismissals to the representatives at the earliest opportunity.
Notify the Redundancy Payment Service (RPS) by completing the online HR1 form. The relevant notice period required depends on the number of dismissals proposed.
Seek consultation for any ways to avoid the dismissals, reduce redundancy numbers, and mitigate the impact of the dismissals.
A right of appeal should be offered to any employee who is ultimately dismissed following the consultation process.
If you are an employer considering restructuring your workforce and/or are having to make redundancies, it is important that you are aware of the processes that you should follow to ensure matters are dealt with in the right way for both the business and affected employees.
There are certain steps that employers should take when managing a restructure and/or redundancy process, to ensure it is acting in line with legal requirements.
If your business fails to comply with its legal duties and obligations, employees may be able to bring a claim, including unfair dismissal.
Our solicitors can offer support and expert advice in managing restructures and redundancy processes.
We help clients nip problems in the bud and resolve their employment issues every day.
Here are the most common questions we receive in regard to restructures and redundancies.
If a dismissal is challenged, or your business offers an enhanced redundancy package over and above the statutory entitlement, you may want to consider the use of settlement agreements.
In an outcome letter, you should outline why the employee has been selected and why their position is redundant. You should also cover any relevant points raised during the consultation process, including suitable alternative employment.
Arrangements on termination should be confirmed, such as the employee’s notice entitlement, whether notice is to be worked or paid in lieu, the entitlements for statutory redundancy pay, and any outstanding holiday.
Notice must be given once the consultation has ended and redundancies confirmed.
An employee’s notice entitlement will be at least the statutory minimum (based on their length of service), or the notice period stated in their employment contract if this is greater.