What is Redundancy Through Restructuring?
It’s normal for businesses to rearrange their internal structure to cut costs and stimulate growth. Whatever the reasons are, redundancies may likely ensue, and job roles could be disposed of.
There may be several justified reasons for reorganising a business, such as:
- The wish to offer new products and services
- Cutting costs
- Reducing debt
- Transferring ownership of the venture (or part of it) or merging with another company (transfer of undertakings)
In any of these circumstances, the underpinning desire always ends up being to save money, and redundancies are oftentimes the best mechanism to achieve this.
How Restructures Affect Redundancy
Restructuring, in most scenarios, involves changing or eliminating departments. For example, suppose you aim to merge two teams to boost productivity. In that case, you may encounter that either team has too many people or that a job role is no longer needed and is only wasting precious money and resources.
The best way to visualise this is by consulting your business’ organisation chart (if you don’t have one, you’d want to create it). With this document, you can identify the areas with personnel shortages or surpluses. You can also evaluate whether you need to reassign tasks to reduce the number of temporary workers with overlapping roles.
Nevertheless, some restructures only concern new assignments or reassignments, not necessarily warranting personnel reduction.
How Do I Make a Position Redundant?
Knowing the “whys” is important, but learning “how” a restructuring and redundancy process works is even more so. Before assessing which positions to eliminate, you must first carefully devise your restructuring plan and arrange a fair process for the affected employees.
Here’s what to look out for and have:
- Employee’s Status
- Selection Criteria
- Selection Matrix
- Suitable Alternative Employment Options (Redeployment)
- Decision and Notice
- Collective Redundancy Process
The first matter to address when making a position redundant is the employees’ status within the company. Employees with more than 2 years of employment may only be dismissed for fair reasons, and they acquire the right to statutory redundancy pay.
When judging which roles are irrelevant for the company moving forward, you must abide by some objective criteria that preclude any possibility of “unfair treatment”.
These criteria should be consulted with the staff so that they can give their feedback. You can also check whether an existing collective agreement has these laid out or look them up in the employment contracts or staff handbooks.
When devising the list of criteria, you ought to:
- Select objective criteria, referencing data contained in instruments such as training or disciplinary records.
- Avoid those directly or indirectly linked to protected characteristics
- Ensure that the assessment on what criteria to follow is done by a group rather than an individual (whenever possible).
Examples of Selection Criteria
Some examples of relevant criteria for choosing redundant employees include:
- Standard of Work
- Disciplinary records (any written warnings already issued)
- Attendance record (discounting any absence due to sick, parental, maternity, or paternity leaves, among others)
- Time working for the company (though this could lead to age discrimination claims, so proceed with care)
Once you’ve chosen the criteria, you should design a scoring system wherein you can set out your priorities and how candidates will be graded.
You could estimate which criterion holds more importance and which can serve as a “tie-breaker”. For example, you probably value good behaviour and performance over qualifications, so the latter can function as the last benchmark to evaluate when there is a stalemate.
When grading performance, you likewise need to weigh all the possible circumstances surrounding each candidate. If they’re not able to perform as well as the others due to a disability, temporal illness, or pregnancy, you must fine-tune the scoring to keep it fair.
Suitable Alternative Employment Options (Redeployment)
Before proceeding with redundancy, you should analyse whether there are suitable alternative employment opportunities that you may offer to the affected employee, in which case you can bypass redundancy payment. This redeployment offering must be made unconditionally before the current employment contract expires, not forcing the employee into a new application process.
The employee who accepts redeployment should be given a trial period of at least four weeks to consider whether or not the new job is suitable. After the trial period, if the employee finds that the job is not fitting, they will be entitled to redundancy pay, whether contractual or statutory.
Waive of Redundancy Pay
If you offer alternative employment and the employee unjustifiably rejects it, they waive their right to redundancy pay.
Decision and Notice
Once you’ve determined which employees need to get ousted, invite them to a meeting to discuss their situation. Make them aware of their right to appeal the decision and give them proper notice, as well as a period or date on which they should receive their redundancy payment (if applicable)
Collective Redundancy Process
If you have over 19 employees facing redundancy, you have to hold a collective consultation meeting with a recognised trade union and/or the employees’ representatives as a statutory requirement. It’s still good practice to have this type of fair consultation process even when the number of redundant employees is inferior.
During these meetings, you must disclose the reasons for restructuring, the roles at risk, and why that is so.
Employees must be allowed to present alternative ideas to avoid redundancies. While you don’t have to heed every suggestion presented by employees, you should at least consider their opinions when making a decision. If the employees prove that they were not given any chance to express their thoughts during these consultation meetings, you can still be confronted with unfair dismissal claims.
These consultations must take place within 30 days of issuing notice if the number of redundancies ranges from 20 to 99. If you’re planning to make more than 100 employees redundant simultaneously, the meetings should take place within the next 90 days.
Redundancies During TUPE
During a “transfer of undertakings” or TUPE, employees’ rights should be preserved as much as possible. If you are a new employer seeking to cut costs and restructure your organisation, you must pay close attention to the employment contracts and agreements already reached with existing employees, either in writing or orally. The former employer is responsible for informing you of these issues.
If you need to begin a collective redundancy process, you ought to get the approval of the old company or transferor beforehand. Moreover, transferors are not legally bound to assist you in your redundancy procedure, complicating matters considerably, especially when faced with transferring employees’ representatives.
How We Can Help
Restructuring a company is a highly complex endeavour with potential legal repercussions. In many instances, it may require a multi-disciplinary effort.
Our employment advisors have demonstrable experience helping employers comply with UK regulations pertaining to employment and, specifically, redundancies by restructuring. We’ll provide the necessary tools and assistance so that you can make jobs redundant while eluding any unfair dismissal claims before an employment tribunal.
If you’re currently seeking restructuring and need legal support for handling overstaffed departments or workplaces, get in contact with our qualified employment solicitors by calling 03334149244. We’ll be glad to speak with you about your possible options.
Both terms are not synonymous. a restructure may involve redundancy, but this is not always so. Restructuring can refer to a redistribution of duties within the same workforce (also known as job restructuring) without that resulting in a staff surplus necessarily.
Employees with less than 2 years of working for the same company have no rights to statutory redundancy pay. However, they may be entitled to contractual pay if it’s stipulated in the employment contract. In this particular case, the contract overrules the legal provisions.
The employee can claim statutory redundancy pay if they’ve been temporarily laid off for either four weeks in a row or six non-consecutive weeks in a 13-week timescale. If the employee is summoned again for work within four weeks and they continue working for 13 weeks at least, any redundancy pay claim could get rejected.
You could always offer or accept an offer for a settlement agreement with an employee instead of following a redundancy process to its conclusion. However, if it’s evidenced that the settlement agreement was reached due to redundancy, it will be considered as such.
For the purposes of a collective redundancy process, you could be held liable for not scheduling the mandatory consultations with the pertinent trade unions or employee representatives.