23 Mar 2020
A business restructure doesn’t necessarily mean you need to make redundancies. However, in some cases it’s unavoidable.
If you’re considering making a position redundant by restructuring, don’t assume you don’t need to follow the usual process. Just because the job role is no longer needed, doesn’t mean you’re safe from unfair dismissal claims.
Here’s everything you need to consider:
Redundancy through restructuring
You may need to restructure the business in order to stimulate growth. Or, if your organisation is struggling financially. Whatever the reason, a restructure usually entails redundancy. In this scenario, you need to remember the following:
Employees who have two years’ service or more have the right to not be unfairly dismissed and the right to statutory redundancy pay.
If your company is undergoing a merger or transfer, your employees may be protected by the Transfer of Undertakings (Protection of Employment) regulations. If this is the case, get TUPE advice here.
Reasons for redundancy restructure
There can be a whole variety of reasons why an organisation might decide to restructure, including:
- Reducing costs
- Merging with another company
- Decrease or consolidate debt
- Introducing a new product or service
Not all of these reasons require people to leave the business. But there are conditions where a company restructure leads to redundancy. Generally, these reasons boil down to one thing: saving money.
Whether your business is struggling or looking to gain a competitive advantage, redundancy is often the best option. You might find that merging teams to increase productivity highlights you have one too many people working on a project. Or, a job role simply isn’t needed anymore with your new focus, and so is a waste of money.
What’s important, is not the reason why, but how you handle it.
Restructure and redundancy process
Before you even start considering which position to make redundant, you need to plan your restructure. Do this by developing a plan and a timeline.
Once you have this, it’s worth taking a look at your company org chart. If you don’t have one—make one. This will help you to identify all of the key roles and accountabilities throughout the organisation. It will also highlight any areas where there’s overlap or staff shortages.
When restructuring, follow redundancy fair procedure. What does this mean?
Firstly, where possible, minimise the need for redundancies. You can do this by:
- Restricting overtime,
- Reorganising work
- Reducing the use of temporary employees
Then, you should consult with employees. First, set out your proposals in writing. This should include the reasons for the restructuring, and which employees are at risk of redundancy, and why.
Then, you need to meet with the affected employees and discuss the changes with them. Consider their thoughts on how you can avoid redundancy and change your proposals if you think they’re viable.
Once the consultation is over, you should go through the selection process. Once you’ve decided, inform the employee of the reasons they’ve been provisionally selected and give them the opportunity to challenge the selection. Do this before issuing them the final notice of redundancy.
The final step is giving the notice of redundancy. Do this via a letter, and invite them to a meeting to discuss. You should consider what the employee proposes in this meeting before making a final decision. Once you’ve made a decision, inform the employee that you’re officially making them redundant, and tell them they have the right to appeal. Ensure you give them adequate notice and confirm when their final payment will be given. Always remain open to contact and discussion throughout the process.
Employment law: redundancy and restructuring
To ensure the redundancy is fair there are a few key principles you must meet. These include:
- Consultation: ensure you communicate with employees throughout the process and listen to their suggestions on avoiding redundancy.
- Fairness: don’t select individuals for redundancy based on ‘last in, first out’ or because they work part-time. Also, don’t pick people purely due to age, or because of pregnancy or maternity leave
- Alternative employment: attempt to identify alternative employment and offer it, if available
There are also redundancy and restructuring legal requirements to consider in terms of pay. You must, as a minimum, pay statutory redundancy pay. If the employee’s contract states they’ll receive more, you must pay the higher entitlement. You should also put in writing how you calculated the payment due.
Redundancy letter due to restructuring
If you need help announcing the proposed changes, take a look at this sample letter:
I’m writing to inform you that <Company Name> are proposing a restructure to the business.
The proposed restructure will directly affect you, as your team would be merged with the <Department Name> department.
At this stage, no firm decisions have been made. This letter is intended to make you aware of the proposed changes and begin a formal consultation process with you. If you have any thoughts on how we could achieve our objectives in a different way we will be happy to hear them.
If the proposal does go ahead, you’ll be given the opportunity to apply for <Alternative Job Role>. We will discuss reasonable training requirements, should you decide to accept this post.
If your application is unsuccessful, you will be entitled to statutory redundancy pay.
We would like your response by <Date>, and we would like to meet with you on <Date> to discuss your thoughts. You may discuss this matter with us at any time during the consultation period.
On <Date> we will make a decision on how we will proceed. This may be a notice of redundancy. However, we’d like to explore all options before making that decision.
We would also like to take this time to thank you for all the good work you do. This restructure is not connected with the quality of your work.
If you’re considering restructuring, or need assistance with a redundancy scenario, speak to a Croner adviser today on 0808 145 3380.
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