Restructures and redundancies – common pitfalls

There are lots of reasons why a business would need to consider changing its structure, as the business grows, evolves and adapts to changing market conditions.

As part of our 2024 employment law workshop series, we will be holding an event discussing restructures, redundancies and the steps you can take to ensure a well-oiled process for your business rather than a stressful mess!

We will be sending out further details soon and would be delighted if you can join us. To give you a taster of what we will cover, we outline 5 key areas here where we would advise particular care is taken:

Is it a restructure, a redundancy situation or both?

This is your starting point and it is important to get it right. Restructures often result in one or more redundancies but not always. Lack of clarity as to the business’s plans from the start can lead to confusion, mixed messaging to employees, and increased likelihood of unfair dismissal claims later down the line. It is also important for you to understand the processes as the risks involved with a restructure which does not involve redundancy are very different to the risks arising from a redundancy process.

Lack of planning

Closely linked to the above, it is important to have a clear plan and realistic timeframes for implementing it. Your plan should be marked ‘subject to consultation’ as you will have an obligation to consult with employees before deciding to implement your plan. You want to be proactive rather than reactive. It is advisable to brainstorm the potential arguments your employees could make around the proposals, so that you feel confident to respond and resolve any issues that follow.

Failure to consult

Recent case law has confirmed that consultation is always necessary for a fair redundancy dismissal or a fair dismissal in the case of a restructure. However, the nature and length of consultation required will depend on how many employees are affected and the rationale underpinning the changes. Special collective consultation requirements apply to larger groups of employees. Failure to comply with the rules can lead to claims for a Protective Award of up to 90 days (uncapped) gross pay per affected employee.

Pools

Deciding on the correct pool for a redundancy situation is one of the trickiest aspects of the process. It may be that there is a pool of 1 or it may be that there are pools of numerous employees. Care should be taken to ensure that the pool is wide enough to catch all relevant employees but the rationale should not be arbitrary or discriminatory.

Section criteria

Where there are multiple employees competing for one role, it is important to ensure that the selection criteria are fair and not discriminatory. For example, where an employee has been away on maternity leave or disability related sickness absence, any performance criteria should be adjusted to take that into account.

If you require any assistance for your business with handling restructures and redundancy exercises, please do not hesitate to get in touch with Heather Cowley or Susanna Spencer.