Redundancy and Restructuring Advice for Employers in the UK

Introduction to Redundancy and Restructuring

Redundancy and restructuring are essential aspects of workforce management that many UK businesses face at some point. Employers must ensure these processes comply with UK employment law, whether due to financial pressures, operational changes, technological advancements or external market factors.

Proper planning and legal guidance help businesses avoid costly disputes, tribunal claims and reputational damage. A well-managed redundancy or restructuring process can help companies adapt to changing circumstances while treating employees fairly and maintaining good workplace relations.

Davenport Solicitors offers expert legal advice to employers, ensuring they conduct redundancy and restructuring legally, effectively and compassionately.

Legal Definition of Redundancy

Under UK employment law, redundancy occurs when an employer:

1.   Ceases carrying on the business entirely
2.   Closes a specific workplace or location
3.   Reduces or eliminates the need for employees to carry out work of a particular kind

This definition is set out in the Employment Rights Act 1996. For a redundancy to be genuine, the employer must demonstrate that the employee’s job no longer exists or is diminished somehow.

Employers must ensure that any redundancy decision is legally justified, genuinely necessary, and handled fairly throughout the process. This includes proper consultation, fair selection, adherence to notice periods and redundancy pay requirements.

Reasons for Redundancy

Employers may need to make redundancies due to various business reasons:

1.   Complete business closure or liquidation
2.   Relocation to a different geographic area
3.   Financial difficulties or cost-cutting measures
4.   Decreased market demand for products or services
5.   Introduction of new technology or automated systems
6.   Business reorganisation, mergers and acquisitions
7.   Restructuring for improved efficiency or competitiveness
8.   Changes in business model or strategic direction

Regardless of the underlying reason, employers must follow a fair and legal process. The reason must be genuine, and employers should document their business case thoroughly to justify the need for redundancies.

Employer’s Legal Obligations

When considering redundancies, employers have several legal obligations they must fulfil:

1.   Follow a fair redundancy process in line with UK employment law
2.   Conduct meaningful consultation with affected employees
3.   Consider suitable alternatives to redundancy where possible
4.   Provide statutory or contractual redundancy pay where required
5.   Give proper notice periods by employment contracts
6.   Avoid discrimination in selection and throughout the process
7.   Offer the right to appeal against redundancy decisions
8.   Keep appropriate records of the entire redundancy process

Failure to meet these obligations may lead to legal claims, including unfair dismissal, discrimination claims, and protective awards for failure to consult properly. These can result in significant financial and reputational costs to the business.

Employee Rights During Redundancy

Employees have several vital rights throughout the redundancy process:

1.   The right to meaningful consultation about the redundancy situation
2.   Statutory or contractual redundancy pay (if eligible with two or more years’ service)
3.   Appropriate notice period or payment instead of notice
4.   Consideration for suitable alternative employment within the organisation
5.   Proper to reasonable time off to look for new work or arrange training
6.   Right to appeal against the redundancy decision
7.   Protection from discrimination and unfair selection
8.   Right to be accompanied at redundancy consultation meetings

Employers must respect these rights throughout redundancy to avoid unfair dismissal or discrimination claims. Special protections also apply to specific categories of employees, such as those on maternity leave.

Fair Selection Process for Redundancy

Implementing a fair selection process is crucial to avoid unfair dismissal or discrimination claims. A fair process should use objective criteria such as:

1.   Skills, qualifications and experience relevant to ongoing business needs
2.   Job performance records based on objective assessments
3.   Disciplinary history (where properly documented)
4.   Attendance records (excluding pregnancy-related or disability-related absences)
5.   Length of service (though this should not be the sole criterion)

Selection criteria should be applied consistently to all employees in the pool. Employers should avoid subjective criteria that cannot be objectively measured or verified.

Employers should document how they applied the selection criteria to each employee and be prepared to justify their decisions. Discrimination in redundancy selection based on protected characteristics such as age, gender, disability, or pregnancy can result in costly tribunal claims.

Redundancy Consultation Process

Meaningful consultation is a legal requirement in redundancy situations. Employers must engage in:

1.   Individual consultation for all affected employees, regardless of numbers
2.   Collective consultation where 20 or more redundancies are proposed within 90 days

For individual consultation, employers should:

1.   Explain the reasons for potential redundancy
2.   Discuss alternatives to redundancy
3.   Consider the employee’s suggestions
4.   Explain how the selection criteria will be applied
5.   Discuss timelines and support available

For collective consultation, employers must:

1.   Consult with trade unions or elected employee representatives.
2.   Provide specific information about the proposals in writing.
3.   Allow sufficient time for meaningful consultation (at least 30 days for 20-99 redundancies or 45 days for 100+ redundancies)
4.   Consider all alternatives and responses to the proposals.

Failing to consult correctly can lead to claims for unfair dismissal and, in the case of collective redundancies, protective awards of up to 90 days’ pay per affected employee.

Redundancy Notice Period

Employers must provide proper notice to employees who are being made redundant. The statutory minimum redundancy notice period is:

1.   1 week for employment between 1 month and 2 years
2.   1 week per year of service for jobs between 2 and 12 years
3.   12 weeks for employment of 12 years or more

Employers must comply with contractual notice periods if they exceed these statutory minimums. Notice periods begin after the consultation process is complete and final redundancy decisions have been made.

Employers may offer payment instead of notice (PILON) if permitted by the employment contract or with the employee’s agreement. Gardening leave is another option, where the employee remains employed but does not work during the notice period.

Alternatives to Redundancy

Before proceeding with redundancies, employers should genuinely consider alternatives, which may include:

1.   Implementing reduced working hours or short-time working
2.   Offering voluntary redundancy or early retirement packages
3.   Agreeing to temporary layoffs if permitted by contracts
4.   Retraining employees for different roles within the organisation
5.   Redeployment to other departments or locations
6.   Freezing recruitment for other positions
7.   Reducing or eliminating overtime
8.   Terminating agency or temporary worker contracts first

Exploring alternatives demonstrates good faith and may help businesses retain valuable talent, knowledge and skills. It can also reduce the risk of unfair dismissal claims by showing that redundancy was a last resort.

Employers should document all alternatives considered and why they were unsuitable if redundancy proves necessary.

How to Manage Restructuring

Business restructuring requires careful planning, legal compliance and transparent employee communication. Employers should take a systematic approach:

1.   Clearly define business objectives and the rationale for restructuring
2.   Develop a comprehensive restructuring plan with timelines
3.   Identify roles that may be affected and potential new positions
4.   Consult affected employees at an early stage
5.   Consider skills mapping to identify redeployment opportunities
6.   Provide retraining opportunities where possible
7.   Ensure compliance with employment law throughout the process
8.   Manage communications carefully to maintain staff morale
9.   Document all decisions and the reasoning behind them

A well-managed restructuring process can revitalise a business while minimising disruption and legal risks. It should align the organisational structure with current and future business needs.

Employment Law Compliance in Restructuring

Throughout the restructuring process, employers must ensure:

1.   Fair dismissal procedures are followed for any redundancies
2.   Consultation requirements are fully met for both individual and collective cases
3.   Employee rights are respected and protected
4.   TUPE regulations are followed if applicable in cases of business transfers
5.   Selection processes are objective and non-discriminatory
6.   Changes to employment terms and conditions are properly handled
7.   Appropriate notice periods are observed
8.   Redundancy payments are correctly calculated and paid

Non-compliance with employment law during restructuring can lead to costly tribunal claims, including unfair dismissal, discrimination, and failure to consult claims. It can also damage employee relations and the company’s reputation.

The Role of TUPE in Restructuring

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) plays a significant role in certain types of business restructuring, particularly:

1.   Business transfers where a business or part of a business changes hands
2.   Service provision changes (outsourcing, insourcing, or changing service providers)

TUPE protects employees by:

1.   Automatically transferring their employment to the new employer
2.   Preserving existing contracts and employment terms and conditions
3.   Protecting against dismissal due to the transfer
4.   Requiring information and consultation with affected employees

The outgoing employer (transferor) and incoming employer (transferee) have specific obligations under TUPE. These include providing employee liability information and consulting with employees about the transfer and any proposed changes.

Failing to comply with TUPE can result in compensation awards of up to 13 weeks’ pay per affected employee, plus potential unfair dismissal claims.

Handling Employee Concerns and Grievances

During redundancy and restructuring processes, employers should:

1.   Address employee concerns openly and honestly
2.   Provide clear information about the process and timelines
3.   Offer support through one-to-one meetings
4.   Ensure managers are trained to handle difficult conversations
5.   Maintain confidentiality where appropriate
6.   Provide access to counselling or employee assistance programmes
7.   Establish a straightforward process for handling formal grievances
8.   Take complaints seriously and investigate them thoroughly
9.   Follow up with employees to ensure concerns are addressed

A well-managed approach to employee concerns can reduce anxiety, maintain morale and minimise the risk of formal grievances or legal claims.

Managing Redundancy for Different Employment Types

Redundancy considerations differ for various types of employment:

Full-time employees:

1.   Entitled to full statutory rights if they have two years of service
2.   Selection pools may be defined by job role and department

Part-time workers:

1.   Must not be treated less favourably than full-time workers
2.   Redundancy pay is calculated pro-rata based on their hours
3.   Selection criteria must not indirectly discriminate against part-timers

Fixed-term contracts:

1.   They may be entitled to redundancy pay if they have two years of service
2.   Non-renewal due to redundancy situation should follow the proper process
3.   They cannot be automatically selected for redundancy simply because they are on fixed-term contracts

Agency staff:

1.   Usually employed by the agency rather than the end-user
2.   Fewer rights against the end-user, but may have rights against the agency
3.   Should be included in collective consultation counts in certain circumstances

Zero-hours workers:

1.   Rights depend on their employment status (worker vs employee)
2.   They may be entitled to redundancy pay if they are employees with two years of service
3.   Selection criteria must be applied fairly

Employers should ensure they understand the specific rights of each type of worker to avoid inadvertent discrimination or unfair treatment.

Collective Redundancy Rules

When proposing to dismiss 20 or more employees within 90 days, collective consultation rules apply:

1.   Employers must consult with trade unions where they are recognised
2.   If no union is recognised, employers must facilitate the election of employee representatives
3.   Consultation must begin at least 30 days before the first dismissal (for 20-99 redundancies)
4.   For 100 or more redundancies, consultation must begin at least 45 days before
5.   Specific information must be provided in writing to representatives
6.   Employers must notify the Secretary of State using form HR1

The consultation should be meaningful and cover the following:

1.   Ways to avoid or reduce the number of dismissals
2.   Methods for minimising the effects of the dismissals
3.   The reasons for the proposals
4.   The proposed method of selection
5.   The proposed method of carrying out the dismissals

Failure to adequately consult can lead to protective awards of up to 90 days’ pay per affected employee, which can be highly costly for employers.

Avoiding Unfair Dismissal Claims

Unfair dismissal claims related to redundancy typically arise if:

1.   The redundancy situation is not genuine
2.   The selection process is unfair or discriminatory
3.   The employer fails to consult properly
4.   The employer fails to consider suitable alternative employment
5.   The redundancy is actually due to a protected disclosure (whistleblowing)
6.   The redundancy is due to asserting a statutory right

To avoid such claims, employers should:

1.   Ensure there is a genuine redundancy situation
2.   Use fair and objective selection criteria
3.   Conduct proper consultation
4.   Consider all alternatives to redundancy
5.   Offer suitable alternative employment where available
6.   Document all stages of the process thoroughly
7.   Provide the right of appeal against redundancy decisions

Successful unfair dismissal claims can result in compensation of up to one year’s salary (capped at £105,707 as of April 2024) plus a basic award similar to redundancy pay.

Impact of Redundancy on Employee Morale

Redundancy programmes can significantly affect workplace morale. The impact extends beyond those directly affected to remaining employees, who may experience:

1.   Increased job insecurity and anxiety
2.   Reduced trust in management
3.   Decreased productivity
4.   Increased workload due to fewer staff
5.   Loss of key colleagues and knowledge
6.   “Survivor guilt”

Employers should take proactive steps to address these issues:

1.   Provide clear communication about the business’s future direction
2.   Offer reassurance where possible about job security
3.   Acknowledge the emotional impact on the team
4.   Involve remaining staff in rebuilding and moving forward
5.   Recognise additional pressures and workload
6.   Provide support mechanisms such as counselling

Effectively managing the impact on morale is crucial for business recovery and future success after restructuring.

Support for Affected Employees

Employers can provide valuable support to employees affected by redundancy:

1.   Outplacement services to help with job searching
2.   CV writing and interview coaching
3.   Career counselling and advice
4.   Financial guidance and benefits information
5.   References and testimonials
6.   Access to training opportunities
7.   Emotional support through employee assistance programmes
8.   Guidance on job market opportunities
9.   Networking opportunities with potential employers

Such support demonstrates good corporate social responsibility and can help maintain a positive employer brand. It can also reduce the likelihood of legal claims by showing that the employer has treated employees respectfully and carefully.

Communicating Redundancy Decisions Effectively

Clear communication is essential throughout the redundancy process:

1.   Announce the possibility of redundancies in a sensitive but honest way
2.   Explain the business reasons necessitating the changes
3.   Outline the process and timeline clearly
4.   Hold face-to-face meetings for individual consultations
5.   Provide written information to supplement verbal communications
6.   Be honest about what is known and what is still undecided
7.   Avoid technical jargon and use plain language
8.   Allow time for questions and provide honest answers
9.   Follow up in writing after key meetings
10.   Keep all employees updated on progress

Poor communication can exacerbate anxiety, damage trust, and increase the risk of grievances and legal claims. Effective communication, while challenging, can help employees understand the situation and process the changes more positively.

Practical Steps for Business Restructuring

A successful business restructuring requires careful planning and implementation:

1.   Conduct a thorough analysis of current business needs and challenges
2.   Develop clear objectives for the restructuring
3.   Create a detailed implementation plan with timelines
4.   Review existing roles and design a new organisational structure
5.   Identify which roles may be at risk and which may be created
6.   Plan the consultation process and prepare the necessary documentation
7.   Train managers in handling restructuring conversations
8.   Consider skills mapping across the organisation
9.   Implement changes in phases if possible to minimise disruption
10.   Review the effectiveness of changes and make adjustments as needed

A well-executed restructuring can position a business for future growth while minimising legal risks and maintaining employee goodwill.

Post-Redundancy Business Recovery

After completing a redundancy or restructuring process, employers should focus on:

1.   Rebuilding team morale and addressing concerns of remaining staff
2.   Clarifying roles and responsibilities in the new structure
3.   Identifying and addressing any skills gaps created by departures
4.   Providing training and development for employees in new or expanded roles
5.   Establishing new working practices and workflows
6.   Communicating positively about the future direction of the business
7.   Monitoring workloads to prevent burnout among remaining staff
8.   Gathering feedback on the restructuring process for future learning
9.   Reviewing business performance against restructuring objectives

A thoughtful recovery plan can help businesses emerge stronger from restructuring and create a positive working environment for remaining employees.

Legal Risks of Poor Redundancy Planning

Failing to follow correct redundancy procedures can lead to significant legal risks:

1.   Unfair dismissal claims (up to one year’s salary compensation)
2.   Discrimination claims (uncapped compensation)
3.   Protective awards for failure to consult (up to 90 days’ pay per employee)
4.   Breach of contract claims
5.   Claims for unpaid statutory or contractual redundancy pay
6.   Damage to employer reputation affecting future recruitment
7.   Trade union disputes and potential industrial action
8.   Negative publicity affecting customer relations

Proper planning, legal advice, and adherence to employment law requirements throughout the redundancy process can substantially mitigate these risks.

Employment Law Audit for Employers

An employment law audit before undertaking redundancies or restructuring can help employers identify and address potential legal issues:

1.   Review of employment contracts and staff handbooks
2.   Assessment of redundancy policies and procedures
3.   Evaluation of the proposed business case for redundancies
4.   Analysis of proposed selection criteria and pools
5.   Review of consultation plans and documentation
6.   Check for potential discrimination risks
7.   Assessment of collective consultation requirements
8.   Review of proposed communications strategy
9.   Evaluation of settlement agreement templates if being used
10.   Consideration of alternatives to redundancy

A thorough audit can highlight potential legal pitfalls before they become problems and help ensure the redundancy process is legally compliant.

The audit should be conducted by experienced employment law specialists who can provide practical advice tailored to the business’s specific circumstances.

How Davenport Solicitors Can Help

Davenport Solicitors offers comprehensive legal support for employers facing redundancy and restructuring situations:

1.   Initial advice on the legal framework and employer obligations
2.   Guidance on establishing a fair and legally compliant process
3.   Review of selection criteria and pooling arrangements
4.   Assistance with individual and collective consultation
5.   Drafting documentation, including letters and scripts
6.   Support with complex cases involving pregnant employees or those on family leave
7.   Advice on handling appeals against redundancy decisions
8.   Guidance on settlement agreements where appropriate
9.   Representation in the event of tribunal claims
10.   Post-redundancy support and employment law audits

Our experienced employment law solicitors work closely with businesses to minimise legal risks while achieving necessary business changes through redundancy and restructuring. Contact us.

Frequently Asked Questions (FAQs)

1. What is the legal definition of redundancy?
   Redundancy occurs when an employer reduces or ceases the need for employees to do work of a particular kind or in a specific location. This can happen due to business closure, workplace closure, or a reduced need for particular work.
2. How much notice must I give employees during redundancy?
   The statutory minimum notice is one week for employees with 1 month to 2 years’ service, one week per year for 2-12 years’ service, and 12 weeks for those with 12+ years’ service. You must also honour any more extended notice periods in employment contracts.
3. How is statutory redundancy pay calculated?
   Statutory redundancy pay is based on age, length of service (up to 20 years), and weekly pay (capped at £643 as of April 2024). Employees receive half a week’s pay per year for those under 22, one week’s pay per year for those aged 22-41, and one and a half weeks’ pay per year for those aged 41+.Do I need to consult with employees before making redundancies?
   Yes, individual consultation is required for all redundancies. For 20+ redundancies within 90 days, collective consultation with employee representatives is also required, beginning at least 30 days (for 20-99 redundancies) or 45 days (for 100+ redundancies) before the first dismissal.
4. What makes a redundancy selection process fair?
   A fair selection process uses objective criteria such as skills, qualifications, performance, disciplinary record, and attendance (excluding disability-related absences). The requirements should be applied consistently and documented thoroughly.
5. Can I make an employee on maternity leave redundant?
   Yes, but special rules apply. If the employee’s role is genuinely redundant, you must offer them any suitable alternative vacancy as a priority over other employees. Failing to do so will likely make the dismissal unfair.
6. What alternatives should I consider before making redundancies?
   Consider reduced hours, job sharing, temporary layoffs (if contractually permitted), redeployment, freezing recruitment, reducing overtime, terminating agency workers, and voluntary redundancy or early retirement options.
7. How do I handle collective consultation for large-scale redundancies?
   Consult with trade unions or elected employee representatives, provide specific written information about the proposals, allow at least 30 days (20-99 redundancies) or 45 days (100+ redundancies) for consultation, and notify the Secretary of State using form HR1.
8. What happens if I don’t follow proper redundancy procedures?
   You risk claims for unfair dismissal (compensation up to one year’s salary), protective awards for failure to consult (up to 90 days’ pay per employee), and potential discrimination claims (uncapped compensation).
9. Are there any employees who cannot claim statutory redundancy pay?
   Employees with less than two years of continuous service, self-employed contractors, and those who unreasonably refuse suitable alternative employment cannot claim statutory redundancy pay.
10. How should I communicate redundancies to the broader workforce?
    Be honest, transparent and compassionate. Explain the business reasons for the changes, outline the process being followed, and provide reassurance where possible about the future direction of the business.
11. What records should I keep during a redundancy process?
    Keep records of the business case for redundancy, selection criteria and how they were applied, all consultation meetings, offers of alternative employment, and all communications with affected employees. These records should be retained for at least six years.
12. Can an employee appeal against redundancy?
    Yes, offering a right of appeal against redundancy decisions is good practice. This allows for addressing concerns about the process and may help avoid tribunal claims.
13. How does TUPE affect redundancy situations?
    If a business or service is transferred to a new employer under TUPE, employees automatically transfer with their existing terms and conditions. Redundancies made because of the transfer are likely to be unfair unless there is an economic, technical or organisational reason requiring changes in the workforce.
14. What support should I offer to employees being made redundant?
    Consider offering outplacement services, CV and interview guidance, career counselling, financial advice, references, reasonable time off for job interviews, and access to employee assistance programmes for emotional support.

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