Reasons for Redundancy Restructure
There are multiple reasons why a company may decide to restructure, from advances in technology to changes in markets, however, at present, as the UK economy continues to show little growth and with high costs, companies across most sectors are struggling and therefore a current pressing need for undergoing a restructure, is for the simple reason to cut cost and remain a viable business.
When considering cutting costs, a company may decide certain positions are surplus to requirement, positions or departments may need to merge or whole departments are no longer needed.
Restructures can be a challenging time for both employers and employees, and as a restructure if likely to result in redundancies, it is important for the employer to provide valid and justifiable reasons for the restructuring, and to ensure a fair and meaningful consultation, as if an employer gets it wrong, then they could be faced with unfair dismissal claims.
Avoiding Unfair Dismissal Claims or Other Redundancy Related Claims
To best avoid unfair dismissal claims following a redundancy process, employers must adhere to legal requirements and follow best practices, these include.
Process of Redundancy through Restructuring
- Follow proper consultation procedures: Failing to engage in consultation or conducting it inadequately can lead to claims of unfair dismissal. Employers must demonstrate that they have genuinely considered alternatives and consulted with affected employees.
- Fair selection criteria: Employers must establish fair and objective selection criteria to identify employees for redundancy. Commonly used criteria include skills, qualifications, performance, attendance records, and disciplinary history. Avoiding discriminatory practices is crucial, and selection criteria should be applied consistently across the workforce. If roles or departments are merging, all in the affected roles and departments should be at risk of redundancy and go through consultation and selection, as opposed to pre-determining who remains. Even if there is not a selection amongst employees doing the same job, and all those in a certain job role are to be made redundant, justification is needed of why it is that role that is no longer needed. Employers also need to be aware of taking work away from one employee and giving it to another. An employer always needs to remember the definition of redundancy, and when it comes to restructure, the most relevant definition is where work of a particular kind has ceased or diminished.
- Explore alternatives to redundancy: Employers should explore all feasible alternatives to redundancy, such as offering voluntary redundancy or exploring alternative roles, permanently reduced hours or retraining. Documenting these efforts can demonstrate a commitment to avoiding dismissals wherever possible.
- Provide appropriate notice and redundancy pay: Employers must provide employees with proper notice periods and redundancy payments as per statutory requirements.
When a company intends to make redundancies following a restructure, it must engage in a consultation process with affected employees. The level of consultation is determined by the number of potential dismissals due to redundancy, you could break it down into two forms of consultation: collective consultation and individual consultation. Collective consultation applies when 20 or more employees are at risk of redundancy within a 90-day period. It involves engaging with elected employee representatives or trade unions to discuss the proposed changes and explore alternatives to redundancies. Consultation would last for at least 30 days if between 20 and 99 potential dismissals and 45 days if 100 or more dismissals due to redundancy. Individual consultation occurs when fewer than 20 employees are affected and would see the employer having direct consultation with the affected employees. While there is no minimum consultation period when less than 20 potential dismissals, there is still a duty to conduct reasonable and meaningful consultation and a period of around 2 weeks would be seen to be acceptable.
During the consultation process, employers should:
- Provide clear information about the reasons for the proposed redundancies, including the scope and potential impact on employees.
- Explore alternatives to redundancy, such as alternative roles, retraining, or voluntary redundancy.
- Allow employees to express their views and provide feedback on the proposed changes.
- Consider and respond to employee suggestions or concerns.
Redundancy Pay and Notice
Some people are entitled to what is called “enhanced redundancy” but this only applies where it says so in their contract or there is a collective agreement giving that entitlement. Otherwise, statutory redundancy applies.
The number of weeks of entitlement depends on age and length of service as below;
- Half a week’s pay for each full year worked under the age of 22
- One week’s pay for each full year worked over 22 but under 41
- One and half week’s pay for each full year worked aged 41 or older
Length of service is capped at 20 years, so the most anyone can get is 30 weeks.
A week’s pay is capped at £643 in the financial year 2023/24.
When a decision is reached that a person is to be made redundant, they should be issued with a letter of dismissal for reason of redundancy. The notice to which they are entitled is either the statutory minimum or a contractual higher amount.
The statutory minimum is one week per complete year of service up to a maximum of 12. If service is 14 years or 40 years, they get 12 weeks’ notice. If service is 8 years 6 months, they get 8 weeks’ notice.
Contractual notice only kicks in where the contract gives a higher amount than statutory, or a collective agreement gives a higher amount.
An employee can be expected to work their notice or though in a redundancy situation, this may not always be possible. If an employee’s contract allows, an employee could be placed on garden leave for the duration of their notice period or they could be paid in lieu of notice.
Navigating restructures/redundancies can be a challenge for many employers and to remain safe it is always best to seek professional advice.