Key points when considering restructuring or redundancies
Updated: August 17 2023
It is a subject no one likes to talk about until it is crunch time but as Benjamin Franklin says by failing to prepare you a preparing to fail. This is not to say you can’t prepare when the time comes but having a contingency plan in place for if the situation arises will make sure that the processes and procedures are thoroughly considered, and nothing is missed.
For a business to make redundancies they must make sure there is an actual redundancy situation. This is set out in section 139 of the Employments Right Act 1996.
If an employer cannot establish if this definition is satisfied, then it is likely that the dismissal is unfair. Furthermore, an employer should be able to show they have considered alternatives such as a recruitment freeze.
A business should always look to give their staff appropriate warning of any redundancy situation and its impact.
Individual or collective consultation
When a business is considering making 20 or more redundancies then there is a legal duty to consult for a minimum of 30 days with elected representatives, increasing to 45 days if redundancies are 100 or more.
The consultation must be ‘meaningful’, there can be financial penalties for failure to consult where it is found that the consultation wasn’t ‘meaningful’ and carried out as a tick box exercise.
Employers must consult with those at risk on an individual basis irrespective of how many redundancies are being considered where collective consultation is required, individual consultation will follow. Again this consultation process must be meaningful and can also lead to unfair dismissal claims.
There are no set rules around how a redundancy pool should be defined. However, the business must show that it has acted reasonably; whilst an employee may not agree with your decision this doesn’t mean your decision was unfair. Business decisions on how to select a pool for redundancy can be difficult to challenge when sound reasoning can be shown to have been used.
You may have a situation where one employee may be potentially impacted and there will be need to identify a pool for selection. However, in many redundancy situations you will need to review similar roles and those with interchangeable skills. It is preferable to put the whole pool at risk and consult them on the selection criteria.
Where there is a pool of people at risk an objective selection criterion must be composed. Potentially fair criteria could include, attendance, performance, skills required in the future by the business, and flexibility.
It is good practice to allow those at risk to see their own scoring, this transparency allows for consideration as to whether the scoring is fair and may be challenged. A business should not be sharing the scores of others involved in the process.
If there are any suitable alternatives you should offer this to those at risk, if you do not, they may have a claim for unfair dismissal. Also, if a suitable alternative is unreasonably turned down by an employee, they may lose their statutory right to redundancy pay.
A jobs suitability depends on:
- how similar the work is to your current job
- the terms of the job being offered
- your skills, abilities and circumstances in relation to the job
- the pay (including benefits), status, hours and location
Don’t forget some individuals have additional rights, including those on maternity leave have additional legal protection and must be offered any suitable alternatives if they are available.
There is no statutory right to appeal to redundancies but by not offering the ability to appeal to an employee you could be leaving yourself open to an unfair dismissal claim.
Whilst HR are there as a helping hand it is management that will need to carry out any meetings and manage those at risk and also those that are still working after redundancies have taken place.
Whilst there are many critical factors, the soft skills that are involved in dealing with redundancies are also incredibly important.
After the Fact
As mentioned, before it is not only those who have been made redundant that are affected. Post redundancies it is likely that the business as a whole will suffer from low morale; this can impact productivity, absence levels, and retention.
Think about the additional support that can be offered to your staff such as details of an Employee Assistance Programme (EAP) or equivalent. Following a restructure there may be CPD needs to be considered, such as training.
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