Making a Position Redundant by Restructuring: Employer Guide

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In the current economic climate, making a position redundant by restructuring has become a pressing consideration for many businesses. Rising operational costs and the recent increase in National Insurance contributions for employers are placing significant financial strain on organisations. As a result, many are reviewing their structures to find more efficient ways to operate. Restructuring can help align businesses with their financial constraints and strategic objectives. While this process can drive long-term growth and sustainability, it often involves tough decisions. Managing these changes ethically and effectively is crucial to maintaining compliance and trust within the organisation.

This article explores the key legal considerations for employers managing restructuring and redundancy, focusing on employee consultations, entitlements, and minimising the risk of unfair dismissal claims arising from redundancy.

What Does Making a Position Redundant by Restructuring Mean?

Redundancy occurs when a role is no longer required due to changes within the business. This may result from merging departments, technological advancements, or shifting business priorities. Other common reasons organisations may take this step includes:

1. Economic Pressures

Rising costs, such as operational expenses, National Insurance contributions, or unexpected financial challenges, can make it difficult to sustain the current workforce. Restructuring allows businesses to streamline processes and reduce expenses to remain viable.

2. Shifting Business Goals

Businesses regularly review their strategies to stay competitive. This might involve focusing on new markets, products, or services. Roles tied to outdated objectives may no longer be relevant within the revised structure.

3. Mergers and Acquisitions

When organisations merge or are acquired, there is often a duplication of roles. Restructuring helps integrate teams and eliminate overlap to achieve a cohesive and efficient operation. In addition, this has led employers to making a position redundant by restructuring

4. Decline in Demand

A drop in demand for certain products or services may reduce the need for roles associated with those areas. Restructuring allows businesses to allocate resources more effectively to growing or profitable areas.

While these reasons justify making a position redundant by restructuring, it is essential to handle the process with care. Clear communication, proper consultation, and adherence to legal requirements will help ensure the transition is both fair and effective.

Planning and Managing a Fair Redundancy Restructure

Before deciding which positions may need to be made redundant, it is vital to carefully plan your restructuring process. A fair, transparent, and legally compliant approach is crucial to avoid potential disputes and maintain trust within the organisation.

If your reorganisation results in staff dismissals, you must prioritise the rights of your employees throughout the process. Employees with two or more years of service are legally protected against unfair dismissal and are entitled to statutory redundancy pay. Failing to uphold these rights can lead to legal challenges and damage to your business’s reputation.

To ensure a making a position redundant by restructuring is fair and compliant, follow these key steps:

1. Create a Clear Business Case

Provide a strong and well-documented rationale for the need to dismiss staff. This should outline the economic, structural, or strategic reasons for the restructuring, ensuring the decision is both necessary and proportionate.

2. Explore Alternative Roles

Before confirming redundancies, actively seek alternative roles within the business for affected employees. Redeployment options can reduce the number of dismissals and demonstrate a commitment to supporting your staff.

3. Hold Meaningful Consultations

Consultation is a critical part of the redundancy process. For 20 or more employees facing redundancy, UK law requires collective consultation, involving two or more meetings and detailed discussions. While not mandatory for fewer redundancies, holding at least one consultation is considered best practice and fosters transparency.

4. Use a Fair Selection Process

When selecting employees for redundancy, apply objective and measurable criteria, such as skills, performance, or attendance records. Avoid discriminatory factors when making a position redundant by restructuring. Ensure the process is impartial and evidence-based.

5. Provide Written Redundancy Notices

Formal notice must be given to employees selected for redundancy. This should clearly explain the reasons for the decision, their rights, and any relevant timelines for leaving the business.

6. Ensure Correct Redundancy Pay

Employees with two or more years of service are entitled to statutory redundancy pay. Ensure calculations are accurate and comply with legal requirements. In some cases, enhanced redundancy packages may be offered as part of company policy.

7. Offer the Right to Appeal

Employees have the right to appeal your decision if they feel the process was unfair or the reasoning was flawed. Be prepared to handle appeals professionally and transparently, providing clear records to justify your decisions.

8. Maintain Comprehensive Records

Document every stage of the process, including consultations, selection criteria, and communications with employees when looking at making a position redundant by restructuring. These records can be invaluable if you need to prove that your actions were fair and objective.

Why a Fair Redundancy Process Matters

A fair and legally compliant redundancy process protects your business from potential claims of unfair dismissal and ensures that employees feel respected, even in challenging circumstances. By following these steps, you can navigate restructuring with integrity, minimise disruption, and safeguard your organisation’s reputation.

How to Manage TUPE Redundancy and Restructuring

TUPE applies when a UK business (or part of it) transfers to a new employer or when services are outsourced to a contractor. Its purpose is to protect employees’ continuity, terms, and conditions during such transfers. However, redundancies may arise if the new employer needs to restructure or cut costs. If this is the case, employers must handle redundancies carefully, following the appropriate legal procedures, especially when considering collective redundancies for 20 or more employees. In such situations, collective consultation is required, and pre-transfer consultation may be possible with the agreement of the transferring employer (transferor).

Pre-transfer consultations can be complex, as the transferee must demonstrate that a relevant transfer is taking place, that redundancies will affect 20 or more employees within 90 days, and that those redundancies relate to employees being transferred. Without cooperation from the transferor, consultation can be challenging, particularly in giving employee representatives access to transferring staff. When collaboration is not feasible, postponing redundancies until after the transfer may be advisable to ensure compliance with TUPE and redundancy laws. Seeking expert guidance is essential to navigate this process effectively.

Benefits of a Well-Handled Restructuring Process

When making a position redundant by restructuring is managed correctly, it can lead to:

  • Improved Efficiency: Restructuring can streamline processes and reduce duplication of effort.
  • Employee Trust: Transparent communication fosters trust, even in difficult times.
  • Business Growth: A well-aligned team contributes to achieving strategic goals.

Common Pitfalls to Avoid

  1. Lack of Transparency: Keeping employees in the dark breeds mistrust and anxiety.
  2. Non-Compliance: Failure to adhere to legal requirements can lead to disputes or claims.
  3. Ineffective Communication: Miscommunication can result in confusion and resentment among staff.

Final Thoughts

Making a position redundant by restructuring is a challenging process, but it can be handled effectively with careful planning and empathy. By prioritising transparency, following legal guidelines, and offering support to affected employees, businesses can navigate this transition smoothly and ethically.

If you need guidance on restructuring and managing redundancy, get in touch with our HR experts. They can ensure compliance and help you implement changes with minimal disruption.

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