Understanding Redundancy and Restructuring
Understanding Redundancy and Restructuring
Redundancy is a specific legal concept under UK employment law. It occurs when an employer needs to reduce their workforce because a job or group of jobs is no longer required. The main reasons for redundancy, as set out in the Employment Rights Act 1996, include business closure, workplace closure, or a reduced need for employees to carry out particular kinds of work. Restructuring – a process where an organisation changes its structure, roles, or ways of working – can often lead to redundancy if certain positions are eliminated or merged.
When a company restructures, it may introduce new technologies, streamline departments, or shift business priorities. If these changes mean that some roles no longer exist or fewer employees are needed in certain positions, those affected roles may be considered redundant. For example, if a business automates a manual process, the jobs previously required for that task may become redundant.
It’s important to distinguish redundancy from other forms of dismissal. Redundancy is not about the employee’s conduct or capability, but about the employer’s need for the role itself. By contrast, dismissal for other reasons – such as misconduct, poor performance, or capability – is based on the individual employee’s actions or abilities rather than the business’s structural needs. For a detailed comparison, you can explore how redundancy differs from other types of dismissal in our guide to Dismissal Law in the UK: An Overview.
Employers must follow a fair and transparent process when making redundancies due to restructuring. This includes identifying genuine redundancy situations, consulting with affected employees, and ensuring selection criteria are objective and non-discriminatory. Failure to follow the correct procedure can result in claims for unfair dismissal.
If you’d like to understand more about the legal definition of redundancy, your rights as an employer or employee, and the protections available under UK law, see our comprehensive overview: Understanding Redundancy in UK Law: Your Rights Explained. This resource provides further guidance on redundancy situations, statutory entitlements, and best practices for both employers and employees.
When and Why Employers Restructure
When and Why Employers Restructure
Restructuring is a common part of running a business, especially in a fast-changing economic environment. Employers may need to reorganise their workforce for a variety of reasons, and sometimes this means making certain positions redundant. Understanding when and why restructuring happens – and how to approach it fairly – is crucial for both employers and employees.
Common Business Reasons for Restructuring
Employers might consider restructuring their organisation for several legitimate business reasons, including:
- Financial pressures: Declining profits or the need to cut costs may prompt a review of staffing levels and business operations.
- Technological changes: The introduction of new systems or automation can make some roles obsolete or require different skills.
- Mergers and acquisitions: Combining businesses often leads to overlapping roles, prompting a need to streamline.
- Changes in demand: Shifts in market demand or customer preferences can make certain products, services, or roles less relevant.
- Legal or regulatory changes: New laws or regulations might require a business to change how it operates, affecting staffing needs.
- Relocation: Moving part or all of the business to a new location can result in some roles no longer being viable.
How Changing Business Needs Affect Job Roles
When a business restructures, it’s not the employees themselves who are made redundant, but the roles they fill. For example, if a company automates its customer service function, the need for manual customer service roles may decrease. Similarly, if a business stops offering a particular product, jobs linked to that product might no longer be required.
It’s important to note that redundancy is only genuine if the role itself disappears or changes so significantly that it no longer exists in its previous form. UK law, specifically the Employment Rights Act 1996, sets out that redundancy can occur if an employer’s need for employees to carry out work of a particular kind has ceased or diminished.
The Importance of Planning and a Fair Process
Restructuring should never be rushed. Employers have a legal duty to plan carefully and follow a fair, transparent process. This includes:
- Identifying genuine business reasons for restructuring and documenting the rationale.
- Consulting with affected employees individually and, if appropriate, collectively (for example, with trade unions or employee representatives). UK law requires collective consultation if 20 or more employees are at risk of redundancy within a 90-day period.
- Using fair selection criteria to determine which roles are redundant, avoiding discrimination or unfair bias.
- Exploring alternatives to redundancy, such as redeployment or reduced hours, wherever possible.
Failing to follow a fair process can expose employers to legal challenges. Employees may claim unfair dismissal if the redundancy is not genuine or if the process is flawed. For more on how to avoid pitfalls and ensure redundancies are legitimate, see our guidance on Challenging Sham Redundancy.
By understanding the reasons behind restructuring and adhering to the legal requirements, employers can manage change responsibly – protecting their business and treating employees fairly.
The Legal Process for Making Positions Redundant
Making positions redundant due to restructuring is a significant decision for any employer, and it’s essential to follow the correct legal process to ensure fairness and avoid legal risks. Here’s what employers in the UK must do to make positions redundant lawfully:
1. Establishing Genuine Redundancy
Redundancy must be genuine – meaning the job itself is no longer needed due to business restructuring, not because of an individual’s performance or conduct. The legal definition of redundancy is set out in the Employment Rights Act 1996, which states that redundancy arises when an employer needs fewer employees to carry out work of a particular kind.
2. Planning and Fair Selection
Once it’s clear that redundancies may be necessary, employers should:
- Identify the affected area: Define which roles or departments are impacted by the restructuring.
- Develop fair selection criteria: Criteria must be objective, transparent, and consistently applied. Common examples include skills, qualifications, experience, and disciplinary record.
- Avoid discrimination: Selection must not be based on age, gender, disability, race, or other protected characteristics. Discriminatory selection could lead to claims of unfair dismissal or discrimination.
3. Consultation with Employees
Employers are legally required to consult with employees who are at risk of redundancy. This consultation should be meaningful and take place before any final decisions are made. The process involves:
- Explaining the reasons for redundancy and how individuals may be affected
- Discussing alternatives to redundancy, such as redeployment or reduced hours
- Considering any suggestions or concerns raised by employees
For a deeper understanding of what questions employees may raise and how to address them, see Key Redundancy Consultation Questions for Fair Treatment.
4. Individual vs Collective Redundancies
- Individual redundancy: If fewer than 20 employees are being made redundant at one establishment within a 90-day period, individual consultation is required.
- Collective redundancy: When 20 or more redundancies are proposed at one establishment within 90 days, collective consultation rules apply. Employers must consult with employee representatives or trade unions and follow strict timelines.
If you’re facing a situation involving multiple redundancies, it’s important to understand the specific procedures under Collective Redundancies. For comprehensive government guidance, refer to Making staff redundant: Redundancy consultations – GOV.UK.
5. Notice and Redundancy Pay
After consultation, if redundancy is confirmed, employers must provide employees with the correct notice period and any statutory or contractual redundancy pay. The amount of redundancy pay depends on the employee’s age, length of service, and weekly pay, as set out in UK law.
6. Avoiding Unfair Dismissal and Legal Risks
Failure to follow a fair and transparent process can result in claims for unfair dismissal or discrimination. It’s essential to keep clear records of the decision-making process and consultation. If concerns arise about whether a redundancy is genuine or being used as a pretext for dismissal, see Challenging Sham Redundancy for further guidance.
By following these steps and adhering to the relevant legal requirements, employers can manage redundancies due to restructuring in a fair and lawful manner, protecting both the business and employees’ rights.
Employee Rights During Redundancy by Restructuring
Employee Rights During Redundancy by Restructuring
When an employer restructures their business and certain roles become redundant, employees are protected by a range of legal rights. Understanding these rights is crucial to ensure the redundancy process is fair and compliant with UK employment law.
Right to a Fair Consultation and to Be Informed
Employers are legally required to consult with employees before making any redundancy decisions. This consultation must be genuine, meaningful, and take place before any final decisions are made. During the consultation, your employer should explain the reasons for the restructuring, why your role is at risk, and explore alternatives to redundancy, such as redeployment.
The rules around consultation are set out in the Employment Rights Act 1996 and further detailed in government guidance. For example, if 20 or more employees are being made redundant within 90 days, collective consultation rules apply, which include minimum consultation periods and the involvement of employee representatives. For fewer redundancies, individual consultation is still required.
For more detailed information about what employers must do during the consultation process, see the official guidance on Making staff redundant: Redundancy consultations – GOV.UK.
Right to Appeal or Challenge the Redundancy Decision
If you believe your redundancy is unfair – perhaps because the selection process was not objective, or the consultation was inadequate – you have the right to challenge the decision. This can involve raising a formal appeal with your employer or, if necessary, making a claim to an employment tribunal for unfair dismissal.
It’s important to act quickly, as there are strict time limits for lodging claims. For practical steps on challenging redundancy, read our guide on How to Win Your Redundancy Case.
You may also find it helpful to understand the broader legal protections against unfair dismissal, which can apply in redundancy situations. For more, see our section on Redundancy in the context of unfair dismissal rights.
Right to Reasonable Notice Period and Pay
If your role is being made redundant, you are entitled to a statutory notice period, or the notice period specified in your employment contract – whichever is greater. Statutory notice periods are:
- At least one week’s notice if you’ve been employed between one month and two years
- One week’s notice for each year of employment, up to a maximum of 12 weeks
During your notice period, you should receive your usual pay and benefits. In addition, you may be entitled to statutory redundancy pay if you have worked for your employer for at least two years. The amount depends on your age, length of service, and weekly pay (subject to a statutory cap).
Rights if Off Sick During Redundancy Notice Period
Being off sick does not remove your redundancy rights. If you are off work due to illness during your notice period, you are still entitled to redundancy pay, notice pay, and accrued holiday. Your employer cannot treat you less favourably because of your sickness absence.
There are specific rules about how notice pay is calculated if you are receiving statutory sick pay or company sick pay at the time. For a detailed explanation of your rights in this situation, see our guidance on Off Sick During Redundancy Notice?.
By understanding your rights during redundancy by restructuring, you can ensure the process is handled fairly and in line with the law. If you have concerns about your redundancy, consider seeking advice or challenging the decision using the resources linked above.
Redundancy Pay and Compensation
When making positions redundant due to restructuring, employers in the UK must ensure employees receive any redundancy pay and compensation they are entitled to by law. Understanding the rules around redundancy pay is crucial for both employers and staff.
Eligibility for Statutory Redundancy Pay
Employees are generally entitled to statutory redundancy pay if they have been continuously employed for at least two years. This right is set out under the Employment Rights Act 1996. However, certain categories of workers – such as agency staff, members of the armed forces, or those dismissed for gross misconduct – may not qualify. The official GOV.UK guidance on statutory redundancy pay provides a clear overview of who is eligible.
How Redundancy Pay Is Calculated
Statutory redundancy pay is based on age, length of service (up to a maximum of 20 years), and weekly pay (subject to a statutory cap, which is regularly updated). The calculation is as follows:
- Half a week’s pay for each full year of service where the employee was under 22
- One week’s pay for each full year of service where the employee was between 22 and 40
- One and a half week’s pay for each full year of service where the employee was 41 or older
The weekly pay is capped at a statutory maximum, which changes each April. For the most up-to-date figures and worked examples, see our Redundancy Pay Eligibility and Timeline guide.
Timeline for Receiving Redundancy Pay
Employers must pay statutory redundancy pay on or before the employee’s final pay date, unless another arrangement is agreed in writing. If payment is delayed or not made, employees can make a claim to an employment tribunal within six months of their dismissal.
Additional Compensation Possibilities
Beyond statutory redundancy pay, some employees may be entitled to enhanced redundancy packages if this is set out in their contract or company policy. Employers may also offer extra compensation as part of a negotiated settlement agreement, especially in complex restructuring scenarios. It’s important to document any additional payments and ensure they comply with employment law.
Special Considerations for NHS Employees
Redundancy arrangements in the NHS can differ from standard statutory rules. NHS staff may be entitled to more generous redundancy terms under the NHS Terms and Conditions of Service Handbook. For a detailed breakdown of how redundancy pay is calculated for NHS employees, including examples and tips to maximise entitlements, visit our NHS Redundancy Calculation: Maximize Your Payout Guide.
Further Guidance and Support
If you have concerns about the legitimacy of a redundancy or suspect the process is not being followed fairly, additional protections may apply. For advice on challenging dismissals that may not be genuine redundancies, see Challenging Sham Redundancy.
Employers are encouraged to seek professional advice to ensure compliance with all relevant legal requirements and to support affected employees throughout the redundancy process.
Alternative Employment and What Happens if You Refuse
When an employer is restructuring and certain roles are at risk of redundancy, they have a legal duty to consider whether there are any suitable alternative positions available within the organisation. This requirement is set out in the Employment Rights Act 1996. Offering suitable alternative employment is an important step in ensuring the redundancy process is fair and minimises the impact on affected employees.
What Is Suitable Alternative Employment?
A role is considered “suitable alternative employment” if it is appropriate for the employee in terms of:
- Job Content and Status: The new position should be similar in duties, responsibilities, and seniority to the redundant role.
- Terms and Conditions: Pay, benefits, working hours, and location should be broadly comparable. Significant reductions in salary or changes in hours may make a role unsuitable.
- Skills and Experience: The employee must have the necessary skills and qualifications, or be reasonably able to acquire them with some training.
Whether a role is suitable depends on both the objective details and the individual circumstances of the employee. For example, a change in work location might be suitable for some but not for others due to personal commitments or travel distance.
The Employer’s Duty to Offer
Employers must actively seek out and offer any suitable vacancies to employees at risk of redundancy before their current role ends. This includes roles at other sites or within associated companies, if applicable. Failing to do so could make the redundancy dismissal unfair, potentially leading to claims at an employment tribunal.
If a suitable role is available, the employer should provide written details of the position, including job description, terms, and start date. Employees are entitled to a statutory four-week trial period in the new role. This allows both parties to assess whether the alternative position is genuinely suitable.
What Happens if an Employee Refuses a Suitable Alternative Role?
If an employee unreasonably refuses an offer of suitable alternative employment, they may lose their right to a statutory redundancy payment. What counts as “unreasonable” depends on the circumstances. For example, refusing a role with similar pay and duties at the same location may be seen as unreasonable, whereas declining a position with significantly worse terms or a much longer commute might be reasonable.
It’s important to note that if the employee accepts the alternative role but it turns out to be unsuitable during the four-week trial period, they can still claim redundancy.
For a detailed look at the implications and your rights if you refuse a suitable alternative job, see our guide on Refusing Suitable Alternative Employment.
Further Guidance
If you believe the redundancy process is not genuine or the offer of alternative employment is a way to avoid proper redundancy procedures, you may wish to review our advice on Challenging Sham Redundancy.
Employers should always document the process of offering alternative roles and the reasons for any refusal, to protect against potential disputes or tribunal claims. Employees should carefully consider any offers and seek advice if unsure about their rights.
Avoiding Unfair or Sham Redundancies
When making roles redundant due to restructuring, it’s crucial for employers to ensure the process is genuine and not used as a cover for unfair dismissal. Both employers and employees should understand what constitutes a sham redundancy, how to recognise potential warning signs, and what steps can be taken if a redundancy appears to be unfair.
What is a Sham Redundancy?
A sham redundancy occurs when an employer claims a role is being made redundant, but the real reason is something else – such as wanting to remove a particular employee for performance, conduct, or personal reasons. In UK law, genuine redundancy is defined under the Employment Rights Act 1996 as a situation where an employee’s job ceases to exist because the employer’s business closes, the workplace closes, or there is a reduced need for employees to do a particular kind of work.
If redundancy is used as a pretext for dismissal, this can amount to unfair dismissal, and employees may have grounds to challenge the decision. For a deeper understanding, see our guide: Sham Redundancy.
Spotting Unfair or Sham Redundancies
There are several warning signs that may suggest a redundancy is not genuine:
- The role still exists: If the same or a very similar role is advertised soon after the redundancy, or if someone else is hired to do the same work, this may indicate a sham redundancy.
- Selection process issues: If the selection criteria are unclear, inconsistently applied, or appear to target a specific individual, this could be a red flag.
- Lack of proper consultation: Employers are legally required to consult with employees before making redundancies. If this step is skipped or rushed, it may suggest the process is not genuine.
- No business case: If the employer cannot provide evidence of restructuring or a reduced need for the role, the redundancy may not be legitimate.
For more on recognising these situations, read our detailed explanation: Spotting Sham Redundancy.
What Can Employees Do if They Suspect a Sham Redundancy?
If an employee suspects their redundancy is not genuine, they have several options:
- Request written reasons: Employees can ask their employer to provide a written explanation for the redundancy decision.
- Raise a grievance: If not satisfied, employees can raise a formal grievance through the company’s internal procedures.
- Seek legal advice: Employees may wish to consult with an employment law specialist or their trade union for guidance.
- Make a claim for unfair dismissal: If the redundancy is found to be a sham, employees may be able to bring a claim for unfair dismissal at an employment tribunal. This must usually be done within three months less one day from the date of dismissal.
For practical examples and further guidance on how sham redundancies are identified and challenged, see Sham redundancy: examples and guidance – Monaco Solicitors.
Understanding the difference between genuine and sham redundancies protects both employers and employees, ensuring the restructuring process is fair, transparent, and legally compliant.
Support and Next Steps After Redundancy
After a redundancy due to restructuring, it’s essential for both employers and affected employees to understand the support available and the practical next steps. Here’s what employers should know to help guide staff through this transition.
Claiming Benefits After Redundancy
When a role is made redundant, employees may be eligible for certain benefits to support them while they look for new work. The main benefit is Jobseeker’s Allowance (JSA), but depending on their circumstances, individuals might also claim Universal Credit or other support. Employees can usually apply for these benefits as soon as they receive their redundancy notice. For a step-by-step overview of how to claim, see the government’s official guidance on being made redundant: finding work, claiming benefits and managing debts – GOV.UK.
It’s important to remind employees that, even if they received a redundancy payment, they may still qualify for benefits. The amount of redundancy pay and any savings could affect what they’re entitled to, so checking eligibility early is key. For more detail on this process, you can also refer to our guide on claiming benefits after being sacked, which covers many of the same steps relevant after redundancy.
Seeking New Employment and Training
Redundancy can be an opportunity for employees to retrain or explore new career paths. The government and various organisations offer support with job searching, CV writing, interview skills, and training courses. Employers may wish to signpost affected staff to local job centres or online resources that provide advice and funding for retraining. Offering outplacement support or time off to attend interviews can also help employees move forward more confidently.
Understanding Notice Periods and Resignation Options
Employees are entitled to a statutory notice period before their employment ends, unless their contract specifies a longer period. The minimum statutory notice is:
- At least one week’s notice if employed between one month and two years
- One additional week’s notice for each year of continuous employment, up to a maximum of 12 weeks
Employers must either allow employees to work through their notice or provide pay in lieu of notice. Sometimes, an employee may wish to resign before the end of their notice period, or may not have a written contract outlining these terms. For more on this scenario, see our guidance on resigning without a contract.
Additional Legal Support and Practical Advice
The redundancy process can be complex, and it’s crucial to ensure all actions are fair and legally compliant. If there are concerns about the legitimacy of the redundancy, or if employees feel they have been unfairly selected, further support is available. For more information on legal protections and what constitutes a fair process, visit our section on spotting sham redundancy.
By providing clear information and support, employers can help staff navigate the challenges of redundancy and take positive steps towards their next opportunity.
