A restructuring process is frequently influenced by external factors such as international economic shifts, supply chain disruptions or macroeconomic pressures. Trade tensions, including the imposition of tariffs on various goods and services have continued to reverberate through global markets. Whilst these protectionist measures are aimed at boosting domestic industries, it is likely to contribute to increased costs for imported goods and materials, placing further strain on UK businesses reliant on international supply chains.
Coupled with recent challenges such as the cost-of-living crisis, rising inflation and increases in the National Minimum Wage and employer National Insurance contributions, many UK employers are facing unsustainable operational cost burdens. These combined economic pressures have forced many businesses to reconsider their workforce models and organisational structure.
It’s not inevitable that redundancies will result from a restructuring. Sometimes, a business will restructure for operational purposes rather than financial reasons. Unfortunately, in some cases, the loss of jobs may be unavoidable, particularly where technological advancements or a change in business model renders certain roles obsolete or where a business must scale down to remain viable.
What Are the Risks?
As with redundancies caused by other factors, employers need to tread carefully when initiating a redundancy process. A misstep can result in tribunal claims for unfair dismissal or discrimination – particularly if statutory requirements and consultation obligations are neglected.
Beyond legal exposure, a poorly managed redundancy exercise can damage workforce morale and lead to reputational harm. The 2023 P&O Cruises case remains a high-profile example of how not to conduct mass dismissals.
Given these risks, it is critical that employers follow all legally mandated procedures when embarking on a redundancy exercise.
The Process
The first step is to consider whether any alternatives to redundancy might be feasible. Viable options will vary by business sector and the specific pressures prompting the restructuring, but common alternatives include:
- Reducing or temporarily halting overtime
- Restricting recruitment and filling roles only where strictly necessary
- Terminating engagements with self-employed contractors or agency workers
- Introducing short-time working arrangements
- Considering temporary lay-offs
Voluntary redundancies may also present a useful option, particularly in organisations with long-serving employees who may be nearing retirement or looking for a career change. Voluntary redundancy can help to reduce costs while preserving morale and limiting legal risk. Employees opting for this route still retain the right to participate in any collective consultation process.
What Happens During a Restructure?
Typically, the first phase of a restructure involves an analysis of the workforce to determine areas where roles may be consolidated or removed due to duplication or decreased need.
Where it becomes clear that there is a genuine redundancy situation, the employer must then determine the scale of the redundancies being proposed. The number of affected employees directly influences the required consultation procedures:
Fewer than 20 Employees
If it’s proposed to dismiss fewer than twenty employees at one establishment within a 90-day period, there is no statutory requirement for collective consultation. However, it remains best practice to:
- Clearly communicate the business rationale behind the redundancies
- Identify roles at risk and define fair and objective selection criteria
- Hold consultation meetings with affected staff
- Explore and offer suitable alternative roles where available
- Confirm redundancy terms, including notice periods and payments
- Allow employees the opportunity to appeal any dismissal decision
Failure to follow a fair process, even in smaller-scale redundancies, may still lead to successful claims for unfair dismissal.
20 or More Employees
If twenty or more employees are to be made redundant within a 90-day period at one establishment, the employer must:
- Notify the Redundancy Payments Service (RPS):
- For 20–99 proposed redundancies: notify at least 30 days before the first dismissal
- For 100 or more: notify at least 45 days before the first dismissal 2
- Begin Collective Consultation:
- Engage with recognised trade unions or elected employee representatives
- While there is no minimum consultation duration prescribed by statute, it must be meaningful and commence before final decisions are made
- Offer Suitable Alternative Employment:
- If alternative roles exist, these should be offered promptly and in writing
- Delays in doing so may compromise fairness and risk claims
- Provide Written Information:
- Affected staff and their representatives should receive detailed information regarding the reasons for redundancy, the affected employee groups, the selection process, and payment calculations
- Maintain Open Communication:
- Questions from staff should be answered clearly and sensitively to avoid uncertainty and protect morale
- Issue Notice of Termination:
- Once consultation concludes and decisions are made, notices must be formally issued to affected employees
- Finalise the Process:
- Confirm redundancy pay, provide details of appeals procedures and consider offering outplacement support
The Effect on Remaining Employees
Post-restructure, it is important that employers also support the employees who remain in the organisation. Change in team composition, increased workloads and diminished morale can pose a significant risk to productivity and engagement. Transparent communication around the reasons for the restructure, and a clear articulation of the strategic goals, can help stabilise teams and reinforce trust in leadership.
The Employment Rights Bill
The legal landscape is also evolving. The Employment Rights Bill, currently before Parliament, proposes changes that may alter how employers assess and manage collective redundancies.
At present, the legal requirement to consult collectively applies where 20 or more redundancies are proposed “at one establishment” within a 90-day period. The original draft of the Bill proposed removing the “at one establishment” condition, thereby requiring collective consultation across an entire organisation, regardless of location.
Following strong feedback from employers and HR professionals, the government has amended its position. The revised approach will require collective consultation either at one establishment or where a “different threshold” is met. Details of what constitutes this alternative threshold are awaited via secondary legislation.
Employers should keep a close eye on developments to ensure their policies and procedures remain compliant with the future legal framework.
How Can We Help?
Given the complexity and sensitivity involved in redundancy exercises, particularly in the current economic climate, it is essential that employers adopt a compliant, fair and well-structured approach.
Our legal experts at rradar can provide strategic advice and hands-on support, ensuring that your internal processes align with both existing legal standards and future changes in the law. We are here to assist you in navigating restructuring exercises while mitigating legal risks and preserving the integrity of your workforce.