Ensuring a fair redundancy process in a restructuring scenario

Harry Hazelwood
Harry Hazelwood

Published: October 14th, 2022

7 min read

During a restructuring process, changes are made to the structure within an organisation and the need for work of a particular kind may be removed, therefore, employers must proceed carefully where there is a potential for redundancies. For example, labour-saving technology replacing certain roles is a common occurrence in the modern workplace. Additionally, financial cutbacks may require employers to reduce their payroll in circumstances of a decline in profitability.

Whilst a business restructure does not signify that redundancy is unavoidable, employers must be prepared for potential job loss within their organisation. Redundancy can be a daunting process for both employers and employees alike. Employees are afforded several protection rights during this process, therefore the onus is on the employer to adhere to the correct procedures and apply them in an equitable manner. As such, it is imperative that businesses are up to date on the key legal issues when dealing with this topic.

Redundancy is a fair reason for dismissal and employees with two years' service or more have the right not to be unfairly dismissed under Section 94 of the Employment Rights Act 1996. An unfair dismissal situation will arise where there is a failure to follow fair procedure by the employer. As such, a fair procedure includes:

  • A fair selection process;

  • A fair consultation process; and

  • The consideration of alternative employment

Fair selection process

Once a redundancy 'pool' has been identified of roles which are at risk of redundancy, it is then a process of identifying fair selection criteria and applying them to the individuals in question. Employers must not discriminate against certain individuals because of factors such as age, disability, sex, race, religion or belief. Common methods for redundancy selection are:

  • An employee's disciplinary and attendance records;

  • An employee's skills, qualifications and aptitude;

  • An employee's performance and standard of work

During this process, employers must talk and listen to any affected employees, outlining their proposals for restructuring and redundancy. In doing so, you must explain the business reasons behind such proposals, how the pool of employees at risk of redundancy was identified, the process for selection and suitable alternative employment.

Where it is proposed that 20 or more employees be made redundant within a period of 90 days, employers must embark on collective consultation. Thus, providing certain information to any employee representatives or relevant trade union to reach an agreement. This is in addition to consulting with employees individually.

Alternative employment

Employers must try to move those selected for redundancy into other roles within the organisation, if a job is suitable this should be offered instead of redundancy. An offer for this role should be made unconditionally in writing, without the need for an application process. Once the role is accepted, a trial period of 4 weeks should be granted to the employee. If the employee rejects the position for a valid reason, they will be entitled to redundancy pay. Whereas, if there is no valid reason the employer may refuse to pay this entitlement.

Common mistakes employers make during the redundancy process

Insufficient planning

Due to the significant financial pressures and need to act quickly during the redundancy process, employers can be prone to jump into action. However, sufficient planning must be the priority in this situation. This can mean taking a step back and setting up a plan to ensure that no corners are cut, and a fair redundancy process is adhered to. This can mean setting sufficient time aside to effectively consult with employees, appoint the necessary representatives when needed and effectively assess any suitable alternative employment.

Rushing the consultation process

Consulting with employees is a vital element of a fair redundancy process and should not be overlooked. For employers this can be an emotional and timeconsuming process, where other financial considerations can seem to be of higher importance. However, effective consultation can ensure that employees understand and accept the need for redundancy. This can help to alleviate any potential claim for unfair dismissal, where an employer has failed to conduct meaningful consultation.

Unfair selection

As noted, when deciding which employees will be made redundant, employers must ensure that this is fair. There are a variety of ways to approach the selection process, but thought must be given to ensure that no one is placed at a disadvantage. This can be avoided by putting steps in place such as interviews and assessments to objectively determine a candidate's suitability for redundancy on an unbiased basis. This will also provide evidence and explanation of how the employer has chosen their redundancy pool if a claim is brought in the Employment Tribunal.

For further information please contact Harry Hazelwood

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