Redundancy During Business Restructuring

When a business restructures-whether due to strategic realignment, economic pressures, technological change or organisational growth-roles and responsibilities can change or become redundant. Redundancy during restructuring is a formal legal process in England and Wales, and employers must follow specific steps to protect employee rights and reduce legal risk. This article explains the legal framework for redundancy in restructuring, the stages of the process, employee rights, employer duties, potential risks and practical guidance.

What Counts as Redundancy in a Restructure?

Under the Employment Rights Act 1996, redundancy arises when an employee is dismissed because:

• The employer has ceased or intends to cease to carry on the business (or part of it), or
• The business no longer requires employees to do work of a particular kind.
  Redundancy can therefore arise naturally during restructuring when roles are eliminated or consolidated as part of organisational change.

Restructuring does not change the fundamental nature of redundancy, but it may make redundancy more likely where the structure of work changes or the business no longer needs certain roles.

Understanding the Legal Framework

Genuine Redundancy and Business Needs

For redundancy to be genuine, an employer must demonstrate that the job role itself is no longer required in the reorganised business. Restructuring scenarios can include merging teams, flattening management structures, closing departments, or replacing roles with technology. Employers should document the business reasons for restructuring and explain how they have objectively concluded that certain positions are redundant.

Employment Status Matters

Only individuals with employee status have statutory redundancy rights. Workers and self‑employed contractors are not automatically entitled to redundancy pay or consultation rights under the redundancy regime, though they may have other rights depending on their contract and status.

The Redundancy Process in a Restructuring Context

Step 1: Planning and Identifying Roles at Risk

Before formal proceedings begin, employers should map the restructure to identify which roles are genuinely at risk of redundancy. This involves reviewing organisational charts, comparing current and proposed work structures, and defining objective selection criteria (such as skills, qualifications, experience, and business need) to determine which roles are surplus to requirements.

Step 2: Consultation with Employees

Consultation is a legal requirement, not merely a courtesy. Employers must consult both collectively and individually where applicable.

Individual Consultation

All employees at risk of redundancy should be consulted individually. The employer must explain the reasons for the potential redundancy, how the process will work, how employees have been selected, and how redundancy pay is calculated. Employees should be given a genuine opportunity to raise questions and suggest alternatives.

Collective Consultation

If the restructuring would result in 20 or more redundancies at one establishment within a 90‑day period, the employer must engage in collective consultation as required by the Trade Union and Labour Relations (Consolidation) Act 1992. This includes:

• Consulting recognised trade unions, or
• Electing employee representatives if no union exists, and
• Providing written information about the business reasons for redundancy, the roles at risk, selection methods and terms of redundancy pay.

The law prescribes minimum consultation periods: at least 30 days before the first dismissal for 20–99 redundancies, and at least 45 days where 100 or more redundancies are proposed. Employers also must notify the Redundancy Payments Service (government form HR1) within these timeframes.

Step 3: Selection and Fair Criteria

Employers must apply objective selection criteria that are consistent and non‑discriminatory. Selection should be based on business needs rather than subjective or protected characteristics. A scoring system can assist transparency and fairness.

Step 4: Alternative Employment and Mitigating Redundancy

Before dismissals are finalised, employers should explore and offer suitable alternative employment within the reorganised business where possible. Redeployment can reduce the number of compulsory redundancies and mitigate hardship.

Step 5: Notice and Redundancy Pay

Once the restructure decisions are made, employers must:

• Give appropriate notice, either statutory or contractual.
• Pay statutory redundancy pay to employees with at least two years' continuous service.
• Pay accrued holiday pay and any other contractual entitlements.

Employee Rights During Restructuring

Right to Fair Consultation

Employees have a right to a meaningful consultation process during restructuring. Consultations should genuinely consider employee suggestions on avoiding redundancies or reducing their impact. Failing to consult fairly can lead to claims for unfair dismissal or protective awards in tribunals.

Protection From Unfair Dismissal

Employees with at least two years' continuous service can claim unfair dismissal if the redundancy process is flawed, discrimination occurs, or the restructure is a pretext for dismissing a protected group. Disciplinary reasons disguised as redundancy can also attract tribunal claims.

Redundancy Pay

Eligible employees (two years' service) receive statutory redundancy pay based on age, length of service and weekly pay, subject to statutory caps. Employers must explain how this is calculated during the consultation.

Other Entitlements

Employees at risk of redundancy have rights to reasonable time off to look for new work, attend interviews or receive training, and to appeals over redundancy decisions.

Time Limits and Legal Remedies

Claims against a restructure redundancy process typically must be submitted within three months less one day of the dismissal date to an employment tribunal, following Acas Early Conciliation. Tribunal remedies can include compensation for unfair dismissal or protective awards for failure to consult.

Common Risks and Pitfalls

Failure to Consult Properly

Inadequate consultation-whether individual or collective-can result in tribunal claims for protective awards or unfair dismissal. Employers should ensure consultation is timely, thorough and documented.

Discriminatory Selection Criteria

Using biased or subjective criteria for redundancy selection can expose the employer to discrimination claims under the Equality Act 2010. Employers must apply fair, objective measures and retain evidence of their rationale.

Ignoring Alternative Roles

Failing to consider suitable alternative roles or redeployment opportunities may strengthen claims that the redundancy was not genuinely necessary, heightening tribunal risk.

Practical Steps for Employees

1. Request written details of the restructure and redundancy rationale.
2. Participate in consultations actively and provide suggestions to avoid redundancy.
3. Check your contract for notice, redundancy pay and enhanced terms.
4. Keep records of meetings, correspondence and proposals.
5. Seek advice from Acas or Citizens Advice early if you suspect unfair treatment.
6. Engage in early conciliation before tribunal claims to maximise resolution options.

Practical Steps for Employers

1. Plan restructuring logically with clear business justifications.
2. Communicate early and transparently with employees about potential impacts.
3. Apply objective selection criteria and document decisions.
4. Consult genuinely and in good time, including collectively where required.
5. Explore redeployment and alternatives to redundancy.
6. Seek legal or specialist HR advice for complex restructures.

Common Questions

Is redundancy always part of restructuring?
Not necessarily. Restructuring can involve internal changes without dismissals, but if roles cease to be required, redundancy processes may apply.

Can an employer restructure without consulting?
No. Even if fewer than 20 redundancies are proposed, individual consultation must take place; meaningful consultation is essential to avoid legal claims.

What happens if collective consultation is missed?
Employees may seek protective awards or claims at an employment tribunal, and tribunals can award compensation if consultation duties are breached.

Key Takeaways

Redundancy during business restructuring in England and Wales involves a structured legal process designed to protect employee rights and ensure decisions are transparent, fair and necessary. Employers must plan objectively, consult meaningfully with employees, explore alternatives, apply fair selection criteria, and meet statutory deadlines for collective consultation where applicable. Employees with sufficient service have rights to redundancy pay, fair procedures and tribunal remedies if obligations are breached. Careful preparation, open communication and adherence to legal duties can help both employers and employees navigate restructuring with reduced risk of dispute.