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Taking the right path on redundancy and restructuring

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Businesses of all shapes and sizes are having to think differently about how they deliver services, and for many it will mean reorganising the workforce. Olivia Bailey, solicitor in Harrison Drury’s employment team, offers a recap on the restructuring process and shares some tips for getting it right.

Company restructuring and reorganisation is an essential part of business planning, in both good times and bad. But as the world continues to come to terms with the COVID-19 pandemic, it has been brought into much sharper focus.

The gradual winding down of the government’s Coronavirus Job Retention Scheme (CJRS) between now and October is likely to be a catalyst for many businesses to review their team structures and staffing needs.

There are many options businesses may consider to mitigate the impact of this process on redundancies, but job losses may inevitably be required. Below we cover some of the issues that employers in this situation need to be aware of and how they can ensure that any redundancy process is conducted properly.

Is the definition of redundancy satisfied?

Where there is a ‘reduced requirement for employees to carry out work of a particular kind’ or a business closure or re-organisation that means fewer staff are required, it’s likely that a redundancy situation will have arisen and the definition of redundancy satisfied.

If this is the case, it’s important to show that the business has explored other options to avoid redundancies. To go ahead with a redundancy process without first considering government support, may enable employees with over two years’ service to pursue claims for unfair dismissal.

Where employers have made use of the CJRS, they may look to commence the redundancy process, where other options have already been exhausted.

Have all alternatives to redundancy been explored?

Organisations will have been implementing cost saving methods to reduce overheads, including the curbing of recruitment and capitalising on a reduced requirement for office space, given the possibilities of widespread homeworking.

Looking ahead, options that may assist in retaining staff include reduced working hours over the full working week or asking employees to agree to working fewer days per week, which will have a similar impact.

Any new agreement can look to match the employee’s needs if your business environment allows, which is likely to be a benefit for both parties. By opening the discussion to all employees, you may find that there are volunteers who are happy to work flexibly.

Each industry and workplace will find different options for reducing the need for redundancies and, wherever possible, these options should be pursued. Business should also consider whether there are any alternative vacancies within the business, or across a group.

What’s the process for making redundancies?

Where 20 or more employees are being made redundant over a period of 90 days or less, an employer has a duty to inform and consult employee representatives:

  • If 100 or more redundancies are proposed, collective consultation must begin at least 45 days before the first dismissal takes effect.
  • If between 20 and 99 redundancies are proposed, the consultation period is 30 days.
  • Where the business is planning on making fewer than 20 redundancies, there are no formal time limits on the consultation process, but a fair procedure must be followed.

Businesses are also required to notify the Secretary of State where more than 20 employees are to be made redundant over a period of 90 days or less.

Once it’s clear that redundancies are required, it’s important to consider the appropriate pool of employees, if selection is necessary, and establish an objective set of criteria under which selection will be made. Special rules apply in relation to any employees that are pregnant, or on family-related leave, and these should be identified at the outset.

How do I go about consulting with staff on redundancies?

Consultation involves meeting with employees that are at risk of redundancy as a group, to explain the reasons behind the redundancy process and to inform of how many jobs are at risk. At the initial meeting, you may wish to ask for volunteers for redundancy, to reduce the number of compulsory redundancies that will be made.

If collective consultation is required, employee representatives should be elected and consulted, or consultation with trade union representatives should take place.

Employees should also be consulted individually about their scores under the selection criteria, once this has been completed, and they should be informed of the proposal to select them for redundancy. If an employee is selected for redundancy, they should be invited to a further meeting prior to a formal dismissal letter being issued.

Once employees are aware that they have been selected for redundancy, they may wish to appeal and a process to allow for this should be made available.

Finally, those employees that have been selected will be made redundant with payment (if they have two years service) and should receive any notice or outstanding holiday period payments due.

The redundancy process requires careful planning and if you are considering making redundancies, we always advise businesses to seek legal advice at an early stage, to ensure that all legal requirements are met and to avoid common mistakes.

For more information on issues surrounding company reorganisation, restructuring and redundancy, contact Olivia Bailey on 01772 258321.


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