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Planning for the future – Getting restructuring and redundancy right

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Olivia Bailey, solicitor in our employment and regulatory team, looks at how businesses can prepare for recovery from the pandemic and how they can restructure their business responsibly to avoid unwanted employment claims.

As organisations begin to consider how their business will look once the current government support comes to an end, it’s important to be proactive and focused in looking to the future.

Creating short and medium-term strategies will give the organisation the best opportunity to move forward in the “new normal” business environment.

Exploring alternatives to redundancy

While some redundancies may be unavoidable, for others there may be ways to restructure the business and mitigate redundancies by making cost savings elsewhere. In the first instance, steps could be taken to reduce overheads by restricting recruitment, reducing overtime opportunities and reducing the engagement of agency workers.

Most businesses will have put in place infrastructure to enable homeworking throughout the crisis, and this could be capitalised on to reduce the need and expense of office space and parking/travel benefits, as well as helping to keep costs of utilities and cleaning services low. Some employees may be happy to work from home permanently; others may be willing to do so for a couple of days per week, so it’s certainly worth having the conversation with employees, with the aim of reaching an agreement.

Another option could be looking to rely on lay off clauses or introducing reduced working hours over the full working week. It could be that employees are willing to agree to working fewer days per week, which will have a similar effect. By opening the discussion to all employees, you may find that there are volunteers. The benefit is that you can tailor any new arrangements to the individual’s needs if your business environment allows, which is likely to result in a win-win situation for both parties.

Negotiating salary reductions

The alternative could be to seek agreement from employees to a pay reduction across the board, or by employees in certain service lines that have been specifically hit by the crisis. In the current environment, employees may be willing to voluntarily agree to a pay reduction to protect their fellow workers.

It may also be possible to transfer employees to different roles, if certain departments have seen an increase in workload, making use of skills that are already in the business.

Getting redundancy right

If redundancies are unavoidable, there is the option of inviting employees to volunteer for redundancy as part of the wider consultation process. A formal redundancy process should be followed, to ensure that you discuss your planned changes with each individual employee that could be affected. As part of the process, you may also be required to consult trade unions or employee representatives, depending on the number of employees involved.

It is worth considering that where a redundancy programme is genuinely the last resort, the senior leadership team is likely to gain far more understanding and buy-in from employees, helping to maintain a level of employee engagement and co-operation for the future.

As redundancy is one of the five potentially fair reasons for dismissal, we recommend that legal advice is sought to prevent any possible claims for unfair dismissal arising from the redundancy process. It is also important to remember that employees who are dismissed for reasons of redundancy are entitled to a redundancy payment, where they have more than two years’ service.

Does your insurance cover protect you against employment claims?

Businesses should also check any existing insurance they have, to see whether it would cover legal expenses and compensation, for any claims arising out of a restructuring or redundancy process.  If not, or if cover does not extend to claims arising out of these particular circumstances (many insurance policies will specifically exclude infectious diseases), you should look to obtain cover prior to commencing any such process.

Harrison Drury’s HR Compass – Employer Protection insurance product is available to any business that has not yet started a restructuring or redundancy process and offers cover against Employment Tribunal compensation and legal fees arising from claims (in addition to discounts on legal work and remote support).

If you would like assistance to consider the options available to your business in terms of restructuring and re-organisation, our team of specialist employment lawyers can provide comprehensive advice and guidance, including in relation to redundancy procedures.

For more information, contact Harrison Drury’s dedicated Coronavirus Legal Support Team on 01772 349999 or via coronavirussupport@harrison-drury.com


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