Redundancy and Restructures: A Legal Guide for UK Employers and Employees

Restructuring and redundancy are terms used in UK employment law to describe changes in the workplace. Organisational restructuring means changing the business structure, workforce or operations, often in response to financial pressures, market demands or strategic changes. This can include merging departments, streamlining roles or introducing new technology.

Redundancy is a legal process where an employee’s role is no longer required. This can be due to job losses, business closure, relocation or automation. It usually affects a particular kind of work or role. Restructuring doesn’t always mean redundancy but often means proposed changes to the business that require staff changes.

When Does Restructuring Lead to Redundancy?

A redundancy situation occurs when the employer no longer needs employees to do a certain type of work or when fewer people are needed to do it. Making redundancies can result from:

• Closing a site or one office

• Moving operations elsewhere

• Reducing the same number of roles

• Changing the way work is done (e.g. digital transformation)

• Responding to a proposed change in business direction

These scenarios usually trigger a redundancy process. Employers making redundancies must follow a fair procedure and apply objective criteria to avoid unfair dismissal or claims at an employment tribunal. The redundancy numbers involved can determine whether individual or collective consultation is required.

The number of redundancies can impact how the process is handled especially if 20 or more employees are being made redundant within a 90 day period at one establishment, as defined under collective redundancy rules.

Legal Requirements for Redundancy and Restructures

Under UK law, employers have a legal duty to manage redundancies fairly and lawfully. Here’s what’s involved:

• Fair redundancy process: Employers must base redundancy decisions on objective selection criteria such as qualifications, attendance and performance. Biased or inconsistent criteria may lead to claims for dismissal without fair reason.

• Consultation: Individual consultation with all affected employees. For collective redundancies (20 or more dismissals within 90 days) employers must also consult with employee representatives or an authorised trade union.

• Notice period: Employees are entitled to the greater of their contractual notice or the statutory minimum—usually based on years of service.

• Redundancy pay: If employees are made redundant after at least two years of continuous employment they are entitled to statutory redundancy pay or, if applicable, contractual redundancy pay. The amount is calculated based on week’s pay, age and length of service.

• Suitable alternative employment: Employers must make reasonable efforts to offer a suitable alternative or alternative role to redundant employees. If the employee unreasonably refuses a new job they may lose their right to a redundancy payment.

Steps in the Redundancy Process

1. Planning and Business Justification

Before taking action, conduct a thorough analysis of business needs and justify the proposed redundancies with clear, documented business reasons. Redundancy should only be used as a last resort when all other alternatives have been considered.

2. Consultation With Employees

Start the consultation process with all affected employees. If a collective basis applies begin collective consultation with a recognised trade union or elected reps. Listen to concerns and explore alternatives to redundancy such as re-engagement or changes to working hours. Allow a reasonable time for employees to respond, ask questions and propose alternatives. Employers should be working closely with HR and legal advisors during this phase to ensure full compliance.

3. Applying Selection Criteria

Use fair and consistent selection criteria when deciding who will be made redundant. Don’t use criteria that could lead to discrimination or claims of automatically unfair dismissal.

4. Communication and Notice

Tell employees of the first dismissal dates, their notice period, redundancy rights and any opportunities for voluntary redundancy or trial periods in other roles.

5. Redundancy Pay and Support

Make sure redundancy payments are processed quickly—whether statutory redundancy payment or contractual redundancy pay. Provide practical advice, job search support or retraining where possible to help employees transition. If employees are made redundant after being continuously employed for at least two years, they are entitled to statutory redundancy pay.

Employers Challenges

Even with the best intentions employers can run into problems during a redundancy process, especially if they fail to follow a fair process. This includes:

• Claims of unfair dismissal if no proper process is followed

• Not giving the correct notice period or redundancy rights

• Not consulting employees on a collective basis

• Mismanaging offers of suitable alternative employment

• Poor record-keeping of the selection process

• Misunderstanding when dismissal is automatically unfair

• Offering lower pay in an alternative role without explanation

To reduce legal risk employers should work closely with legal advisors or experienced redundancy solicitors.

Redundancy FAQs

Q: What’s the difference between redundancy and restructuring?
A: Restructuring means reorganising the business or departments. Redundancy is when roles are eliminated and employees are dismissed because of those changes.

Q: How much notice should an employee get before redundancy?
A: That depends on the employment contract or statutory minimum based on years of service. The longer the service the longer the notice period.

Q: Can you avoid redundancies during restructuring?
A: Yes by offering alternative employment, cutting overtime or using voluntary redundancy schemes. Restructuring should always seek to minimise redundancies where possible.

Q: What is a trial period for an alternative role?
A: If an employee is offered a suitable alternative they can try the new job for four weeks. If it’s unsuitable they may still be eligible for a redundancy payment. An example could be a move from full-time to part-time within the organisation.

Q: What if an employer doesn’t follow redundancy procedures?
A: The employee may bring a tribunal claim for unfair dismissal, exposing the employer to potential compensation claims and reputational damage.

Q: Is redundancy ever justified for a substantial reason?
A: Yes, but the substantial reason must be genuine and followed by a legally compliant process.

Employer Key Points

• Redundancy and restructuring are legal processes that must be planned and executed properly.

• Always follow the fair redundancy procedures, use objective criteria and document everything.

• Consult impacted employees individually and if required on a collective basis.

• Respect statutory severance pay, enhanced termination compensation, and applicable notice periods.

• Offer a suitable alternative wherever possible with a trial period.

• Get help from solicitors for redundancy matters to reduce the risk of unfair dismissal claims or tribunal claims.

Summary: Restructuring and the Law

Employers must treat redundancy as a legal obligation. Following a structured, proper process not only protects against unfair dismissal but supports employees through a tough time. Not doing so risks legal costs, loss of morale and reputational damage.

Take time to consult properly, explore every suitable alternative employment and ensure every redundant employee is treated with respect. In times of business restructuring get expert legal advice.

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