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When you run a business and have staff, you may find that you wish to restructure your company. If so, this could affect your employees’ roles, potentially leaving them without jobs. As a result, it is essential that you follow the appropriate processes to terminate your employees. This article will explain some legal aspects of redundancies during restructuring for small business owners.
What Are Restructuring and Redundancy?
If you restructure your business, this means that you make changes to your company in terms of either the:
- organisational structure; or
- available job roles.
Restructuring could be beneficial, as it may allow your business to operate more efficiently and plan well for the future. However, it can also include cutting out activities not aligning with your future commercial goals. Therefore, you may need to make redundancies when you restructure your business.
What Do I Need to Do if I Am Considering Redundancies?
Before making your employees redundant, you should ensure that there is no alternative action you can take that would result in them retaining their role or another job at your business. For example, you could consider:
- reducing overtime;
- slowing down on recruiting new staff;
- no longer using contractors or freelancers;
- implementing short-time working;
- making temporary lay-offs; and
- offering staff the opportunity for voluntary redundancy.
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How Do I Ensure Legal Compliance During the Redundancy Process?
If you decide redundancies are your only option during your business’s restructuring, you must keep your employees updated on your plans and their expected timeframes. Alongside these updates, you must ensure that your redundancy process is fair. This includes:
- implementing a selection stage;
- having a consultation period; and
- considering alternative employment for your staff.
Selection Stage
How you select employees for redundancy must be fair, and you must not discriminate. Therefore, you may select by:
- looking at their level of previous work;
- comparing employee’s skills and qualifications; or
- looking at disciplinary records.
Consultation Stage and Other Employment
If you carry out redundancies, you must then have a consultation process. This means you discuss your potential redundancies with staff and respond to their objections and representations. You will also have to consider offering alternative employment to your employees.
Redundancy Pay
You may need to pay your redundant employees redundancy pay. This is because you may have a contractual entitlement to do so. Even if there is no contractual entitlement, they may qualify for a statutory entitlement. This will likely apply if you have employed them continuously for two years.
Notice Period
Furthermore, you have a legal duty to give your employees notice of redundancy. The length of the notice may be contained in their employment contract. However, if it does not, a statutory notice period applies that you must pay your staff for. This applies even if your staff are not working for the notice period.
If you have continuously employed an employee for two years, you must also allow them time off work to look for a new job or arrange training to assist with the new job search. This timeframe extends to the end of their notice period. You do not have to pay them more than 40% of a week’s worth of pay when they take this time off. Importantly, a reasonable amount depends on the employee’s circumstances.
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What if I Am Making Other Changes?
When you restructure your business, you may not make redundancies, but other changes may affect your employees’ roles. For example, you may make changes to their:
- job roles;
- places of work;
- pay amount; or
- benefits.
If so, you may legally need your employees’ consent for these changes. However, this will depend on the flexibility of your employment contracts. Therefore, you should seek assistance from an employment lawyer if you are transferring employees as part of the restructuring process.
Key Takeaways
If you decide to restructure your business, you may need to change job roles and make your employees redundant. Because this process can significantly affect your employees’ livelihoods, you should consider alternatives first, such as short-time working and reducing staff overtime. However, if you choose to go ahead with redundancies, ensure that you:
- hold a selection stage and consulting period;
- consider alternative employment for your staff; and
- provide sufficient notice to the affected employees.
If you encounter redundancies when restructuring your business, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Restructuring is where you make changes to your company either through organisational structure or job roles to make your business, for example, run more efficiently.
Redundancy is a type of employee dismissal where the employee’s work no longer aligns with your business’ operational needs.
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