Redundancy is a challenging, emotionally-charged process that no business leader or owner wants to face. However, the Coronavirus pandemic has brought challenges to all organisations from large corporates to the smallest SMEs, and for many, restructuring and redundancy may be the only option.
In times of crisis, businesses go through three phases – Survive, Reset, Thrive.
The survive phase saw us all getting by day by day to get the job done, in many cases supported by the Government’s COVID-19 furlough scheme to keep staff in employment.
Most businesses will have now moved on to the Reset phase. This is where plans must be developed, and very difficult decisions made, to put the organisation in the best possible position to thrive in the future.
Unfortunately, there may be a need for fundamental changes to staffing – and support from expert redundancy HR specialists can be required to achieve this. Even large companies with their own HR teams may require specialist restructuring and redundancy HR support, particularly if they are preparing to make a large number of redundancies.
Before taking any action, it is crucial to understand what redundancy means, the legal process required, and the pitfalls that can be encountered along the way.
What are restructuring and redundancy?
This may sound like a straightforward question, but many employers struggle to understand it. First of all, there is no legal definition of restructuring and redundancy and the term restructuring may in fact cover a range of options such as reduced hours, lay-offs and changes to pay and contracts that stop short of redundancy.
As many businesses seek to cut staff costs due to the impact of Coronavirus, it’s important to understand that businesses do not make a ‘person’ redundant – it is the role they perform that is now no longer required. This means in order to make a job redundant, there must be a reduction in the requirement for the work to be carried out, a business closure, or the closure of a workplace. You should also consider alternatives to restructuring and redundancy before you begin.
What are the alternatives to restructuring and redundancy?
Redundancy should be a last resort, and there are a number of alternatives that should be considered. Many will require the agreement of employees, but in the difficult circumstances we all face because of COVID-19 you may find that staff are agreeable to change if it means they remain in employment.
Not every solution will be right for every business but you may consider pay freezes or cuts, a temporary deferral in pay, a cut in hours, and unpaid sabbaticals. When considering restructuring or redundancy you should also look at whether it is possible to redeploy one or more employees to another part of the business. Sometimes an external eye – such as an outsourced HR provider – can help with identifying these alternatives and spot opportunities you may have missed.
If there are no viable alternatives or employees do not accept the offer of a change to hours, pay or terms, then redundancy may be a fair reason for dismissal. It is crucial that fair and legally sound processes are followed – again, an employer or in-house HR team may need support from an external HR provider to support with this.
A fair redundancy process – consultation is key
From the largest corporates to the smallest businesses, the same rules of redundancy apply. In large companies which may be making a significant number of redundancies, it is essential that a thorough consultation process – including collective consultation where relevant – is carried out meticulously and fairly. Getting this process wrong can be expensive and risks exposure to employment tribunals and reputational damage.
If you intend to make 20 or more employees redundant within any 90-day period at a single place of work, then you must follow collective consultation rules which require a consultation period of 30 days (45 days if the number of employees being made redundant is 100 or more). There is no set consultation period for employers proposing to make fewer than 20 redundancies but it is good practice to consult, and a tribunal could decide that a member of staff has been unfairly dismissed if they were not consulted or if the consultation was not adequate.
When selecting employees for potential redundancy, you must be scrupulously fair. Of course, selection must not discriminate on the grounds of any protected characteristics such as age, race, religion, sex or sexuality.
Usually candidates are “scored” on performance – their output or quality of work, attendance, and disciplinary records. This can be a complex process and may be subject to a challenge by an employee – so often to ensure complete compliance, objectivity and impartiality, this process is run by an external HR provider that specialises in restructuring and redundancy.
Restructuring and redundancy for employees on the Coronavirus furlough scheme
Staff who are on furlough may still be dismissed on the grounds of redundancy. However, businesses should be wary of making redundancies as soon as the furlough period ends as HMRC may interpret that the intention was to make the redundancies all along.
It’s important to note that despite the existence of the furlough scheme, all normal employment rules, including the need for redundancy consultation, are still in effect.
If furloughed staff are not at work then meaningful consultation must take place – either bring them safely into the workplace, or carry it out by phone or video call.
If you do make an employee redundant, then you will need to calculate their statutory redundancy payment. This is based on a number of factors including their pay, length of service and age. Redundancy payments are based on the employee’s full salary – not the reduced amount paid through the furlough scheme. An employer must meet the cost of this payment – it cannot be claimed through the job retention scheme.
External HR support for restructuring and redundancy
Restructuring and redundancy is a complex process, especially taking into account the additional factors of Coronavirus and the furlough scheme.
Even for very large companies, it may be that internal HR teams need support from an external HR team which specialises in redundancy. An external team can view your workforce with an objective eye, identify alternatives to redundancy, ensure consultation is carried out legally, fairly and sympathetically, and advise on any potential issues your business may face as a result of the process.
This article was produced in association with Reality HR which delivers bespoke HR services including restructuring and redundancy support to a range of organisations through its team of CIPD qualified specialists.