FAQs: The Three R’s – Redundancy, Restructure and Reorganisation
30 April 2013 (but checked in December 2019 and still up to date)
We regularly get asked questions about redundancy, restructure and reorganisation and here we have set out some common questions and answers for you. This was also inspired by our recent fully booked breakfast workshops on the subject!
Please note that these FAQs do not cover the basics of a fair redundancy process – separate advice should be sought on that:
What constitutes a restructure or reorganisation?
These are not legal terms, so there is no exact definition, but usually they refer to changes to the organisational structure or to roles within an organisation. This may or may not involve a loss of headcount. A recent case, Packman v Fauchon (2012) shows it is not necessary to have a reduction in headcount in order for there to be a redundancy – this case is covered in our article here.
We are currently undergoing a restructure and a senior role is being made redundant to make way for a new organisational structure. There is an alternative position but it attracts a lower salary and has less responsibility. It seems a disservice to the senior employee to offer this – should we?
An important part of a redundancy process is to consider whether there are suitable alternative vacancies within the business (and that includes any across the group companies). Whether the role is suitable is an objective test, having regard to whether the role is a job match for the particular employee in question. It is difficult to assess this without understanding the details of each role in this question. However, as best practice many employers choose to simply provide a list of all open vacancies within the organisation and allow the employee to indicate whether they are interested or not. Employers may also choose to red-circle an employee’s salary. There is no obligation to do so, but it may help minimise job losses.
Can we offer an alternative role on a trial basis? What happens if the trial doesn’t work out?
A statutory trial period of four weeks is set for alternative employment where the employee has been offered a role with terms that wholly or partly differ from the corresponding terms of the employee’s previous employment. An employer and employee can agree a longer trial period if they wish, although the terms of this should be agreed in writing. The trial period is for both the employer and employee to assess whether the role is suitable.
If a trial period does not work out (from either party’s perspective) then the employee is likely to be made redundant. For the purposes of the statutory redundancy payment, this will be calculated based on the end of the original contract. Complexity can arise in regard to notice – does the notice period apply from the end of the original contract or from the end of the trial period? There is no set guidance in law on this point but if an employer is intending that notice starts from the end of the original contract we recommend it is made abundantly clear to the employee before they commence the trial period.
What is bumping?
Bumping is the process of moving a potentially redundant employee into another role, and dismissing the employee currently performing that role. It is a strange concept, but this can still be a fair dismissal by reason of redundancy. This is unusual in practice and used in occasional circumstances where employers wish to retain the skills of a senior employee and a junior employee becomes “bumped.” However, it must be the transfer of the “bumping” employee that causes the “bumped” employee to lose their job, and that employee must be paid the appropriate redundancy payments if applicable. It is an area where we strongly recommend advice is sought.
Our business has lost a large contract. Whilst we do not wish to make anyone redundant, it seems inevitable. One manager has raised that an alternative would be to ask our employees to consider a drop in salary – can we do this?
Part of a fair redundancy process is to consider whether there are any alternatives to making redundancies. Things such as reducing salary would involve changing the terms and conditions of the employee’s employment and as such employees should be consulted with to see whether they accept such changes. Consultation periods should be reasonable bearing in mind the change being made. If employees do not accept the change then there are ways to impose the change, but these can carry risks. You should seek advice if changing terms and conditions is being considered as an option.
If you are dealing with a redundancy, restructure or reorganisation issue, then we can help. Please call us on 01243 836840 for a no obligation chat, or email us at [email protected].