Disclaimer: The information in this blog is accurate as of its publication date. Any updates after that date are not reflected here.
Sometimes businesses need to restructure because of changes in business strategy, cost reduction programmes, role redundancy, and mergers/acquisitions. In this guide, where we will explain the essential elements of restructuring and role changes for employers. This will include the key laws, the rights of employees, the redundancy process, and the implications of TUPE.
Table of Contents
What Does ‘Restructuring’ Mean?
‘Restructuring’ refers to changes in the organisation of a business. It is often done with a view to making it operate more efficiently, cost-effective and/or effective. Businesses restructure for many reasons, including changing business models or strategy, saving money, moving into new markets, or because of a merger with/or acquisition of another business.
Furthermore, business restructuring may require transferring some employees to a newly acquired business or making them redundant. However, it is imperative that employers follow the correct legal processes at each step of the way. This will avoid reputational damage and/or a claim for wrongful, unfair, or constructive dismissal by an employee if their employment rights have been breached.
Failing to follow the law and best practices in restructuring can lower morale and reduce productivity. It may also increase stress, cause valuable team members to leave, and trigger trade union action.
Can I Change the Terms of an Employee’s Contract?
No, you cannot change the terms of an employee’s contract without their agreement to do so. This is because both parties sign an employment agreement as a legally binding contract, so neither party can impose changes on the other.
Varying an employee’s contract of employment
If you want to change the terms of an employee’s contract, for example, to reduce or increase their working hours, you may need to:
- Propose a change and have this agreed upon by your employee
- Renegotiate the terms of a trade union’ collective agreement’ or
- Exercise a flexibility or variation clause within the existing employment contract, which will allow you to make a change. For example, the contract may include a flexibility clause that allows the employer to vary the office the employee works from or the working hours. Even if a flexibility clause exists, employers should always consult with the employee before imposing the change. This will ensure that they have the chance to discuss any concerns and be comfortable with the new arrangement. Failing to do so may frustrate the employee with the imposed change.
The key point here is that you must obtain an agreement to vary the terms and conditions of employment. Any change that may affect workers’ rights should only be made after securing this agreement. Changing the terms and conditions of employment offers a great opportunity to discuss any concerns with the employee and to address these before finalising the new arrangements.
Dismissal and rehire
It is not possible to reach an amicable agreement on any proposed role changes. Other options may be available to you, including rehiring the employee on a new contract with revised terms (‘dismissal and rehire’) or giving them notice of any proposed changes. If you decide to dismiss and rehire on a revised contract, it is essential that you follow the correct process, including:
- Ensure that you have a fair reason for dismissal (e.g. redundancy or a substantial reason such as financial issues or lack of any other option)
- Follow a fair dismissal procedure (e.g. the redundancy process)
- Provide sufficient notice
- Provide the employee with the right of appeal against their dismissal
You must ‘collectively consult’ if you intend to dismiss and rehire 20 or more employees at a single location and within a period of 90 days or less. The consultation process should aim to avoid or reduce the number of dismissals and limit the negative consequences of the dismissals. If employers fail to collectively consult, an employment tribunal may order compensation in the form of a ‘protective award.’
If you are unsure of the correct process to follow to dismiss and rehire, it is recommended that you follow the Department of Business and Trade’s Code of Practice on dismissal and re-engagement in accordance with the Trade Union and Labour Relations (Consolidation) Act 1992. Failing to follow this code of practice may increase any award by up to 25%.
What is the Redundancy Process in the UK?
Sometimes, restructuring necessitates redundancy. This may happen, for example, if a change in business strategy eliminates certain roles. Before deciding on redundancy, you should first assess whether it is truly necessary. Other options may include:
- Offering voluntary redundancy
- Varying working hours
- Offering alternative roles in other parts of the organisation or
- Halting the employment of new staff.
If you conclude that redundancy is necessary and voluntary redundancy is not suitable or accepted, you should create a redundancy plan. This plan should outline the options considered and the steps you will take to ensure a fair process. Redundancy can be a lengthy process, including:
- Advising staff of the risk of redundancies, how many roles may be affected, and what will happen next
- Write to any employees who are at risk of redundancy, explaining that they are at risk of redundancy and their options
- Holding consultations with employees regarding the proposed changes, how to reduce the impact of the proposals, any concerns raised, and the selection criteria for redundancies
- Select employees to be made redundant using a fair selection system
- Work out a redundancy pay package
- Give appropriate notice to those being made redundant
- Offer alternative employment if it is possible to do so
- Offer an appeals process and
- Support your staff through the process.
Remember, if you fail to follow a fair and complete redundancy process, employees may challenge their dismissal. They could make a successful claim to the Employment Tribunal for unfair dismissal. This may then have serious reputation and financial and legal implications for your organisation.
Final Thoughts
If you are considering redundancy, we recommend following the best practice process set out by ACAS. This explains everything you need to know about employee rights during redundancy. It includes how to make staff redundancies, collective consultation for redundancy, redundancy protection for pregnancy and new parents, and TUPE. TUPE (the Transfer of Undertakings (Protection of Employment) regulations) ensures that employees retain continuity of employment when a new employer takes over, such as in an acquisition or merger. Continuity of employment means existing employees have the right to have the same or comparable contractual terms following the transfer process.
