Redundancy v Restructure
Redundancy:
From time-to-time Employers may need to adapt or restructure their business, so they have the right roles and structures to suit the changing external environment.
The process of redundancy, and payment of redundancy compensation (where applicable), are a last option. It should only happen after all redeployment options have been exhausted.
When you advise one of your employees, they were unsuccessful in the redeployment process you need to make sure that the employee is offered at least all of the support that is mentioned in any employment agreement or policies and/or has been mentioned in the change proposal.
Things you should consider include:
- Ensuring that all redeployment and alternative options have been worked through with the employee. Recheck this with the employee also
- Ensuring all employees know what date, the job is to be disestablished.
- Are there other options for the employee to stay on longer while further redeployment options are considered
- Is the employee agreeable to continue working for a while and take redundancy later
- Support where outplacement is not made available, or outplacement does not include counselling
Such support which may include: - Counselling
- Curriculum Vitae (CV) or Resume support
- Interview skills training
- Training that may improve the employee’s chances of future employment
- Career advice
- The notice period must be at least the length of notice referred to in the employment agreement or workplace policies. If the employee agrees you may give an extended notice period while they continue in their role, or in a special project of some sort, while the change implementation is completed. This can allow for other redeployment opportunities to be explored. The employee does not have to agree to a later date.
Notice of redundancy
If there is no specific clause in an employment agreement giving a period of notice in a redundancy situation, ‘reasonable notice’ must be given. The length of ‘reasonable notice’ depends on a variety of factors, such as:
- the reason for the redundancy
- the employee’s length of service
- the employee’s seniority and/or remuneration package
- custom, practice and industry norms
- the employee’s ability to find alternative employment
- the amount of compensation being paid (if any).
Final payments
Remember that unused annual leave and salary, along with any other entitlements, up to the end date is payable. Notice of termination of employment must be given in accordance with the employee’s agreement. Consider whether you want the employee to work the notice or be paid their notice.
Redundancy compensation
Whether employees receive redundancy payments is dependent on the applicable employment agreements and is a matter for negotiation between the employees either individually or with their Union or other representation.
If an employment agreement mentions redundancy pay, the employer will have to pay for the redundancy. However, if an employment agreement doesn’t mention any such clause, an employee isn’t legally entitled to redundancy pay.
Section 4 of the Employment Relations Act 2000 requires employers to act in good faith when making employees redundant.
Restructure:
If you think a new structure could improve the way your business operates, a business may choose to investigate restructuring its business. This doesn’t mean that you will make employees redundant although that may be an outcome, it means people’s roles may change.
One of the reasons for a restructure maybe that the business or part of it is to be sold to someone else. In this situation there are extra rules that protect certain groups of employees. These groups include people who do cleaning, catering, laundry, caretaking or provide security services.
Such workers are considered to be at greater risk of losing their job due to a lack of bargaining power and working in areas that are often sold, transferred, or contracted out. The extra requirements set out a process to follow in situations where an employee’s work will be taken over by a different employer. The rules give these workers the right to transfer over to the new employer on their existing terms and conditions of employment.
Reasons for business changes
An employer will need a genuine business reason to restructure and need to state the reason clearly to employees and/or a union if applicable as they go through the proper process.
Genuine reasons may include:
- financial issues resulting in the need to downsize or realign
- no longer needing a department or job functions
- wanting to outsource certain business functions
- realignment of brand
- changing your product or service offerings
- changing your business model
- changes in consumer behaviour e.g., shopping online
- merging all or part of your business with another.
How to restructure – the step-by-step process - Document the proposal including the reasons for the changes and what the business is trying to accomplish.
- Invite the affected employees and/or the union to a meeting. (You may need several)
- At the meeting, explain your proposal and give affected staff a copy of the proposal.
- Ensure enough time is provided (days/weeks) for staff and/or the union to provide feedback.
- Genuinely consider the feedback.
- Make any necessary adjustments based on the feedback received and agreed with.
- Confirm the structure.
- Meet to discuss next steps.
Common mistakes to avoid - Treating the proposal as a done deal before you have heard and considered the feedback.
- Not giving your employees enough time to consider the changes, provide feedback and arrange support.
- Not being clear about what the proposed structure is.
- Using redundancy to get rid of non-performing staff.
- Making a person redundant and replacing them with someone else in a similar position with a different job title.
- Giving out confidential information or refusing to give out information that you should disclose.
- Not consider re-deployment or re-training employees instead of making them redundant.
- Not acting in good faith.
Consequences of not following a fair process
Not following a proper process can impact on an employee’s well-being. An employee who has been made redundant and feels unfairly treated, can take a personal grievance case to the Employment Court. If their claim is upheld, you could be liable for reinstatement, reimbursement of lost wages, payment of compensation for hurt and humiliation and penalties.
Author: Ronald Jones