Whatever the reason, workforce restructuring can have significant employment law implications. Changes to roles, reporting lines, working arrangements or headcount need to be planned carefully, particularly where the proposals could lead to redundancies.
Understanding the key legal considerations at an early stage can help employers implement organisational change effectively while reducing the risk of employee disputes and Employment Tribunal claims.
Establish a clear business reason for the restructure
Before announcing a restructure, employers should be clear about what they are trying to achieve.
This might involve:
- Reducing operating costs
- Removing duplicated roles
- Combining teams or departments
- Changing management structures
- Introducing new technology
- Responding to reduced demand
- Moving work to another location
- Creating roles requiring different skills
Having a clear business rationale helps employers explain the proposals to employees and provides a foundation for a meaningful consultation process.
Does the restructure create a redundancy situation?
Not every business restructure results in redundancy.
However, a redundancy situation can arise where a business closes, a workplace closes or the employer’s requirement for employees to carry out particular work reduces or disappears.
A role does not necessarily need to vanish completely. A restructure that reduces the number of employees required to perform similar work may still result in redundancies.
Employers should identify which roles are genuinely affected before deciding which individual employees may be at risk.
Consultation should happen before decisions are final
Employees affected by potential redundancy should be consulted before final decisions are made.
Consultation should be genuine and meaningful. Employers should explain the proposed changes, why they are being considered and how employees could be affected.
Employees should also have an opportunity to ask questions, challenge proposals and suggest alternatives to redundancy. Acas advises employers to consult before making redundancy decisions and genuinely consider suggestions raised during the process.
Alternatives might include voluntary redundancy, reduced recruitment, redeployment, changes to working arrangements or alternative organisational structures.
Consider your redundancy selection pool
Where a restructure removes an entire role occupied by one employee, selection may be relatively straightforward.
Where the business needs fewer people carrying out similar work, employers will usually need to consider an appropriate redundancy selection pool.
The pool should normally include employees performing the same or similar roles, although the appropriate approach will depend on the organisation and the work involved.
Employers should avoid designing a selection pool simply to achieve a predetermined outcome.
Use fair and objective selection criteria
Once the appropriate pool has been identified, employers may need to score employees against selection criteria.
Acas recommends that redundancy criteria are as objective and measurable as possible and applied consistently across employees within the pool.
Potential criteria could include:
- Skills and qualifications
- Relevant experience
- Performance
- Disciplinary record
- Attendance, where appropriate
Employers should maintain evidence supporting the scores awarded.
Care should also be taken to avoid discrimination. For example, disability-related, pregnancy-related or maternity-related absence should not simply be treated in the same way as ordinary absence when assessing attendance.
Consider suitable alternative employment
Redundancy should not automatically mean the employee leaves the organisation.
Employers should identify whether there are suitable alternative roles available and discuss these with employees at risk of redundancy.
Factors such as the employee’s skills, responsibilities, pay, hours and location can all affect whether an alternative role is suitable.
Acas guidance confirms that employers should try to provide alternative roles for affected employees where available.
Additional priority rules can also apply to certain employees who are pregnant or have recently returned from specified forms of family leave.
Be careful when creating new roles
A restructure may involve removing existing positions while creating new roles.
Employers should consider whether the new role is genuinely different from an employee’s existing position or whether it could amount to suitable alternative employment.
Where several employees are competing for fewer new positions, a fair selection process may be required.
Employers should be particularly cautious about requiring employees to apply competitively for jobs that are substantially the same as their existing roles without considering the legal implications.
Will employees’ terms and conditions change?
Not every restructure involves redundancy. Sometimes the proposed organisational change requires employees to remain employed but work under different terms.
This could involve changes to:
- Duties
- Working hours
- Shift patterns
- Location
- Pay or benefits
- Reporting responsibilities
Employment contracts cannot be changed unilaterally without significant potential legal risk. Employers should therefore consider consultation and agreement before implementing contractual changes.
If agreement cannot be reached, obtaining advice before considering more significant steps such as dismissal and re-engagement is particularly important.
Does collective consultation apply?
Additional rules apply to larger redundancy exercises.
Currently, employers proposing 20 or more redundancies at one establishment within a 90-day period must follow collective consultation requirements, alongside individual consultation.
Employers should identify whether collective consultation may apply at the very beginning of the restructuring process because statutory minimum consultation periods can affect the project timetable.
Further changes are expected during 2027, including an additional organisation-wide threshold for collective redundancy consultation under the Employment Rights Act 2025 and significant changes to when it is appropriate to change contract terms.
Plan communications carefully
Restructuring can create uncertainty throughout a workforce, including among employees whose jobs are not directly at risk.
Employers should consider:
- When employees will be informed
- Who will communicate the proposals
- What information managers will need
- How questions will be answered
- How confidentiality will be managed
- When clients, suppliers or other stakeholders should be told
Consistent and transparent communication can help maintain trust and reduce unnecessary uncertainty while the consultation process takes place.
Managing a workforce restructure effectively
Successful restructuring involves more than designing a new organisational chart. Employers need to consider consultation, redundancy selection, alternative employment, contractual changes and discrimination risks while continuing to meet the commercial needs of the business.
Taking employment law advice at the planning stage can provide greater flexibility and help avoid problems later in the process.
DTM Legal’s Employment & HR team advises employers on workforce restructuring, organisational change, redundancy processes, consultation and changes to employment terms.
If your business is considering a restructure or changes to its workforce, contact DTM Legal’s Employment & HR team to discuss how to plan and implement the process effectively.