Redundancy and Restructuring for Employers: How to Run a Fair and Defensible Process

Redundancy may be commercially necessary, but a genuine business reason is not enough on its own. Employers must also follow a fair, reasonable and properly documented process.

This guide explains how employers can manage redundancy and restructuring exercises, including identifying a genuine redundancy situation, selecting a fair pool, applying objective criteria, consulting meaningfully, considering alternatives and reducing the risk of unfair dismissal or discrimination claims.

Introduction

Redundancy is often an unavoidable part of running a business, particularly in challenging economic conditions or periods of change. For SMEs and growing companies, restructuring can be necessary to remain competitive, protect profitability, streamline operations or adapt to shifting market demands. However, redundancy is also one of the most legally sensitive areas of employment law.

Even where there is a genuine business reason, a poorly handled redundancy process can expose employers to claims for unfair dismissal, discrimination, and, in larger exercises, significant protective awards. The key is not simply identifying a redundancy situation, but ensuring that the process followed is fair, reasonable and properly documented.

Understanding what counts as redundancy

Under English law, redundancy has a specific meaning. It arises where there is a reduced need for employees to carry out work of a particular kind, or where a business or workplace is closing. More specifically, a redundancy situation may arise where the employer has ceased, or intends to cease, carrying on the business or workplace in question, or where the requirement for employees to carry out work of a particular kind has ceased or diminished, or is expected to cease or diminish.

In practice, this often includes situations such as a reorganisation of roles, the introduction of new technology, outsourcing, a reduction in headcount, relocation, or a downturn in work. It is important to distinguish redundancy from dismissals related to performance or conduct, as the legal framework and obligations are different.

Employers should begin by clearly identifying and recording the business rationale for the proposed redundancies. This forms the foundation of a defensible process and is often scrutinised if a claim arises. The rationale should be genuine, evidenced and capable of being explained consistently throughout the process.

Why process matters as much as reason

One of the most common misconceptions is that a genuine redundancy situation automatically justifies dismissal. In reality, employment tribunals focus just as closely on the process followed as they do on the underlying reason.

A dismissal may be found unfair if the employer has failed to:

• consult properly with affected employees;
• adopt a fair and objective selection process;
• consider suitable alternatives to redundancy; and/or
• follow a reasonable procedure overall.

For SMEs in particular, where processes may be less formalised, this is an area where mistakes frequently occur. A lack of internal HR resource is not, of itself, a defence to an unfair process, although what is reasonable will always depend on the circumstances, including the size and administrative resources of the employer.

Establishing a fair selection pool

A critical early step is identifying the correct pool of employees from which redundancies will be made. This is not always straightforward, particularly where roles overlap or employees perform similar functions.

Employers should consider whether roles are interchangeable and whether it is reasonable to group certain employees together. A narrow or artificially defined pool can be challenged and may render dismissals unfair.

While there is no single correct approach, the decision should be based on a rational assessment of the business structure and should be capable of being explained and justified. Employers should avoid deciding in advance which individual employees will be made redundant before consultation has taken place. The pool should be approached as part of a fair process, rather than as a means of reaching a predetermined outcome. Acas guidance also emphasises the importance of fair selection pools, selection criteria and scoring.

Using objective selection criteria

Once the pool has been identified, employers must apply fair and objective selection criteria. This is an area where care is required, as poorly chosen criteria can lead to both unfair dismissal and discrimination claims.

Appropriate criteria often include factors such as skills, qualifications, and performance. Attendance records may also be relevant, but employers must take care to ensure that any absence related to disability, pregnancy or other protected characteristics is treated appropriately.

A balanced approach is usually best. Overly subjective criteria can appear arbitrary, while overly rigid criteria may fail to reflect the needs of the business. Criteria should be as measurable as possible, supported by evidence, and applied consistently across the selection pool. Where managers are scoring employees, it is sensible to moderate scores to reduce the risk of inconsistency or unconscious bias.

The importance of meaningful consultation

Consultation is at the heart of a fair redundancy process. It is not simply a procedural step, but an opportunity for dialogue between employer and employee.

Employees should be informed of the proposals, the reasons behind them, and how they may be affected. They should be given a genuine opportunity to respond, raise concerns, and suggest alternatives.

Employers are expected to approach consultation with an open mind. A process where decisions have already been made, and consultation is merely presented as a formality, is unlikely to be considered fair. Consultation should usually begin while proposals are still at a formative stage, before final decisions have been taken.

In larger redundancy exercises involving 20 or more employees within a 90-day period, collective consultation obligations arise. These bring additional requirements, including minimum consultation periods and notification to the Secretary of State. 

Considering alternatives to redundancy

Before confirming any dismissal, employers must consider whether there are alternatives to redundancy. This is an essential part of a fair process and one that is often overlooked.

Alternatives may include redeployment into other roles, changes to working hours, or voluntary redundancy schemes. Even where alternatives are limited, employers should demonstrate that they have been actively considered.

Where a suitable alternative role is available, it should be offered to the employee. Failure to do so can undermine the fairness of the dismissal.

Making and communicating decisions

Once consultation has concluded and selection criteria have been applied, employers must make decisions carefully and consistently. It is important that scoring is evidence-based and that records are retained.

Employees should be informed of the outcome in writing, with a clear explanation of how the decision was reached. Transparency at this stage can reduce the likelihood of disputes. The outcome letter should usually address notice, redundancy pay, accrued holiday, any appeal right, and the proposed termination date.

Employees should also be given the opportunity to appeal the decision. Ideally, the appeal should be heard by someone not previously involved in the process, although this may be more challenging in smaller organisations. Where a fully independent appeal manager is not available, the employer should still try to ensure that the appeal is handled as objectively as possible.

Common pitfalls for employers

In practice, many redundancy-related claims arise from relatively avoidable mistakes. These include, among other things, the following:

• selecting employees before consultation has taken place;
• failing to properly document decision-making;
• applying inconsistent or unclear criteria;
• overlooking discrimination risks; and
• failing to consider alternative roles.

For SMEs, where internal HR resources may be limited, it is particularly important to plan the process carefully from the outset. A clear timetable, draft communications, scoring matrix and consultation notes can make a significant difference if the process is later challenged.

Managing discrimination risk

Redundancy processes must be handled in a way that does not disadvantage employees with protected characteristics. This is an area where employers can face significant liability if not handled correctly.

For example, using absence as a selection criterion without adjusting for disability-related absence can give rise to discrimination claims. Similarly, selecting an employee on maternity leave without careful justification can lead to automatic unfair dismissal and/or discrimination issues, depending on the circumstances.

Employers should take a cautious and informed approach, particularly where protected characteristics may be relevant. Selection criteria should be reviewed before they are applied to ensure that they do not create an unjustified disadvantage for particular groups of employees.

Practical guidance for employers

A well-run redundancy process is structured, transparent and evidence-based. In practical terms, employers should aim to:

• document each stage of the process clearly;
• ensure consistency across decision-making;
• communicate openly with affected employees;
• consider alternatives to redundancy before confirming dismissals; and
• seek legal advice where there is uncertainty.

Taking these steps not only reduces legal risk but also helps maintain trust and morale within the workforce. This is particularly important where the business needs to retain key employees following the restructure.

FAQs: Redundancy and Restructuring for Employers

How long should a redundancy process take?

There is no fixed timeframe for individual redundancies, but the process must allow for meaningful consultation. Collective redundancies are subject to statutory minimum consultation periods.

Can I make redundancies if the business is still profitable?

Yes. Redundancy does not require a business to be loss-making. It is sufficient that there is a reduced need for employees to carry out work of a particular kind.

Do I have to offer alternative employment?

Where suitable alternative roles exist, they should be offered. Failure to do so may render the dismissal unfair.

Conclusion

Redundancy is rarely straightforward, particularly for SMEs navigating change with limited internal resources. However, by focusing on fairness, transparency and proper procedure, employers can significantly reduce the risk of legal challenge.

A well-managed process not only protects the business from claims but also demonstrates professionalism and respect towards employees at what is often a difficult time. Employers who plan carefully, consult meaningfully and keep clear records will usually be in a much stronger position if their decision is later scrutinised.

SMEs often have limited internal HR capacity, but tribunals still expect a reasonable process. Early legal advice can help ensure the process is structured, documented and proportionate to the size and resources of the business.

How the Jonathan Lea Network can help

At The Jonathan Lea Network, we help employers manage redundancy and restructuring processes fairly and defensibly. We can advise before consultation starts, prepare the necessary documents and support you through difficult employee communications, settlement discussions or tribunal risk.

We will respond to most enquiries with both an indicative scope of work and fee estimate, as well as the offer of a complimentary 20-minute discovery video call to discuss your issues and how we can help, before sending a more considered formal fee estimate via email.

In some limited cases, if you would just like initial advice and guidance on a call, we may instead offer a fixed fee appointment (commonly charged between £280 and £500 + VAT) whereby we will review the information you provide, hold a video call consultation and then follow up with an advisory email (as well as a fee estimate for any further work identified).

Please email wewillhelp@jonathanlea.net or call us on 01444 708640 as a first step. We first need an overview of the background and your issues, together with any significant documents, to provide an indicative scope of work and fee estimate.

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.