The Difference Between Redundancy & Restructuring

With so much pressure on employers in 2020 due to COVID-19 – the introduction of work from home, social distancing and hygiene practices to prevent a second wave during Level 3 Alert, some employers will also need to consider restructuring and potentially disestablishing some positions to navigate their business forward.

Firstly, it is important to note that employers are obliged to act in good faith and in the interests of employees as well as in the interests of their business at all times.

All considerations in regards to restructures – and potential resulting redundancies must be fully transparent.

Employers have the right to act in accordance with the requirements of their business, but a process must be followed in the area of altering the structure – whether it be for business growth or reduction.

Restructures are commonly assessed due to a change of market and trading environment, an acquisition or a change in direction in business strategy.

Firstly, by way of definition, redundancy (otherwise termed as role disestablishment) is the outcome of a restructuring process, and would usually be considered the last resort in terms of the employee or employees concerned.

Role disestablishment does not always mean the termination of an employee’s contract – very commonly where a role is disestablished, the employee is moved into another broader (or more specialised) role.

The single most important consideration is whether or not the role is required in the immediate and foreseeable future for the business.

To begin the process of business restructure, the business plan must first be put in place and all resources – inclusive of workforce, taken into consideration.

Where workforce is concerned, the skill matrix identifying gaps and overlaps is a key element. While a downsized structure due to pressure on profitability and business viability is in question, succession planning must also be considered and the business plan needs to examine areas of potential growth and increased margin.

In this regard, your overall restructuring strategy may well require the introduction of new or higher skills in some areas – or specific requirements for experience and expertise may be sought out for business plan progression into new avenues.
A restructure does not necessarily mean a chopping of employee numbers (although this is commonly the outcome). Every aspect of business must be carefully considered.

Where role disestablishment is the only option – and no new role can be established for the employee in the role, redundancy due to role disestablishment takes place.

Careful communication with the employee concerned is required. Redundancy is very stressful for employees and it’s important that it is not a surprise – and equally important that all avenues for retaining or repositioning this employee are evaluated.

Employees faced with disestablishment must be paid all owing holiday pay in their final pay cycle, they must be allowed time to attend interviews if they wish to and they may also be offered outplacement support – which involves assisting them with CV optimisation, prepares them for successful interviewing and ensures they are feeling as optimistic and positive as is reasonably possible under the circumstances.

If employers are feeling unsure about the correct process to follow – ensuring compliance and risk minimisation during this process, professional HR support is recommended.

For full and detailed guidance, please contact us and one of our consultants will be happy to assist you, or you may wish to consider purchasing our Restructure & Redundancy Toolkit from this website.

Book a complimentary 15 minute consultation now with our Director, Tanya Gray.