The words “redundancy” and “restructuring” carry very different connotations. Redundancy is often received with dread as it implies cutbacks and job loss. Restructuring, on the other hand, sounds strategic and forward-looking.
It’s no surprise therefore that employers often refer to redundancies as “restructuring” in an effort to deliver difficult communications sensitively. But beware – it’s essential not to lose sight of the legal distinctions.
Redundancy or SOSR?
Redundancy is one of the five potentially fair reasons for dismissal. Under section 139(1)(b) of the Employment Rights Act 1996, it applies where there’s a reduced need for employees to do a particular kind of work.
Restructuring, by contrast, could fall under “some other substantial reason” (SOSR) where the restructure requires changes to terms and conditions. If employees refuse the new terms, they may be dismissed and offered re-engagement.
Confusingly, you can’t assume “restructure” means SOSR. In Packman v Fauchon, an employee’s hours were reduced due to a fall in demand. Even though the headcount didn’t change, the dismissal was still found to be a redundancy in law.
Termination payments – why language matters
Though the consultation process can look similar for both (engaging employees, considering alternatives, fairly selecting), the key difference lies in termination payments.
A redundancy dismissal typically entitles the employee to a statutory redundancy payment, whereas SOSR does not – just notice pay.
Top tips for HR
- Even if no roles are lost, a reduced need for work may still be redundancy.
- Mislabelling a redundancy as a restructure can risk unpaid redundancy claims.
- Collective consultation rules apply for both SOSR and redundancy if 20+ dismissals are proposed within 90 days.
- Always align your documentation and rationale with the actual legal basis for dismissal.
Further reading
- About dismissals – ACAS
- Could alternative employment be better than redundancy? – Hunter Law
- Code of Practice on “fire and rehire” in force – Hunter Law
- EAT stresses the need for proper consultation in redundancy cases – Hunter Law
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