What is the legal difference between restructuring and redundancy?

Redundancy and restructuring are different concepts, where redundancy has clear negative connotations, while the other can be seen as more strategic, and thus more positively framed.

As a result, employers may often try to refer to redundancies as a restructure.

However, there are clear legal distinctions between these two concepts.

Redundancy occurs when an employee’s role is no longer needed within the business, which can be a result of the closing of the business or the closing of a specific location, or even as a result of a restructure within the business.

On the other hand, restructuring refers to changes in an organisation’s structure or processes, with the aim of making the business more efficient.

And with this process, there may not be the need for any job losses within the business.

Redundancy is recognised as one of the five potentially fair reasons for dismissal, whereas restructures can sometimes fall under another of the five fair reasons, such as Some Other Substantial Reason (SOSR), although this is not always the case. However, as mentioned above, restructuring can also lead to redundancy.

Another difference is that, with redundancy, employees would be entitled to receive statutory redundancy pay if they have at least two years’ continuous service, whereas someone subject to a SOSR dismissal as a result of a restructure may only receive notice pay.

Employers are therefore advised to be cautious when applying a restructure or redundancy process, and to ensure that they are following the correct procedure, as there can be risks involved in applying the wrong process.

If you are planning changes to roles or team structures and want to avoid using the wrong process, contact Solutions for HR for practical support with the right approach and documentation.