“We cannot direct the wind, but we can adjust the sails.” – Dolly Parton
In this challenging economic environment, many firms will feel the need to adapt in order to save costs or change how they do things. Labour is a huge element in any cost to business, often this will mean restructuring the workforce in some way. Here, we briefly take you through what this can entail and how we can help. For clarity, some of the concepts have been simplified so always take legal advice about your specific circumstances.
What is restructuring?
It is a loose term covering a wide range of possible changes to the workforce. Not all of these carry legal implications. Here, we take a brief walk through some typical scenarios.
‘We need to change what people do’
Adding or taking away duties from staff or reallocating duties between staff will often not involve contractual change. Employees have an implied duty to give faithful service and cooperate which means taking on additional tasks even if there is nothing in the written contract requiring them to do so. If duties are set out in a job description, that can change too since job descriptions generally do not form part of the contract of employment. For more radical changes of this type, however, we would recommend securing agreement, either because the job itself is changing significantly or because imposing unwelcome changes to duties could be a breach of the implied duty of trust and confidence. This carries a risk of a constructive unfair dismissal claim in an employment tribunal, attracting a risk of compensation being awarded of about a year’s pay.
‘We need to reduce our workforce’
Reducing headcount is a redundancy situation. Employers must give plenty of warning and go through a proper process of objective selection and consultation for redundancy dismissals to be fair. This is important only for staff with over two years’ service since staff with less do not have ordinary unfair dismissal rights. Staff with over two years’ service must also be paid a statutory redundancy payment (starting at £1,142 for a two-year employee under 41 years of age). So, the two-year cut-off is very significant.
‘We need to relocate’
This is also a redundancy situation but only if staff don’t have a ‘mobility clause’ in their contracts - that is, a provision that entitles an employer to move them. Even then the clause has to be exercised with caution to allow staff to adapt to working from the new location. If your staff contracts don’t have one, consider adding it before you make any major decisions. You might also have to carry out an equality impact assessment to see if the change would unlawfully discriminate against certain staff.
‘We need to lose a lot of staff’
If that number is 20 or over within a period of 90 days at any one location, you need to engage in a process of collective consultation either with a trade union (if you recognise one) or with certain staff elected by colleagues to do this. The consultation period is 30 or 45 days before redundancy notices are given, depending on the numbers involved. A failure to do so can result in a tribunal award of compensation amounting to wages for the period of the failure.
‘We need to change contracts’
Sometimes contracts become unfit for purpose. For example, they may contain hours of work that are no longer suitable. If staff are willing to agree to variations, that is fine. If not, you could ultimately consider ‘firing and re-hiring’ - that is, terminating existing contracts and offering re-employment on new terms. But this is fraught with risk. Not only could it be an unfair dismissal of anyone with over two years’ service, but it can also for the purposes of collective consultation be deemed a redundancy, requiring you to go through consultation (as above) if 20 or more employees are involved.
‘We need to sell part of the business’
A sale of the whole or part of a business is very often a transfer of an undertaking under the TUPE Regulations. This is a solution, not a problem, because TUPE ensures that staff contracts transfer automatically to the buyer of your business. So, the buyer will want to carry out due diligence on those staff assigned to the part being sold. TUPE also imposes a duty on the seller to inform and consult staff representatives and inform the buyer of certain statutory information. TUPE is simple in its effect but is often complicated to apply in practice.
‘We need to transfer staff to another group company’
This normally does not involve a TUPE-style transfer and can be done by serving notices on staff that they are to be employed by an associated company.
How 3CS can help
Famous author Stephen King once said, ‘There is no harm in hoping for the best as long as you are prepared for the worst’. In all of these scenarios, the object is to keep you out of the employment tribunal. We can help by working with you on how to go about the change you propose, including advice on the likely timescales and costs that could be involved and the paperwork required - and our experienced HR consultants can help with face-to-face consultations. Please get in touch with your usual 3CS contact to find out more.
