Restructuring…what is it, why should you know about it, and why may it be necessary?
Restructuring is a HR term used to describe an internal change in a business to respond to evolving circumstances. It usually involves the reallocation of human resources or a reduction in headcount. Or both.
At present, however, restructuring is best thought of as a situation arising when a business is working to return to regular operating levels following the impact of the COVID-19 pandemic. To do that, this business may consider hiring more staff, upskilling current employees, or perhaps letting some people go.
Other reasons why a restructure may be necessary include:
Risks of restructuring
When undertaking a restructure, focus on the business case. Ensure that you are crystal clear on why the business needs to restructure. This involves examining the reasons why the business needs to change and the options that will allow the business to adapt to the evolving pressures.
There are three main risks when undertaking a restructure:
1. Redundancy risks:
If considering redundancies, you must follow correct procedure before confirming any dismissals. Employees are well protected under redundancy legislation and there are multiple redundancy-related risks that could lead to an unfair dismissal claim.
2. Constructive dismissal risks:
A contract of employment can only be changed by agreement with the employee. You should never change an employee’s contract without first consulting them or seeking their consent. Doing so runs the risk of incurring an unfair or constructive dismissal claim.
3. Discrimination risks:
Employers have a legal duty to avoid discrimination under the Employment Equality Acts 1998 – 2015. You’ll need to bear this in mind during a restructure as any decisions you take with regard to reallocation of staff or termination of employment must not favour one cohort of employees over another.
The business risks of a restructure are far-reaching and can have a long-lasting impact. The morale and motivation of staff who continue on with your business are likely to dip if the restructuring process is not handled in a fair and transparent manner.
Effective communication during the transition is vital. Providing relevant supports to staff who leave should also be part of your reorganisation planning. Your employees who continue on with your business may even suffer from “survivor” guilt. What’s the difference between restructuring and making redundancies?
Restructuring usually means that the same people remain employed but do different jobs. Sometimes a restructure does lead to redundancies if the requirement for people to do a particular job is eliminated and they cannot do another job instead.
Lay-off and short-time working are two alternative options to redundancy to consider. Employers can place employees on a period of unpaid lay-off where there’s a contractual provision to do so or established custom and practice of laying employees off within your workplace. Rules do apply, however, including:
This Business Support article featured in the November/December 2021 issue of The Hardware Journal