Restructures and redundancies spike: preparing with care

With the struggle for cost efficiency at the top of the agenda for many businesses, restructures and redundancies are set to rise. Here we look at trends impacting employment and how a well-managed redundancy process can be the difference between business integrity and costly tribunals.  

The impact of wage hikes and automation on UK employment

There are many external UK and global factors impacting the economy and shaping key business decisions. But for the purposes of this article, we’re focusing specifically on employment matters that are driving restructures and redundancies.  

Firstly, technology’s impact on employment cannot be ignored. For some time now, technological advances and the rise of AI have accelerated the automation of some processes. Although not replacing people altogether, technology will affect productivity and team dynamics. 

More recently and specifically, the changes announced in the Budget are having a significant impact on many employers, which was fully felt in the April payroll onwards. Increased national insurance contributions (NIC) along with a decreased NIC secondary threshold have placed a particular financial strain on some employers this month.

National Minimum/Living Wage increases have also put pressure on margins. The higher rate (National Living Wage) brings an increase of 6.7%, which is significantly higher than the median c.3% award that forecasters predict for employees across the board this year. Those employing younger workers and apprentices are hardest hit and can expect to see an 18% increase in their pay bill given the significant uplifts awarded to those workers. 

CIPD forecasts a rise in redundancies

CIPD findings suggest that around a quarter of surveyed employers intended to reduce their workforce through redundancies in the three months to March 2025. With the factors outlined above, this trend is set to continue. Peter Cheese, CEO of the CIPD, has suggested, rather gloomily, that “these are the most significant downward changes in employer sentiment we’ve seen in the last ten years” and that “employment indicators are moving in the wrong direction”. 

Navigating restructures or redundancies

It’s not possible to provide all the advisory notes on this wide and deep topic. But we’ve put together this helpful reminder of three key areas to focus on before starting any type of downsize, restructure or redundancy. 

1. Be clear when outlining the business rationale

• Translating business needs into a clear and relatable message for employees is key. 
• Be prepared to be challenged and make sure your message is robust enough to withstand scrutiny both internally and externally.
• While the message might be difficult for people to accept, clear, transparent advisory notices to employees are always appreciated, as is sincerity and authenticity from business leaders.

2. Developing fair and meaningful selection criteria

• Managing redundancy is challenging for leadership. They carry a high level of responsibility and must act respectfully and with integrity during the redundancy process.
• To mitigate the risk of any perceived bias in the process, it is essential to develop clear, transparent and objective selection criteria. These criteria must be applied consistently and with due diligence across all affected roles.
• Leaders should work on the assumption that all decisions may be subject to scrutiny and be prepared to clearly justify the rationale behind each one.

3. Holding meaningful consultation

• During the redundancy consultation period, affected employees are considered to be at risk of redundancy. It is crucial to avoid language or actions that imply decisions have been predetermined, as this can undermine the integrity of the process.
• While there is no legally mandated minimum duration for consultation, it must be long enough to ensure that the process is thorough, with all feedback given due consideration before final decisions are made. Failing to do so may lead to claims of unfairness and, in the worst-case scenario, unfair dismissal.
• Consultation can be conducted on an individual or collective basis, depending on the number of employees affected, their locations and any applicable legal or contractual obligations.

Redundancy programmes are never easy. Managed poorly, they can open the door to employment tribunals, reputational damage and unnecessary costs. On the other hand, a well-managed process can preserve business integrity and employee trust. 

There are many other variables to consider that can emerge during a redundancy programme, such as ‘bumping’ and family leave. Please contact Kerri Constable for a conversation about HR and legal support in this important area.