Key differences between redundancy, restructuring, and TUPE processes

Last updated: June 30th, 2022

First published: June 29th, 2022

Due to certain circumstances, be it financial reasons or lack of work, you might need to make an employee redundant. It’s never easy, but often necessary. On the other hand, a business restructure may require you to retrain employees to adapt to external pressures and a new way of working.

Another situation that’s not wholly uncommon is a business changing hands. It can happen without a consumer blinking an eye, especially if the same staff are there to greet them each time they walk in the door.

These three situations detail redundancy, restructuring, and TUPE. They can affect any business and, because of that, it’s best that you understand the ins and outs of each.

Redundancy in Ireland

Redundancy can occur for one of several reasons. Usually, an employee is made redundant because the need for the work they do, or their role, has diminished.

Rules around redundancy in Ireland require employers to remain compliant with the employment law redundancy procedure set out in the Redundancy Payments Act 1967-2014.

Before you begin a redundancy process, you must ensure that you have a legitimate reason for the proposed redundancies under the Act. Filing to follow the legislation could give an employee reason to claim unfair dismissal or make a complaint to the Workplace Relations Commission (WRC).

As per the Section 7(2) of the Act, there are five genuine grounds for redundancy situations which are:

  • Closure of the employer’s business, or its cessation in a particular location.
  • The disappearance of the employee’s job.
  • A reduction in workforce numbers.
  • The replacement of the employee by someone who can also do the work in a manner “for which the employee is not sufficiently qualified or trained”.
  • The replacement of the employee by someone who can also do other work for which the employee is not sufficiently qualified/trained.

 

You could find yourself undertaking an unfair redundancy process if you:

  • Discriminate against a member of staff.
  • Indirectly discriminate against a member of staff.
  • Fail to follow your process correctly.
  • Don’t offer a consultation period.
  • Dismissing an employee after ignoring your process.
  • Fail to consider alternative roles for your employee.
  • Don’t have a process at all.

 

What follows is your selection process. This process should be the most appropriate one based on the circumstances. The three most common selection processes used are:

  • Last in first out (LIFO)
  • An interview process
  • A skills matrix
  • Many businesses decide on a points-based system. This will consider the specific qualities of every employee

 

As a system, a solid selection process can also limit discrimination. You can score employees on:

  • Contributions to the business
  • Importance within the business
  • Relationships with key clients

 

At the end of the process, you should add together your scores. Those with the lowest you can consider for dismissal.

What is restructuring?

Restructuring refers to an internal change in a business in response to certain circumstances. That may be the reallocation of human resources or a reduction in workforce numbers, or both.

Restructuring may be necessary for two reasons:

  • Internal pressures such as an aging workforce.
  • External pressures such as increased costs.

 

Before making any long-term decisions, investigate why your business needs to restructure. Examine the reasons why the business needs to change and how the business will adapt to the evolving pressures. This could involve recruiting experienced employees, retraining current employees, or reducing headcount in particular departments.

If your current situation has you considering redundancies, remember that employees enjoy strong protections under redundancy legislation. And that’s not the only risk. The effects of a restructure can linger long after the new work roles are set out. For instance, morale among staff who stay on with your business may dip if the process isn’t handled correctly.

That’s what makes effective communication so important during a company restructuring process. It can be a stressful time for all involved, so remember to provide support to staff who leave. With regards to employees who continue with your business, it’s very possible they may suffer from “survivor” guilt.

Article: The risks of restructuring

TUPE meaning

TUPE refers to the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003. It protects employees in a business when a new owner takes over.

TUPE applies to transfers of a business where there is a change in the entity (either individual or corporate) employing the workforce. It applies in situations where there’s no significant difference in the day-to-day operations of the business.

For TUPE regulations in Ireland to apply to a transfer, the following elements must be met:

  • There must be a legal transfer from one employer (either an individual or a company) to another.
  • Carrying on the previous economic activity of the business.
  • Employees are a part of the transfer.

 

If a transfer occurs due to the compulsory liquidation of the employer, TUPE rules don’t apply.

But what if the new owner restructures the business? Well, the fact is that TUPE rules don’t prohibit the new owner from restructuring the business. However, they must adhere to fair procedures and respect any accrued employment law rights which the existing employees have. If the new owner makes a number of dismissals or redundancies that weren’t in agreement with the way the business ran, they’re vulnerable to employee claims.

This is because employees could have accrued substantial periods of service which would entitle them to several employment law protections under unfair dismissals, employment equality, and redundancy legislation.

Need more information?

If you have TUPE questions or want to know more about redundancy or restructuring, speak to one of our experts on (01) 653 3663 or request a callback here.

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