Redundancy, Restructure and Fire-and-Rehire: A Practical Guide for Employers

Redundancy and restructuring are among the most difficult issues employers face, often leading to potential employment claims. Whether a business is reducing headcount, closing a site, changing roles, cutting costs, reorganising teams or trying to change contractual terms, the process needs to be handled carefully. 

For employers, this is not simply an operational or financial issue. It involves legal risk, employee relations, communication, consultation, documentation and timing, all of which are essential to avoid claims for unfair dismissal. If handled incorrectly, redundancy and restructuring exercises can lead to grievances, unfair dismissal claims, protective award claims, breach of contract allegations and reputational damage. 

This is also a particularly important time for employers to review their approach. From 6 April 2026, the maximum protective award for failure to comply with collective redundancy consultation obligations increased from 90 days’ pay to 180 days’ pay for each affected employee. Employers also need to be aware of the statutory Code of Practice on Dismissal and Re-engagement, which came into force on 18 July 2024 and applies where employers are considering changes to contractual terms and conditions. 

This article considers the key issues employers should be aware of when managing redundancy, restructuring and fire-and-rehire risks. 

What Is Redundancy? 

Redundancy usually arises where an employer’s need for employees to carry out work of a particular kind has reduced or ceased, potentially leading to fire and rehire practices. This may happen because of financial pressures, reduced demand, changes in business structure, new technology, outsourcing, site closure or a change in how work is organised. 

A redundancy situation does not always mean that the business is failing. It may be part of a strategic restructure, a cost-saving exercise, a change in management structure or a decision to reorganise roles. 

The important point for employers is that a genuine business reason is not enough on its own. Employers also need to follow a fair process before making redundancies. 

Employers should therefore avoid treating redundancy as a decision that has already been made. Consultation should take place before final decisions are reached. 

Why Should Employers Take Redundancy Processes Seriously? 

There are several reasons employers should take redundancy processes seriously. 

First, there is the legal risk. A redundancy dismissal can be unfair if the employer does not consult properly, uses an unfair selection pool, applies unreasonable selection criteria, fails to consider alternatives or appears to have predetermined the outcome. 

Secondly, there is the financial risk. Where collective consultation obligations apply, the potential exposure can be significant. Employers proposing to dismiss 20 or more employees as redundant at one establishment within a 90-day period must follow collective consultation rules. A failure to comply can result in a protective award of up to 180 days’ full pay for each affected employee. 

Thirdly, there is the management risk. Redundancy and restructuring exercises can quickly damage morale, productivity and trust if employees feel the process is rushed, unclear or unfair. 

The practical point is simple: employers should plan redundancy and restructuring exercises carefully before announcements are made. 

Planning a Redundancy or Restructure 

A well-managed redundancy process starts with planning. 

Before speaking to employees, employers should be clear about: 

• the business reason for the proposed change; 

• which roles or teams may be affected; 

• whether the proposal is genuinely about redundancy or a wider restructure; 

• whether there are alternatives to redundancy; 

• whether collective consultation may be triggered; 

• what documents will be needed; 

• who will manage the process; 

• what timetable is realistic; 

• how employees will be informed and consulted. 

Employers should also consider whether the proposed change could affect employees who are pregnant, on maternity leave, disabled, absent due to sickness, part-time, on family leave or otherwise potentially vulnerable. These situations may require additional care. 

The aim should be to create a process that is legally compliant, commercially sensible and capable of being explained clearly to employees. 

Consultation 

Consultation is central to a fair redundancy process. 

Consultation should be genuine and meaningful. Employees should be told why the proposal is being considered, how it may affect them, what alternatives have been considered and how they can respond. Employees should usually be consulted individually where fewer than 20 redundancies are proposed, and collectively where 20 or more redundancies are proposed. 

Consultation should not be treated as a box-ticking exercise, as it is crucial for protecting employment rights. Employers should listen to employee suggestions and consider whether redundancies can be avoided, reduced or mitigated. 

During consultation, employers may need to discuss: 

• why the restructure or redundancy is proposed; 

• which roles are at risk; 

• how selection pools have been identified; 

• what selection criteria will be used; 

• whether there are alternatives to redundancy; 

• whether suitable alternative roles exist; 

• whether voluntary redundancy will be considered; 

• what support will be provided; 

• what payments may be due. 

A common mistake is announcing a final decision too early. Employers should avoid language suggesting that redundancies are inevitable before consultation has taken place. 

Collective Consultation and HR1 Notifications 

Collective consultation obligations apply where an employer is proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less. 

Where collective consultation applies, employers must consult with appropriate representatives. If there is no recognised trade union or existing employee representative body, employee representatives may need to be elected. 

Employers must also notify the Government’s Redundancy Payments Service using form HR1. The notification must be made before individual notices of dismissal are issued and at least 30 days before the first dismissal where there are 20 to 99 proposed redundancies, or at least 45 days before the first dismissal where there are 100 or more proposed redundancies. 

This is an area where employers can easily make mistakes, particularly where decisions are moving quickly or where redundancies are spread across different teams, sites or phases. 

Employers should take advice early if there is any possibility that collective consultation may apply. 

Selection Pools and Selection Criteria 

Where only some employees in a group are at risk of redundancy, employers will usually need to consider an appropriate selection pool and fair selection criteria. 

A selection pool is the group of employees from which redundancies may be made. The pool should be considered carefully. If the pool is too narrow, employees may argue that they were unfairly targeted. If it is too wide, the process may become unnecessarily disruptive. 

Selection criteria should be as objective as possible. Employers commonly consider factors such as skills, qualifications, experience, disciplinary record, attendance, performance and future business needs. 

Employers should be careful with criteria that may indirectly disadvantage certain employees. For example, attendance criteria may disadvantage disabled employees or employees with pregnancy-related absence. Performance criteria may be risky if appraisals have not been carried out consistently. 

Employers should therefore check: 

• why the selection pool has been chosen; 

• whether employees understand why they are at risk; 

• whether the criteria are objective and measurable; 

• whether scoring can be evidenced; 

• whether any adjustments are needed; 

• whether managers are applying criteria consistently. 

Poor selection is one of the most common causes of redundancy disputes. 

Suitable Alternative Employment 

Before confirming redundancy, employers should consider whether there is suitable alternative employment available. 

This may include vacancies in other teams, alternative roles, reduced hours, different locations, redeployment opportunities or roles requiring some retraining. Employers do not usually have to create a role where none exists, but they should consider existing options properly. 

Employers should keep records of vacancies considered and explain why roles are or are not suitable. Where an employee is on maternity leave or certain types of family leave, special rules may apply and additional care will be needed. 

A failure to consider suitable alternative employment can undermine an otherwise genuine redundancy process. 

Restructuring Without Redundancy 

Not every restructure involves redundancy. 

Sometimes an employer may want to change reporting lines, job titles, duties, working patterns, location, pay arrangements, hours or benefits without reducing headcount. These changes may still create legal risk if they involve changes to contractual terms. 

Employers should first check whether the employment contract allows the proposed change. Even where a contract contains flexibility wording, employers should be cautious about relying on it too aggressively. 

Where agreement is needed, employers should consult with employees, explain the business reason for the change and consider objections properly. 

The more significant the change, the greater the need for a careful process. 

Fire-and-Rehire 

“Fire-and-rehire” is the informal term used where an employer dismisses employees and offers to re-engage them on new terms. 

This is a high-risk option and should not be treated as a routine way of changing contracts. The statutory Code of Practice on Dismissal and Re-engagement states that dismissal and re-engagement should be used only as a last resort. 

Employers considering dismissal and re-engagement should usually be able to show that they have: 

• explained the business reasons for the proposed changes; 

• consulted meaningfully and in good faith; 

• provided relevant information; 

• considered employee objections; 

• explored alternatives; 

• considered whether changes could be phased or modified; 

• taken reasonable steps to avoid dismissal; 

• followed the Code of Practice. 

Fire-and-rehire can create unfair dismissal risk, breach of contract issues, collective consultation obligations and employee relations problems. Employers should take advice before using this approach. 

Common Mistakes Employers Make 

Employers should be particularly careful to avoid the following mistakes: 

• announcing redundancies before consultation has taken place; 

• failing to explain the business reason clearly; 

• using an unfair or unexplained selection pool; 

• applying subjective or inconsistent selection criteria; 

• failing to keep records of scoring decisions; 

• ignoring alternatives to redundancy; 

• failing to consider suitable alternative employment; 

• missing collective consultation obligations; 

• failing to submit an HR1 form where required; 

• issuing notices of dismissal too early; 

• treating fire-and-rehire as a simple contractual shortcut; 

• failing to consider discrimination or family leave issues; 

• using outdated redundancy letters or policies; 

• failing to train managers on consultation. 

Many redundancy disputes arise not because there was no business reason, but because the employer moved too quickly or failed to follow a fair process. 

Practical Steps for Employers 

Employers considering redundancy, restructuring or contractual changes should consider the following steps: 

1. Identify the business reason for the proposed change. 

2. Check whether the proposal is redundancy, restructure, contractual change or a combination. 

3. Consider whether collective consultation may apply. 

4. Prepare a clear business rationale and consultation plan. 

5. Identify appropriate selection pools and criteria. 

6. Consult employees before final decisions are made. 

7. Consider alternatives to redundancy. 

8. Review suitable alternative employment. 

9. Keep clear notes of consultation meetings and scoring decisions. 

10. Take advice before issuing dismissal notices. 

11. Follow the fire-and-rehire Code where contractual changes cannot be agreed. 

12. Review contracts, redundancy policies and manager guidance. 

Taking these steps can reduce legal risk and help employers manage workplace change more confidently. 

Conclusión 

Redundancy, restructuring and fire-and-rehire are issues employers cannot afford to handle casually. Handled poorly, they can lead to grievances, unfair dismissal claims, protective award claims, breach of contract disputes and serious employee relations problems. Handled properly, they allow employers to make necessary business changes in a fair, structured and commercially sensible way. 

The key for employers is to act early, avoid assumptions and plan the process carefully. Employers should understand whether collective consultation applies, whether HR1 notification is required, whether selection is fair and whether alternatives to dismissal have been properly considered. 

At Ronald Fletcher Baker, our Employment Team advises employers on redundancy, restructuring, collective consultation, HR1 notifications, settlement agreements, contractual changes and fire-and-rehire risks. If you are considering redundancies, restructuring your business or changing employment terms, we can help you assess the risks and identify a practical way forward.