Business restructuring is the process of reorganising how a company is run — its structure, roles, operations or finances — to improve performance, cut cost, respond to change or prepare for growth. On the people side, where most of the legal risk sits, restructuring can involve redundancies, redeploying staff, changing terms and conditions, merging or splitting teams, or transferring employees under TUPE when work is outsourced or a business changes hands. Done well, restructuring positions a business for the future; done badly, it generates unfair dismissal and discrimination claims, damages morale, and costs far more than it saves.
This guide focuses on the employment-law dimension of restructuring — the duties, processes and pitfalls every UK employer needs to manage. It explains the main routes a restructure can take, the consultation and fairness obligations that apply, the significant 2026 changes to collective redundancy and to changing terms, and how to plan and run a restructure that achieves its commercial aim while staying on the right side of the law.
In short: Restructuring usually involves one or more of redundancy, redeployment, changing terms, or a TUPE transfer. Each carries legal duties: fair process and selection for redundancy; collective consultation where 20 or more redundancies are proposed at one establishment in 90 days (minimum 30 or 45 days); and strict limits on imposing changed terms (“fire and rehire”). Key 2026 changes include the protective award doubling to 180 days’ pay and a forthcoming organisation-wide collective redundancy trigger. Plan early, consult genuinely, and document the business rationale.
Key takeaways
- Restructuring commonly uses redundancy, redeployment, changing terms, or TUPE — each with its own legal duties.
- Collective consultation is required where 20+ redundancies are proposed at one establishment in 90 days (30 days’ minimum, or 45 for 100+).
- From 6 April 2026 the protective award doubled to 180 days’ pay per affected employee for consultation failures.
- Imposing changed terms by dismissal and re-engagement (“fire and rehire”) is tightly restricted and usually automatically unfair.
- Watch discrimination and protected groups — pregnancy and family-leave staff have priority redundancy protection.
In this guide
- What restructuring means
- The main routes
- The core legal duties
- Redundancy in a restructure
- Collective consultation
- Changing terms and fire and rehire
- TUPE and transfers
- Avoiding discrimination
- Planning a restructure
- Worked example
- Common mistakes
- Alternatives to redundancy
- Settlement agreements
- Financial restructuring
- Morale and communication
- Embedding the change
- Common mistakes
- What we see in practice
- How Hayhills can help
- FAQs
What business restructuring means
Restructuring is a broad term covering any significant change to how a business is organised. It might be operational — redesigning teams, removing layers of management, centralising or outsourcing functions; strategic — refocusing on core activities, integrating an acquisition, or preparing for sale; or financial — reshaping the balance sheet, and in distressed cases using formal insolvency procedures. Most restructures combine elements: a decision to cut cost and refocus typically flows through into changes in roles, headcount and terms.
Whatever the driver, the moment a restructure touches people it engages employment law. Removing roles raises redundancy; changing what people do or how they are paid raises variation of contract; moving work to another provider raises TUPE. The legal framework is not there to prevent restructuring — businesses are entitled to organise themselves as they see fit — but to ensure that, where jobs and livelihoods are affected, the process is fair, consultative and free of discrimination. Understanding which legal route a particular change falls into is the first step to managing it properly.
The main routes a restructure can take
Most employment aspects of a restructure fall into one of a few recognisable categories, often used in combination.
| Route | What it involves | Main legal framework |
|---|---|---|
| Redundancy | Reducing headcount where a role is no longer needed | Fair reason + fair process; collective rules if 20+ |
| Redeployment | Moving staff into alternative roles | Suitable alternative employment; trial periods |
| Changing terms | Varying pay, hours, duties or location | Contract variation; fire-and-rehire restrictions |
| TUPE transfer | Outsourcing, insourcing or selling part of the business | TUPE 2006: automatic transfer + inform/consult |
| Delayering / reorganisation | Removing management tiers or merging teams | Often redundancy and/or changed terms |
The legal consequences flow from the substance of the change, not the label the employer puts on it. Calling a headcount reduction a “reorganisation” does not avoid redundancy law; moving work to a contractor is a TUPE transfer whatever it is called. Identifying the true nature of each element of a restructure is essential, because the wrong analysis leads to the wrong process and a vulnerable decision.
The core legal duties
Across these routes, a consistent set of duties applies. Employers must have a genuine business reason for the change and act fairly in carrying it out. Where dismissals are involved, they must follow a fair procedure and, for employees with the relevant qualifying service, be able to show the dismissal was for a fair reason and handled reasonably. They must consult — individually in all cases, and collectively where the numbers trigger it. They must avoid discrimination, ensuring that selection and treatment do not disadvantage people because of a protected characteristic. And they must honour specific protections, such as the priority redundancy rights of employees on or returning from family leave.
These duties are not merely procedural box-ticking. A restructure that delivers the right commercial outcome but ignores consultation or fairness can unravel into tribunal claims that cost more than the restructure saved. The discipline of doing it properly — planning, consulting genuinely and documenting the rationale — is what turns a risky exercise into a defensible one.
Redundancy within a restructure
Redundancy is the most common employment consequence of restructuring, and it has its own fairness requirements. A genuine redundancy arises where the need for employees to do work of a particular kind has ceased or diminished. To dismiss fairly for redundancy, an employer generally needs to: identify an appropriate pooling of at-risk roles; apply fair, objective selection criteria; consult individually with those at risk; search for suitable alternative employment; and pay statutory (or any enhanced) redundancy pay to those with two or more years’ service.
The figures matter. Statutory redundancy pay is calculated on age, length of service and a weekly pay figure capped at £751, giving a statutory maximum of £22,530 (from 6 April 2026). Getting the pool, the criteria and the consultation right is what makes a redundancy fair; skipping or rushing them is what makes it unfair. Our dedicated guide to redundancy covers the process in detail, and unfair dismissal explains the wider fairness test.
Collective consultation
Where a restructure involves larger numbers of redundancies, additional collective consultation duties apply. Where an employer proposes to dismiss as redundant 20 or more employees at one establishment within 90 days, it must consult appropriate employee representatives (a recognised union or elected representatives) and notify the Secretary of State. The minimum consultation periods are 30 days where 20 to 99 redundancies are proposed, and 45 days where 100 or more are proposed, before the first dismissal takes effect.
| Redundancies proposed (one establishment, 90 days) | Minimum consultation | Notify Secretary of State? |
|---|---|---|
| Fewer than 20 | Individual consultation only | No |
| 20 to 99 | 30 days | Yes (form HR1) |
| 100 or more | 45 days | Yes (form HR1) |
The stakes for getting this wrong rose sharply in 2026. From 6 April 2026 the protective award for failing to consult collectively doubled to a maximum of 180 days’ pay per affected employee (previously 90 days) — a very substantial liability across a large workforce. Looking further ahead, the Employment Rights Act 2025 introduces a second, organisation-wide trigger: collective consultation will also be required where a threshold number of redundancies is proposed across the whole business in 90 days, regardless of how they are spread across sites. That change is expected in 2027, with the threshold being consulted on, and it will catch multi-site employers who previously fell below the per-establishment limit. Always check the current position at GOV.UK.
Changing terms and “fire and rehire”
Restructures often require changes to terms — new hours, duties, pay structures or locations. The cleanest route is agreed variation: consulting and securing the employee’s consent, often in exchange for something of value. Where agreement cannot be reached, some employers have historically dismissed employees and offered re-engagement on the new terms — “fire and rehire”. This is now tightly constrained: dismissing an employee for refusing a contract variation, or to replace them with someone on worse terms, is treated as automatically unfair except in narrowly defined circumstances, and a statutory Code of Practice governs how any such exercise must be approached.
The practical message is that imposing changed terms by dismissal is a high-risk last resort, not a routine tool. Employers should focus on genuine consultation and agreement, use the business case to explain why change is needed, and take advice before contemplating dismissal and re-engagement. Where terms are varied without proper agreement or process, the employer risks breach of contract, constructive dismissal and unfair dismissal claims.
TUPE and business transfers
When a restructure involves outsourcing, insourcing, or selling part of the business, the Transfer of Undertakings (Protection of Employment) Regulations — TUPE — are likely to apply. TUPE automatically transfers the affected employees to the new employer on their existing terms, preserves continuity of employment, and makes dismissals connected with the transfer automatically unfair unless there is an economic, technical or organisational reason entailing changes in the workforce. It also imposes duties to inform and consult employee representatives before the transfer.
TUPE interacts closely with restructuring because reorganisations frequently move work between providers or entities. Changing transferred employees’ terms is heavily restricted, and getting the analysis wrong — assuming TUPE does not apply when it does, or mishandling the information and consultation duties — is a common and expensive error. Our guide to TUPE transfers sets out how the rules work.
Worked example
Scenario. A company with offices in three cities decides to centralise its back-office functions in one location to cut cost. The plan would make 24 roles redundant across the three sites — 9, 8 and 7 respectively — while creating 12 new roles at the central site.
The analysis. No single site reaches 20 redundancies, so under the current per-establishment test collective consultation might not be triggered — but the employer must check the position carefully, particularly given the forthcoming organisation-wide trigger. Individual consultation is required with all 24 at-risk employees, with a fair pool and objective selection. The 12 new roles are potential suitable alternative employment that must be offered to at-risk staff, with trial periods where appropriate.
The pitfalls. Rushing the timetable, failing to consult genuinely (consulting only after the decision is finalised), or overlooking an employee on maternity leave who has priority for the new roles would each expose the company to claims. Handled properly — with real consultation, fair selection and proper redeployment — the restructure achieves its aim while remaining defensible.
Avoiding discrimination and protecting key groups
Selection for redundancy and treatment during a restructure must be free of discrimination. Selection criteria based on attendance can disadvantage disabled employees or those who have taken pregnancy-related or family leave; criteria based on length of service can raise age issues; and subjective scoring can mask bias. Criteria should be objective, measurable and applied consistently, with adjustments where a protected characteristic is engaged.
Particular care is needed for employees with enhanced statutory protection. Those on maternity, adoption or shared parental leave — and, following recent reforms, during pregnancy and for a period after returning — have a priority right to be offered any suitable alternative vacancy ahead of other at-risk colleagues. Overlooking this in a restructure is one of the most common and costly mistakes, turning a redundancy into an automatically unfair dismissal and a discrimination claim. See our guides to discrimination claims and maternity and family leave.
Planning and running a restructure
A successful restructure is planned, not improvised. The key stages are:
- Build the business case. Define the commercial rationale and the future structure clearly — this underpins the fairness of everything that follows.
- Map the legal routes. Identify which elements are redundancy, changed terms or TUPE, and what duties each triggers.
- Plan consultation. Decide who must be consulted, individually and collectively, and build in the required minimum periods before any dismissals.
- Consult genuinely. Consult while proposals are still genuinely capable of being influenced — not after the decision is made.
- Apply fair selection and seek redeployment, honouring priority protections.
- Document everything — rationale, consultation, selection scores and decisions — to evidence a fair process.
Common mistakes to avoid
- Consulting after the decision. Genuine consultation must happen while proposals can still be influenced — a pre-decided outcome dressed up as consultation is unfair.
- Misreading the numbers. Miscounting redundancies or misjudging the establishment can mean missing collective consultation duties — now far costlier with the 180-day protective award.
- Mislabelling the change. Calling a redundancy a “reorganisation”, or treating a TUPE transfer as an ordinary recruitment, leads to the wrong process and a vulnerable decision.
- Overlooking protected groups. Failing to give priority on suitable vacancies to staff on family leave is a frequent, expensive error.
- Reaching for fire and rehire. Imposing changed terms by dismissal is heavily restricted and usually automatically unfair — pursue agreement instead.
- Neglecting the rebuild. Focusing only on cuts and ignoring how the new structure will actually function leaves a business lean but dysfunctional.
What we see in practice
Restructuring that touches people lives or dies on consultation. Where an employer proposes 20 or more redundancies at one establishment within 90 days, collective consultation is mandatory under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 — at least 30 days before the first dismissal for 20 to 99 redundancies, and 45 days for 100 or more. Skipping or rushing it risks a protective award of up to 90 days’ gross pay for every affected employee, which often dwarfs the saving the restructure was meant to deliver.
The second trap is treating a transfer like a redundancy. On a relevant transfer under TUPE 2006, employees move to the new employer on their existing terms, and a dismissal connected to the transfer is automatically unfair unless there is a genuine economic, technical or organisational reason. We map every affected role against both regimes before any announcement, because the order and timing of the steps is what keeps a restructure both lawful and affordable.
How Hayhills can help
Hayhills Legal Advisory helps UK businesses plan and deliver restructures that achieve the commercial aim while managing employment-law risk — mapping the legal routes, designing fair redundancy pools and selection criteria, planning individual and collective consultation, handling TUPE analysis, and navigating changes to terms without falling into the fire-and-rehire trap. As a non-reserved legal advisory service we focus on strategy, process and documentation; where a restructure requires court representation or a formal insolvency procedure — both reserved or regulated activities — we introduce a trusted regulated professional and work alongside them. Related reading: redundancy, TUPE transfers and unfair dismissal.
Alternatives to redundancy
Redundancy is not the only way to achieve the savings or change a restructure is aiming for, and considering alternatives is itself part of a fair process. Before confirming compulsory redundancies, employers should weigh options such as a recruitment freeze, reducing or removing overtime, offering voluntary redundancy or early retirement, redeploying staff into vacancies, and — where contracts allow — temporary lay-off or short-time working. Reduced hours or a temporary pay reduction agreed with staff can sometimes preserve jobs through a difficult period while delivering the necessary cost saving.
Exploring these alternatives does more than reduce job losses; it strengthens the fairness of any redundancies that do follow. A tribunal assessing the reasonableness of a dismissal will look at whether the employer genuinely considered ways to avoid it. An employer who can show it explored and, where sensible, offered alternatives is in a far stronger position than one that went straight to compulsory redundancies. Voluntary redundancy in particular can ease a restructure, allowing the business to reduce headcount with willing leavers rather than forced selection — though it must be managed so the business does not lose the skills it needs to retain.
Using settlement agreements in a restructure
Restructures frequently conclude individual exits through settlement agreements, particularly for more senior staff or where the employer wants certainty and a clean break. A settlement agreement records agreed exit terms and a waiver of claims in exchange for a payment, and — because it waives statutory employment claims — requires the employee to take independent legal advice and the agreement to meet strict statutory conditions. Used well, it gives both sides closure and removes the risk of a later claim.
Settlement agreements and the redundancy process work together rather than being alternatives. An employer may run a fair redundancy process and then offer a settlement agreement with an enhanced package to confirm the exit on agreed terms; or use without prejudice discussions or a protected conversation to propose an agreed departure. The key is to keep the open redundancy process and any settlement discussions properly separated, so that the fairness of the process is not undermined by the negotiation.
Financial restructuring and insolvency
Not all restructuring is operational. Where a business is in financial difficulty, restructuring may involve formal procedures — a company voluntary arrangement (CVA), administration, or a restructuring plan — designed to rescue the business or maximise returns to creditors. These are reserved and regulated activities conducted by licensed insolvency practitioners, and they sit outside what a non-reserved advisory service can carry out. Hayhills does not act as an insolvency practitioner; where a formal procedure is needed we introduce a regulated professional and support the employment-law aspects alongside them.
For employees, formal insolvency carries specific protections. Certain debts — such as arrears of wages and holiday pay up to statutory limits — rank as preferential claims, and where an insolvent employer cannot pay, employees may claim statutory amounts (including redundancy pay, notice pay and unpaid wages, within limits) from the government’s Redundancy Payments Service. The employment-law duties around consultation and fair process still apply in an insolvency context, though they interact with the insolvency regime in ways that need careful, specialist handling.
Managing morale and communication
The legal process is only part of a successful restructure; how it is communicated determines whether the organisation emerges stronger or demoralised. Uncertainty is corrosive, so clear, honest and timely communication matters enormously. Employees who understand why the change is happening, what the process will be, and how they will be treated are far more likely to engage constructively — even those who ultimately leave. Drip-fed information, rumours and inconsistent messages, by contrast, breed anxiety, damage trust and can prompt valued people to leave before the employer wants them to.
It is equally important to look after the people who remain. The “survivors” of a restructure often carry increased workloads and survivor guilt, and a botched process they witnessed happening to colleagues damages their loyalty too. Treating departing staff with dignity — fair process, proper support, a good reference — is noticed by everyone who stays. Managers should be briefed and supported to handle difficult conversations consistently and humanely, because they are the face of the restructure to their teams. Good communication does not just reduce legal risk; it protects the engagement and productivity the restructure was meant to improve.
Embedding the new structure
A restructure does not end when the last consultation meeting closes or the final dismissal takes effect. The new structure has to be made to work. That means ensuring the redesigned roles are clearly defined, that remaining staff have the skills and capacity for their new responsibilities, and that any gaps created by departures are addressed through training or recruitment. A common failing is to focus all the energy on the difficult cost-cutting phase and neglect the rebuilding phase, leaving the organisation lean but dysfunctional.
It is also wise to review, a few months on, whether the restructure has delivered what the business case promised — the cost savings, the efficiency, the strategic refocus — and to address any unintended consequences. Roles that were merged may prove unworkable; savings may have come at the expense of capability that now needs rebuilding. Treating the restructure as a process with a beginning, middle and end — rather than a one-off event — is what turns short-term disruption into lasting improvement, and ensures the upheaval and cost were worthwhile.
This article is for general information only and does not constitute legal or accountancy advice. Hayhills Limited, trading as Hayhills Legal Advisory, provides non-reserved legal advisory services. Always check current requirements at GOV.UK.
Frequently asked questions
What is business restructuring?
Business restructuring is reorganising how a company is run — its structure, roles, operations or finances — to improve performance, cut cost or prepare for change. On the people side it can involve redundancy, redeployment, changing terms, or transferring staff under TUPE.
What legal duties apply when restructuring?
Employers need a genuine business reason, a fair process and fair selection where dismissals occur, individual and (where numbers require) collective consultation, no discrimination, and respect for protections such as the priority redundancy rights of staff on family leave.
When is collective consultation required?
Where an employer proposes to dismiss as redundant 20 or more employees at one establishment within 90 days. The minimum consultation period is 30 days for 20 to 99 redundancies and 45 days for 100 or more, and the Secretary of State must be notified.
What is the protective award for failing to consult?
If an employer fails to consult collectively, a tribunal can make a protective award. From 6 April 2026 the maximum doubled to 180 days’ pay per affected employee, up from 90 days, making consultation failures considerably more expensive.
Is fire and rehire still allowed?
It is heavily restricted. Dismissing an employee for refusing a contract change, or to replace them with someone on worse terms, is treated as automatically unfair except in narrow circumstances, and a statutory Code of Practice governs any such exercise. It is a high-risk last resort.
How does TUPE affect a restructure?
Where a restructure involves outsourcing, insourcing or selling part of a business, TUPE may automatically transfer affected employees to the new employer on their existing terms, with continuity preserved, dismissals connected to the transfer usually automatically unfair, and duties to inform and consult.
How much is statutory redundancy pay?
It is based on age, length of service and a weekly pay figure capped at £751, giving a statutory maximum of £22,530 from 6 April 2026. Employees with two or more years’ service qualify, and some employers pay enhanced redundancy terms.
Can I select anyone for redundancy in a restructure?
No. Selection must use a fair pool and objective, consistently applied criteria, free of discrimination. Employees on maternity, adoption or shared parental leave — and during pregnancy and a period after return — have priority for suitable alternative vacancies.
How long does a restructure take?
It depends on scale. Small restructures may take a few weeks of individual consultation; larger ones triggering collective consultation must run at least 30 or 45 days before the first dismissal. Rushing the timetable is a common cause of unfair dismissal claims.
What changes to collective redundancy are coming?
The Employment Rights Act 2025 adds a second, organisation-wide trigger so collective consultation will also apply where a threshold number of redundancies is proposed across the whole business in 90 days, regardless of site. This is expected in 2027, with the threshold under consultation.