What’s the difference between restructuring and redundancy?

People often use restructuring and redundancy to refer to the same thing, but there is a difference. This article takes a look at these important processes and how you can ensure you get them right.

People often use the terms restructuring and redundancy to refer to the same thing, but there is a difference. Let's take a look.

Restructuring

Restructuring (or reorganisation) is a process. It involves changing the operational structure of a business to improve the way it runs, delivers products or services etc.

It aims to get the right roles configured the right way and can involve adding new roles, merging two or more existing roles, retrenching roles that are surplus to requirements, or a combination of these.

You need a genuine business reason to restructure, e.g. a change in market demands, financial constraints, realigning your brand, merging with another company. The reason must be clearly stated during the restructuring process.

Redundancy

Redundancy is an outcome, usually of a restructuring process. Redundancy occurs when a position or role, rather than a person, is surplus to the business’ commercial needs.

Under Section 389 of the Fair Work Act, if there is no proper consultation, an effort to find employment for any person you're considering making redundant, and an offer of this work, the redundancy is not genuine, even if a net reduction of a person's role occurs.

However, if you follow the correct process and can prove that any redundancy is genuine, your business will be protected from claims of unfair dismissal.You must pay the employee any redundancy compensation detailed in the terms of their employment contract and/or negotiations between parties, and any other entitlements (salary, unused annual leave etc) up to the last day of employment. The notice period must be at least the length stated in the National Employment Standards, award, agreement or company policies.

In all cases, you must give all affected employees a detailed proposal, reasonable time to consider it, the opportunity to comment and take that feedback into consideration before you make any decisions.

Find out more about restructuring and redundancies in this helpful article.