Can you demote an employee in a post-Covid restructuring?

By Neil McLeese, CEO at BeyondHR

The Covid-19 pandemic has had a profound effect on the jobs market over the past nine months, resulting in a raft of new challenges for businesses and many requiring restructuring. This has forced many corporations to re-evaluate their business structure in line with new requirements as well as the changing needs of clients and customers. The furlough scheme may have been extended until the end of April, but the ongoing economic challenges have led many firms to consider cost-saving measures including restructuring their business. 

What’s involved in business restructuring?

This often involves reviewing existing roles, as a result of a reduced need for middle-management staff or those with a specific skill set.

Sometimes restructuring internal operations, can open up opportunities for employers, enabling them to keep as much skill set as possible within the business. However, this is an extremely delicate and emotive process that needs to be carefully thought through and executed correctly.

Both the business and employees need to have a clear understanding of whether the restructuring is for the short or long term and firms must give serious consideration to any suggested alternative options. There must also be a good reason for taking the decision to restructure, such as the move being more cost-effective for the business in response to the current economic conditions.

If you make the decision to restructure the business, it’s important to consult with employees throughout the process. It is likely that an employee’s contract terms will have to change, and this may include a shift in roles.

Whilst this provides an opportunity to move staff to retrain them, staff may view this change as a demotion, especially if it involves a reduction in pay or job seniority. It may also be seen as a punitive measure and therefore, constant communication throughout the process is necessary as well as the need to be open and transparent throughout.

Restructuring the business also poses a large legal risk. If the business does redefine roles, directors must consider the impact of the proposed changes and the extent to which they would change to ensure all adjustments remain lawful.

Newly-created roles should be comparable and reasonable. Also, it is important to keep in mind that simply changing a job title does not create a new role – there must be clear differentiation between the old and new job descriptions.

Restructuring within a company is a more favourable option for employers, especially when there is great uncertainty around the next 12 months.

It may be unwise for businesses to get rid of highly skilled staff when things may change in the future – therefore altering roles offers a good alternative, allowing firms to retain valued members of staff.

As the process is full of legal risk, firms need to have a clear understanding of what is required during the process and should seek professional guidance.

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