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One of the most significant, and least discussed, risks in tech restructuring is the 'sham' redundancy. This unlawful practice affects any UK tech employer using redundancy as a pretext to exit specific individuals, and it carries serious legal consequences. This article explains how genuine redundancy works in practice, what the process requires of employers, and what the consequences are for businesses that fail to engage.

What This Means for Tech Employers

The technology sector is currently navigating a period of significant transition. Following years of rapid expansion, many UK tech firms, from agile startups to established SaaS providers, are now restructuring to lean into efficiency. While redundancy is a legitimate management tool, the fast-paced nature of tech can sometimes lead to 'sham' redundancies, where the process is used as a pretext to remove specific individuals. For tech employers, getting this wrong does not just lead to reputational damage; it opens the door to costly unfair dismissal claims.

1. Genuine Redundancy vs. Performance Pretext

The most common pitfall in tech restructures is using redundancy to exit an employee who is underperforming or 'not a culture fit.' In the eyes of an Employment Tribunal, a redundancy is only genuine if the requirement for employees to carry out work of a particular kind has ceased or diminished.

Using redundancy as a shortcut to avoid difficult performance conversations is a high-risk strategy that often fails under legal scrutiny.

• If a role is 'made redundant' on Monday but an identical job description is advertised on Friday, the redundancy is likely a sham.
• If the real motivation is a performance issue, the employer must follow a capability procedure, not a redundancy process.
• Document the specific business reason for the restructure: a shift in strategy, loss of funding, or a merger.
• Ensure the work is actually disappearing, not just the person performing it.
  

2. Defining Selection Pools Correctly

In a tech environment, roles are often highly specialised. However, when identifying who is 'at risk,' employers must look beyond job titles. A selection pool should include all employees performing the same or similar roles.

Selection criteria must be objective and measurable throughout.

• If headcount must reduce in engineering, all developers with similar skill sets must be considered, not just the most expensive.
• A 'pool of one' must be robustly justified; it should reflect a truly unique role, not a convenient target.
• Use objective, measurable criteria: technical skills, disciplinary records, or length of service.
• Exercise caution with 'last in, first out' criteria, as this risks age discrimination claims.

3. The Importance of Meaningful Consultation

Consultation is not a 'rubber-stamping' exercise; it is a legal requirement to discuss proposals with affected employees and to explore ways to avoid redundancies. In the tech world, this is often where the best solutions are found.

Failing to allow an employee to challenge their scores or suggest alternatives can render an otherwise fair dismissal procedurally unfair.

• Moving developers to a different product squad.
• Offering flexible working or reduced hours.
• Identifying alternative vacancies within the wider group.
• For collective redundancies of 20 or more employees at one establishment within 90 days, statutory timeframes and representation requirements apply.

Why This Matters in Practice

• Sham Redundancy Risk: If a 'made redundant' role reappears in a job advertisement shortly after dismissal, an Employment Tribunal will likely find the redundancy was not genuine.
• Performance Pretext Risk: Using redundancy to manage out a poor performer, without following a capability procedure, exposes the business to costly unfair dismissal claims.
• Pool of One Risk: Failing to define a proper selection pool invites tribunal scrutiny and may render the entire process unlawful.
• Inadequate Consultation Risk: Failing to hold meaningful consultation, or treating it as a formality, can make an otherwise fair dismissal procedurally unfair.
• Age Discrimination Risk: Applying 'last in, first out' selection without careful consideration risks indirect age discrimination claims.
  

Why Work with a Specialist Employment Lawyer

Early legal advice is essential when restructuring in a tech business. A specialist employment lawyer can:

• Map out a redundancy process that is legally robust from the outset.
• Advise on how to define selection pools and criteria to withstand tribunal scrutiny.
• Ensure collective consultation obligations are correctly triggered and met.
• Review documentation to confirm the business case is clear, contemporaneous, and defensible.
• Help design a process that treats employees fairly while protecting the business from costly claims.

Protecting Your Tech Business from Sham Redundancy Claims

Businesses should be aware of the legal risks surrounding redundancy in tech restructures and begin preparing now. Ensuring you are ready to carry out a fair, genuine, and well-documented redundancy process is not optional; it is a legal obligation that applies from the moment any employee is placed at risk.