Mergers & Acquisitions – Redundancies For Firms

Usually lumped together in the same phrase, “merger & acquisition” is a corporate strategy that can help an enterprise to survive and grow. The main difference between a merger and an acquisition is that mergers refer to two or more companies (usually of a similar size) merging together to form a new company, whereas acquisition refers to one company taking over another company but establishing itself as a newly owned entity. While this reductive explanation is good in theory, in practice the buying, selling, dividing or combining of different companies can happen in all sorts of different permutations.

Inevitably, when companies go through a merger or acquisition there are huge repercussions for both the employers and employees. Redundancies are common because as companies join or divide, roles become dormant or duplicated and staff need to be re-organised.


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The Employee

Employment protection law gives employees individual rights when it comes to making them redundant. Details of employee rights with regard to redundancy should be outlined in the employee contract that both employee and employee sign during recruitment. By law both parties must adhere to the terms.

Employees may be within their rights to receive a statutory redundancy payment, but this does depend on their contract and how long they have been employed. If you have been working continuously for your employer for at least two years then you are legally entitled to a statuatory redundancy payment, the amount of which depends on how long you have worked for the company, your age and your rate of pay. However, if your employer offers to keep you on after a merger or acquisition or offers you suitable alternative work which you refuse then you may not be entitled to this payment.

It is a legal requirement that the employer give you a written statement detailing the amount of redundancy money you will receive and how this was calculated. if your employer does not uphold the terms of your employment contract, then they may be in breach of contract and this could mean as an employee you could take them to a tribunal and sue them.

The Employer

With a merger or acquisition, employers inevitably have to reorganise the work force and redundancies are often unavoidable. There are certain laws and regulations employers must follow. One of the most important details to be aware of as an employer is that the possibility of redundancy is often very stressful and concerning for employees, so it vital that employers act decisively but also help employees through the process as much as they can.

Employers must follow a well-defined processes and complete a fair redundancy procedure for every employee. Communication with employees is equally important. In fact, it is a legal requirement to consult employees and/or their representatives about the redundancy.

With mergers and acquisitions, it is common for redundancys to be compulsory. However it may be possible to offer voluntary redundancy or even early retirement. Both have different legal ramifications and processes to follow.

In the current economic climate, mergers and acquisitions are on the increase as businesses look to work together to grow and thrive. It is a stressful move which effects all those involved, both those that remain and those that are made redundant. Employers have responsibilities to treat employees fairly and redundancy should be the last resort. If there is no alternative, employers should ensure that redundancy protocol is followed, employment laws are adhered to and that the process is as humane as possible for both employee and employer.

This article was provided by BCL Legal – Specialist law recruiters.

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