Restructuring in Mid-Sized Companies: Why the Target Organisation Chart Is the Real First Step
When companies have to reposition themselves, the preparation under employment law often wrongly begins with calculating notice periods or severance payments. Anyone who proceeds in this way starts the implementation before the legal foundation has even been laid. A restructuring process can withstand judicial scrutiny only if it follows a strict, logical sequence of review. The real first step is to link a detailed stocktaking with a coherent and comprehensible entrepreneurial decision (unternehmerische Entscheidung).
It begins with a detailed analysis of the current situation. Entrepreneurs must examine exactly what the current organisation chart (Organigramm) looks like, how functions are staffed and at which specific points in the process a structural surplus of labour exists. Based on this stocktaking, management must record in writing a new, binding organisational concept – the target organisation chart (Ziel-Organigramm). What matters in practice is that the labour courts (Arbeitsgerichte) do not review such an entrepreneurial decision for its economic expediency, but do review whether it was actually made definitively, is not arbitrary and is not based merely on non-binding plans.
From this precise comparison between the current and the target state arises the delta that is mandatory for every dismissal for operational reasons (betriebsbedingte Kündigung), namely the permanent loss of the need for employment (Wegfall des Beschäftigungsbedarfs). Only once it has been documented that certain tasks will be permanently discontinued or can be handled by the remaining workforce after restructuring has the first hurdle been cleared. Blanket economic justifications such as a mere decline in revenue are not sufficient for this, since the loss must always be derived in a function-specific and gap-free manner.
Only after this loss of employment has been established may further instruments under employment law be examined in the subsequent steps, since every dismissal is a last resort. This includes the statutory duty to examine less severe measures first, such as the transfer to vacant positions in the company or the issuing of notices of dismissal with an offer of amended terms (Änderungskündigungen). Only if no less severe measure applies does a proper social selection (Sozialauswahl) follow among comparable employees on the basis of the statutory criteria of length of service, age, maintenance obligations and severe disability.
Moreover, employment law dictates the timing and the sequence in which external and internal bodies are involved. Adhering to this chronology protects the company against ineffective measures and spares management personal liability risks. An existing works council (Betriebsrat) must be comprehensively informed and involved well before any dismissals are issued, in order to conduct the mandatory negotiations on a reconciliation of interests (Interessenausgleich) and a social plan (Sozialplan). In parallel, the exact number of intended dismissals must be compared with the size of the establishment: if the ratio within 30 calendar days exceeds the statutory thresholds, a formally flawless notification of mass dismissal (Massenentlassungsanzeige) must be filed with the Employment Agency (Agentur für Arbeit) before any dismissals are issued.
Employment law therefore tolerates no skipping of review steps. Only when the concept is logically sound and the statutory notification and negotiation duties have been fulfilled does the operational implementation in the HR function follow.
