Handling Employee Demotions Due to Organizational Restructuring: A Guide for HR

We’re breaking down all the not-so-fun facts about getting a demotion at work. The internet is full of articles about how to land a

Organizational restructuring often involves eliminating positions or reducing headcount. As a result some employees may face demotions to lower-level roles. Handling these demotions thoughtfully and compassionately is crucial for maintaining morale and retention.

As an HR professional, you play a key part in ensuring demotions due to restructuring are handled professionally. This guide covers best practices to follow when demoting employees after organizational changes.

Why Restructuring Leads to Demotions

There are several common triggers for company restructuring that can result in demotions:

  • Financial pressures – Trying to cut costs by delayering management or consolidating roles.

  • Shift in strategy – Pivoting business priorities and needing different skillsets.

  • Mergers and acquisitions – Streamlining and eliminating redundant positions

  • New leadership – Executives wanting to reorganize based on their style

Whatever the reason, restructuring often means positions are combined or eliminated. Employees in these roles may be offered demotions if other jobs at their level don’t exist.

Challenges of Demoting Valued Employees

Demoting competent, hard-working staff due to restructuring can be difficult. Here are some potential hurdles to be aware of:

  • Morale issues – Employees may feel undervalued or that demotions reflect poorly on them.

  • Pay cuts – Demotions usually involve lower compensation, which can cause financial strain.

  • Damaged trust – Employees may feel betrayed if promised career growth doesn’t happen.

  • Reduced productivity – A demoralized employee may disengage from their demoted role.

  • Culture impacts – Demotions could make other employees feel insecure about their jobs.

Preparing for Restructuring Demotions

To manage demotions effectively, preparation is key. Here are some tips:

  • Give ample notice of the restructuring and explain the business rationale.

  • Be transparent about the process for role/staffing changes.

  • Offer career counseling and resume help to affected employees.

  • Identify alternative roles at the same level for qualified employees.

  • Consider temporary pay protection after demotions to ease transitions.

  • Train managers on conducting sensitive demotion discussions.

Handling Demotion Conversations

Having empathetic one-on-one talks is critical when demoting staff. Consider these recommendations:

Demonstrate Understanding

  • Be compassionate and acknowledge this is difficult for the employee.

  • Note that the demotion doesn’t reflect poor performance on their part.

  • Appreciate their contributions and say you want them to remain with the company.

Explain the Rationale

  • Provide context on the organizational changes and business reasons behind the demotion.

  • Explain the rationale for their specific demotion.

  • Take ownership of the decision as a company leader. Don’t make the employee feel targeted.

Discuss the New Role

  • Describe the responsibilities of the new position and how the employee’s skills make them a great fit.

  • Be clear and candid about any changes to compensation and benefits.

  • Outline prospects for future growth opportunities once conditions improve.

Listen and Respond

  • Allow time for the employee to process the news and express their feelings before responding.

  • Answer any questions transparently and with compassion.

  • If requested, consider allowing a few days before finalizing the demotion.


  • Have a demotion letter ready to formally present the details discussed.

  • Gather any needed signatures on revised job descriptions, compensation forms, etc.

  • Update the employee’s personnel file and status change paperwork.

Supporting Demoted Staff

To help employees adjust to their new roles after demotion, consider providing:

  • Mentorship – Assign a mentor at the company to provide guidance and support.

  • Training – Offer job-specific training to quickly gain proficiency.

  • Coaching – Check in periodically see how they’re adjusting and offer encouragement.

  • Feedback – Provide informal performance feedback to build confidence.

  • Communication – Have managers provide transparent updates on company plans to revisit roles/levels.

Transitioning Successfully

While initially difficult, with care and compassion, demotions due to restructuring can successfully transition to improved morale, performance, and retention. Some best practices include:

  • Set expectations that the situation is temporary until conditions improve.

  • Encourage employees to view the new role as an opportunity to gain new skills.

  • Highlight how the employee’s knowledge can help improve the revised role.

  • Schedule check-ins to gather feedback on how to support their transition.

  • Recognize and praise the employee’s cooperation and flexibility publicly.

  • After a reasonable period, re-evaluate potential to restore the employee’s prior role or level.

Avoiding Pitfalls

When managing restructuring demotions, be sure to avoid these common missteps:

  • Failing to explain the strategic business context behind changes.

  • Not providing enough notice or transparency about impending shifts.

  • Demoting top performers who lack seniority along with poor performers.

  • Assuming employees will easily and happily accept demotions.

  • Forcing abrupt transitions without time to process the change.

  • Failing to show empathy in demotion conversations.

  • Refusing to discuss options or support struggling transitioning employees.

  • Making promises to restore levels without following through.

Key Takeaways

Handling demotions with care and communication is vital for organizational success during restructuring. Keep these tips in mind:

  • Provide context on factors driving restructuring changes.

  • Give advance notice and explain the process for staffing changes.

  • Offer alternate comparable roles first if possible.

  • Have compassionate transition conversations.

  • Support employees adjusting to new positions.

  • Set expectations that demotions are not permanent punishments.

  • Solicit feedback on how to improve the process.

With empathy, transparency, and engagement, HR can lead the organization through restructuring demotions while maintaining team morale, productivity, and retention.

demotion due to organizational restructuring

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What Is a Demotion?A demotion in the simplest sense is when a company (or sometimes an employee, which we’ll discuss in a moment) decides to lower an employee’s status, title, and (usually) pay.The tricky part about demotions, though, is that it’s rare for someone to say, “We’re demoting you.” There are all sorts of words that people use to offset the sting.Restructuring or organizational restructuring. “The company is going through a reorg.” Reassignment. In most cases, the demotion is compulsory—meaning the employee doesn’t get a say in the situation. Still, occasionally there are reasons why an employee might request a voluntary demotion.

  • Poor performance
  • Backtracking—a recent promotion that wasnt going according to plan
  • Organizational restructuring including the elimination of a position
  • An employees request to have a lesser role or less responsibility
  • We can explore these reasons a bit more with the common “types” of demotions.

When You Get Demoted Because Your Company Restructures ☹️

What causes a demotion due to organizational restructuring?

A demotion due to organizational restructuring often occurs when a company wants to keep an employee but needs to move them to a different job role with fewer responsibilities. External forces, such as finances or a merger between companies, often cause organizational restructuring.

How do you retain a demoted employee after a restructuring?

To retain an employee who has been demoted due to a restructuring, Harrison said, managers need to create a plan—if possible—to eventually move the employee back to the previous position. “There have to be clear, well-articulated steps to get them back to where they were before,” he added.

Should you demote employees during a restructuring programme?

Demoting employees as part of a restructuring programme may offer a more favourable alternative to redundancies, but employers need to beware of the ramifications of making such contractual changes and to ensure the process followed is lawful. Paida Dube explains

What happens if an employee is demoted during a reorganization?

When an employee is demoted during a reorganization, the sting shouldn’t feel as personal, Harrison said—but it can still hurt.

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