Redundancy and Restructuring Advice for NZ Employers
If you are considering restructuring your business or making an employee’s position redundant, it is important to get the process right from the beginning. It isn’t as simple as issuing a redundancy letter.
A genuine business reason for change is important, but it is not enough on its own. Employers must also follow a fair and reasonable process before making a final decision affecting an employee’s employment.
I.R. Thompson Associates provides practical redundancy and restructuring advice to employers throughout New Zealand. We can assist from the initial proposal through consultation, selection, redeployment and the final outcome.
If you are considering a restructure or redundancy, talk to us before announcing the proposed changes.
What is redundancy in New Zealand?
Redundancy occurs when an employee’s position is no longer required because of a genuine change in the employer’s business or operational requirements. It is the position that becomes redundant, not the employee.
A business may need to restructure for many genuine reasons, including:
- reducing operating costs;
- declining revenue or changes in demand;
- reorganising how work is performed;
- introducing new technology or systems;
- removing duplicated positions;
- combining or changing roles;
- outsourcing work;
- reducing the number of employees performing particular work; or
- changing the management or operational structure of the business.
Cost savings are therefore not the only legitimate reason for restructuring. An employer may decide that there is a better or more efficient way of operating its business.
However, redundancy should not be used as a substitute for dealing with an employee’s performance, misconduct or other personal employment issues.
What process should an employer follow when restructuring?
There is no single restructuring process that will be appropriate for every business. The nature of the proposal, the number of employees affected, the employees’ employment agreements, and whether a selection process is required can all affect the procedure to follow.
As a general guide, an employer considering restructuring should:
- Identify the genuine business reason for the proposed change.
- Review the affected employees’ employment agreements and any relevant policies or collective agreement requirements.
- Develop a genuine proposal.
- Explain the proposed changes and the reasons for them to affected employees.
- Provide relevant information necessary for employees to understand and provide meaningful feedback on the proposal.
- Give employees a reasonable opportunity to consider the proposal and respond.
- Meet with employees and genuinely consider their questions, feedback and proposed alternatives.
- Consider whether there are reasonable alternatives to redundancy.
- Consider appropriate redeployment opportunities.
- Undertake a selection process where fewer employees will be required to perform the same work.
Can an employer restructure to save money?
Yes, financial pressure and the need to reduce costs can provide a genuine business reason for restructuring. Financial reasons as an example of a genuine reason for workplace change.
However, a restructure does not have to arise because the business is in financial difficulty. A profitable employer may still have genuine commercial or operational reasons for reorganising its business.
The important issue is whether there is a genuine business reason for the proposed change and whether the employer follows a fair and reasonable process.
What if only some employees are being made redundant?
Where an employer proposes to reduce the number of employees performing the same roles, a fair selection process may be required.
The selection criteria should reflect the genuine requirements of the remaining roles and should be applied fairly and consistently. Employees should ordinarily have a reasonable opportunity to comment on the proposed selection process before final decisions are made.
Does an employer have to pay redundancy compensation?
Redundancy compensation will usually depend upon the applicable employment agreement or other contractual entitlement.
Employers should therefore review the employment agreement before commencing the restructuring process, including provisions dealing with:
- restructuring;
- redundancy compensation;
- notice;
- redeployment;
- consultation;
- technical redundancy; and
- any specific process the parties have agreed to follow.
Any required notice and final employment entitlements also need to be dealt with correctly if employment ultimately ends by reason of redundancy.
Getting advice before the proposal is issued can be significantly easier than trying to remedy a defective process after consultation has begun.
Employer Redundancy and Restructuring Advice Throughout New Zealand
I.R. Thompson Associates works with employers throughout New Zealand dealing with restructuring, redundancy and wider employment law issues.
We can assist with the complete process or with individual stages, including:
- reviewing the business rationale and proposed restructure;
- preparing restructuring proposals and consultation correspondence;
- advising on information disclosure and consultation requirements;
- assisting with or running consultation meetings;
- responding to feedback from employees and representatives;
- developing and applying appropriate selection processes;
- advising on redeployment and alternatives to redundancy;
- preparing restructuring and redundancy outcome letters; and
- representing employers in personal grievances, mediation and Employment Relations Authority proceedings.
Our focus is practical. We help employers understand what they can do, what process they should follow and how to reduce unnecessary employment-law risk while still achieving legitimate business change.
Talk to us before starting your restructure.
If you are considering restructuring your business, changing employee roles, reducing staffing numbers or making a position redundant, obtaining advice before announcing the proposal can avoid significant problems later.
Contact I.R. Thompson Associates for practical redundancy and restructuring advice for employers throughout New Zealand.
This page provides very general information about redundancy and restructuring in New Zealand. It is not a substitute for advice about the circumstances of a particular employer, employee or proposed restructure. Any advice on a redundancy will depend on a case-by-case basis; this page does not constitute advice for you to rely on to defend or run a claim.