Procedures for Restructuring and Redundancies

In Short

Ensure you have a genuine business reason for restructuring, backed by evidence.
Follow a fair consultation process, providing clear information to employees and considering their feedback.
Review employment agreements for notice periods and compensation details before implementing redundancies.

Tips for Businesses

Always prioritise good faith and transparency during restructuring. Document your reasons for change, involve employees early in the process, and ensure all decisions are based on business needs rather than individual performance. If downsizing or redeploying roles, seek legal advice to avoid complications.

Restructuring and redundancies are significant events in any business. These processes can be difficult but sometimes necessary to ensure the sustainability and growth of your company. In New Zealand, the Employment Relations Act 2000 and other relevant employment laws guide these processes to ensure they are handled fairly and transparently. This article provides a comprehensive guide for employers navigating legal procedures, compensation and employee rights during restructuring and redundancies.

Why Do I Need to Restructure My Business?

Restructuring usually happens when a business needs to adapt to new circumstances. This might include financial difficulties or the need for increased efficiency. It is crucial to have a clear and justifiable reason for restructuring. Without a solid reason, you could face potential personal grievances from employees.

You may consider restructuring due to:

Financial Difficulties: When revenue drops, costs need to be cut.
Technological Changes: New technology might mean fewer people are needed.
Operational Efficiency: Sometimes, the business needs to be streamlined to stay competitive.

Preparing for a Restructure

It is essential to prepare your reasoning before you begin the restructuring process. This preparation will help ensure that it is as smooth and fair as possible. Some key steps include:

Document Your Reasons: You should write down your reasons for restructuring and explain how these changes will benefit your business. It is important to be as specific as possible.
Develop a Business Case/Proposal: Create a business case that outlines the need for change. This should include financial data, market analysis, and projections.
Plan the Process: Decide on the steps involved in the restructuring and plan the timeline and key milestones. Identifying who will be responsible for each part of the process is good practice.

The Consultation Process

Consultation is a critical part of restructuring. It involves communicating with your employees about the proposed changes and considering their feedback before making any final decisions. During this process, it is important to consider any redeployment obligations you may have, such as exploring alternative roles within the organisation for affected employees. If redundancies are necessary, ensure you have a fair and transparent selection process to determine which positions will be affected.

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Notify Employees

As a starting point, you should inform employees about the proposed restructuring. However, you must emphasise that this is a proposal and not confirmed. You should communicate the information contained in your business proposal, such as:

the reasons for the changes; and
how they will impact the business and staff.

Additionally, you could provide financial reports or market analyses to help your employees understand the proposal.

Collect and Consider Feedback

Once you have informed your employees about the proposed changes, you should allow them to ask questions and provide feedback. This could involve holding meetings to discuss proposals and listen to employees' concerns.

Genuinely consider all of your employees' feedback before making a final decision. If they have raised valid points, you should adjust the proposal to accommodate them.

Making the Final Decision

After the consultation process, it is time to make the final decision about restructuring. This decision should consider all the feedback you received from employees.

Carefully review all the feedback that your employees provided, considering the impact of any changes they have suggested. Evaluating how these suggestions align with the business' goals and whether they can be incorporated effectively is crucial.

After reviewing the feedback, make the final decision based on both employee input and the business' overall needs. Document the reasons for the decision to ensure clarity and transparency throughout the process.

You must also clearly communicate your final decision to your employees. Explain how their feedback was considered and provide the rationale behind the final decision.

Implementing the Changes

Once the decision has been made, the next step is to implement the changes. This involves making the necessary adjustments to the business structure and handling any redundancies.

If redundancies are necessary, you should provide formal notice to the affected employees. The length of notice will depend on each employee's employment agreement and relevant legal requirements. Be sure to review these agreements to see if there is a payment in lieu of notice clause that you may want to use.

Additionally, check the employment agreements for any specific redundancy compensation terms. While you are not legally obligated to offer redundancy compensation in NZ, you might choose to provide it as part of your process.

You may also consider offering support services to affected employees to help them transition. This could include:

career counselling;
job placement assistance; or
financial advice.

Make sure all documentation related to the restructuring and redundancies is accurate and complete. Keep thorough records of all communications and decisions made throughout the process to ensure transparency and compliance.

Legal and Ethical Considerations

It is important to handle restructuring and redundancies legally and ethically. This helps protect your business from legal challenges and maintains employee trust. If you are unsure about any aspect of the process, it is wise to seek legal advice to avoid potential issues.

You should prioritise treating all employees fairly and with respect throughout the process. Avoid discrimination and make sure your decisions are based solely on business needs, not personal biases. Additionally, communicate openly and transparently with your employees while maintaining their confidentiality and sensitive information.

Key Takeaways

Restructuring and redundancies are complex processes that require careful planning and execution and we suggest seeking legal advice prior to commencing any restructuring process. It is important to remember to document your reasons, consult with employees, consider their feedback, and provide support throughout the process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.