There was a time when restructuring and redundancies weren’t a regular concern for employers and employees, but in our quick-changing, competitive global economy, they have become commonplace.
That’s because reorganising or rearranging a company’s structure to make it more efficient, more profitable, or better organised often needs to happen, whether that’s because of financial pressures or the business wants to expand and capitalise on new opportunities.
There are various forms of restructuring within a business, such as debt restructuring or asset restructuring, but we’re focusing on the restructure of roles or teams. This is known as organisational restructuring.
In New Zealand, the process of restructuring isn’t prescribed to the letter in employment legislation; instead, best practice has been established by case law (rulings by judges).
This means there is some flexibility in terms of the scale and detail of each restructure, but there are some crucial steps and principles that can’t be legally ignored.
Failing to get the restructuring or redundancy processes right could lead to complications, delays, and, at worst, personal grievance claims and financial penalties.
It’s much easier to avoid problems and make the necessary changes smoothly if you fully understand the process, and everyone’s part in it, before you embark on it.
In this white paper, we take a broad look at restructuring and redundancies, how to make sure you handle them correctly, how to avoid common errors, and highlight some real examples.
Restructuring vs. Redundancy
The terms restructure and redundancy often get confused for the same thing, but there is a definite difference.
Restructuring is a process that aims to get the right roles set up in the right way so the business runs more efficiently, or delivers its products or services more effectively.
In the course of a restructure, roles or positions can be identified as surplus to the company’s ongoing commercial needs. These roles become redundant, or are disestablished.
So a redundancy is a potential outcome of the restructuring process. A restructure can lead to a redundancy, but a redundancy cannot trigger a restructure (we’ll discuss this further).
Not all restructures cause redundancies, either; they can involve creating new roles or merging some existing roles.
Getting the restructuring process right
Restructures can affect one role or many, and while the scale can vary, the process is largely the same.
At the heart of both processes is the principle of good faith detailed in the Employment Relations Act, and before any decision is made, employers must consult with every employee whose ongoing employment will, or is likely to be, adversely affected. Taking employee feedback into consideration is also crucial.
To save opening the business up to too much legal risk, plan and prepare well. You need a genuine business reason to launch a restructure, things like financial constraints, realigning services or products to meet a change in market demands, or merging with another company. The commercial imperative must be demonstrable and clearly stated throughout the restructuring process.
Once you have the business case sorted, the next step is to develop a proposal that you will put to affected team members for feedback. In essence, you are telling your employees a story that has to make commercial sense.
Employees should have access to all the information used in preparing the proposal so they can respond in a meaningful way. This includes the objectives, why you’ve chosen specific roles for changes or redundancy, costs and expected benefits to the company, and how the changes will roll out.
Present the proposal by meeting individually with