Businesses are constantly evolving. Sometimes, through acquisition or economic changes, companies must undergo restructuring and manage redundancies to stay competitive or address financial challenges.
While these processes are essential for operational efficiency and long-term sustainability, they must be conducted with a deep understanding of New Zealand employment law and a strong commitment to fair employee treatment.
This extended guide delves into the nuances of restructuring and redundancies, aiming to provide employers and employees with a comprehensive understanding and practical advice.
The legal framework for restructuring and redundancies
Key legislation
The Employment Relations Act 2000 sets the framework for managing restructuring and redundancies, ensuring that employers conduct these processes in a fair and reasonable way. It mandates a meaningful consultation process with affected employees and adherence to the terms of employment agreements.
Personal grievance claims
Failure to comply with legal obligations can lead to claims of unjustified dismissal. Employers must navigate the restructuring process meticulously to mitigate the risk of personal grievance claims and redundancy complaints, which can be costly and damaging to your reputation.
What’s the difference between restructuring and redundancy?
Restructuring and redundancy are terms frequently encountered in the realm of organisational change, yet they describe distinct concepts.
Restructuring
Restructuring refers to modifying an organisation's structure, operations, or strategy for a genuine business reason, like enhancing efficiency, responding to new market demands or achieving particular goals. This may encompass alterations in job roles, departmental functions, or the overall organisational hierarchy.
Redundancy
Redundancy arises when an employer determines that a job or role is no longer necessary, often due to restructuring activities, technological advancements, or economic downturns.
Restructuring vs. redundancy
Restructuring might result in the creation of new opportunities or the reshaping of roles within the organisation. In contrast, redundancy specifically signifies the cessation of positions, potentially leading to employees exiting the organisation if no alternative roles are forthcoming.
Best practices for handling restructuring and redundancies
While sometimes necessary, restructuring and redundancies can be a challenging and emotionally charged experience for employers and employees. The risk of redundancy complaints adds another layer of complexity. These best practices can help you navigate restructuring with compassion and transparency.
Early engagement
Initiate conversations with employees as early as possible. Early engagement helps to manage uncertainty and allows employees to prepare for potential changes.
Transparent communication
Maintain open lines of communication throughout the restructuring process. Transparency about the company’s situation and the reasons for restructuring builds trust and eases the transition for affected employees.
Employee support services
Offer support services, such as outplacement counselling and financial planning advice, to help employees navigate the transition, whether staying with the company or leaving due to redundancy.
Training for remaining staff
Post-restructuring, invest in training and development for remaining staff. This helps address any skill gaps resulting from the restructuring and demonstrates a commitment to employee growth and development. It is also reassuring for employees concerned with job security.
Navigating disestablishment and redundancy
When disestablishment — the elimination of a role — becomes necessary, handling the process with transparency, empathy, and respect for everyone involved is vital.
Disestablishment of role
When a role is disestablished, it's essential to clarify that the decision is based on genuine business needs and not the individual employee's performance. A fair and reasonable employer should explore all possible alternatives to redundancy, such as redeployment within the company.
Employee rights during a restructuring
Employees have the right to fair treatment throughout the restructuring process, including the right to be heard and to be considered for alternative roles. They are also entitled to a notice period and redundancy compensation if specified in their employment agreement.
Restructuring process step-by-step
For New Zealand employers navigating a restructuring process, precision and a step-by-step approach is essential to balance organisational objectives with compassionate employee treatment. Here is a detailed framework:
Strategic planning:
- Assess the current situation: Analyse financial performance, market position and operational efficiency to identify the need for restructuring.
- Define objectives: Clearly articulate what the restructuring aims to achieve, such as cost reduction, market repositioning or operational improvements.
Develop a restructuring plan:
- Design the new organisational structure: Outline changes in reporting lines, departmental consolidations, or the creation/disestablishment of roles.
- Financial analysis: Project the financial impact, including cost savings and any potential restructuring charges.
Legal and regulatory compliance:
- Review employment agreements and important legislation: Ensure the plan complies with legal obligations regarding redundancies, notice periods, and severance packages.
- Consult with legal experts: To navigate complex employment laws and avoid potential litigation.
Communication strategy:
- Prepare transparent messaging: Develop clear, empathetic communication materials explaining the reasons for restructuring, its benefits and expected impacts.
- Schedule announcements: Plan a timeline for communicating with stakeholders, starting with internal teams.
Implementing the Plan:
- Conduct individual meetings: For those affected, hold respectful, one-on-one conversations to discuss their options, including redundancy, redeployment or altered roles.
- Provide support services: Offer career counselling, resume workshops and mental health support to help employees transition.
Support for remaining employees:
- Reassurance and clarity: Communicate the future vision and their role in it to reassure remaining staff and rebuild morale.
- Training and development: Invest in training programs to upskill employees for new roles or responsibilities.
Monitoring and adjustment:
- Evaluate progress: Regularly review the implementation against objectives, making adjustments as necessary.
- Feedback loops: Establish channels for ongoing employee feedback to address concerns and make continuous improvements.
Post-restructuring review:
- Assess outcomes: Evaluate the restructuring’s impact on business performance and employee morale.
- Lessons learned: Document insights and feedback for future reference.
This structured approach ensures employers achieve the strategic goals of restructuring and manage the process with empathy and respect for all employees, maintaining morale and engagement during challenging times.
Common pitfalls to avoid during a restructuring
During a restructuring process, avoiding common pitfalls is crucial for the success of the transition and maintaining employee morale. Key mistakes to avoid include:
- Inadequate communication: Not providing clear, transparent, timely information can fuel rumours and anxiety and diminish trust.
- Lack of consultation: Failing to engage with employees or their representatives overlooks valuable insights and increases resistance to change.
- Underestimating emotional impact: Neglecting the emotional toll on all employees, not just those directly affected by job losses, requires addressing with support and reassurance.
- Misalignment with business strategy: Not aligning the restructuring objectives with the overall business strategy can lead to confusion and misdirected efforts.
- Overlooking legal requirements: Ignoring the legal aspects related to redundancies and changes in employment conditions can result in costly legal issues and harm the organisation's reputation.
Careful planning, effective communication, and treating employees with empathy are essential to navigating restructuring smoothly and successfully.
Employees rights
Employees are entitled to various rights to safeguard their interests and promote fair treatment during a restructuring process. These rights include:
- Clear and timely communication: Employees should be informed about the restructuring's impact on their role, the reasons behind the changes, and the implementation plan.
- Right to consultation: Individuals can express their concerns, ask questions, and provide input on the restructuring proposals.
- Fair selection process: If redundancies occur, the selection process must be equitable, with criteria clearly communicated to all affected employees.
- Notice of redundancy: Employees are entitled to receive adequate notice before their employment ends, in line with legal requirements and employment contracts.
- Redundancy pay: Depending on their contract, company policies and applicable agreements, employees may be eligible for redundancy compensation for the loss of employment.
- Entitlements: Employers must also pay out employees for any accrued annual leave and public holiday entitlements in their final pay.
- Alternative employment: Where possible, employees should be offered alternative positions within the organisation, aligning with their skills and experience.
- Outplacement support: Assistance with finding new employment, including career counselling and job search services, may be provided to facilitate a smooth transition.
Understanding these rights is crucial for employees facing restructuring challenges, ensuring they receive the respect and dignity they deserve throughout the process.
Examples of restructuring cases in New Zealand
New Zealand has seen several high-profile examples of restructuring across various sectors. These highlight the diverse reasons behind restructuring, from technological advancements and consumer behaviour changes to financial sustainability and regulatory compliance.
Telecommunications
Major telecommunications companies in New Zealand have undergone restructuring to adapt to the rapidly changing technology landscape, including shifts towards digital services and the need for more agile business models. These restructurings often result in consolidating roles or departments to enhance efficiency.
Banking and finance
Financial institutions have restructured to respond to digital banking trends, regulatory changes, and the need to focus on core operations. This has included the closure of physical branches in favour of online services, impacting staff roles and employment.
Public sector
Various government departments and agencies have undertaken restructuring to improve service delivery and efficiency. This might involve merging departments, centralising functions, or revising service delivery models to better meet the needs of New Zealanders.
Education sector
Universities and polytechnics have faced restructuring due to changes in funding, student numbers and educational priorities. This can involve the realignment of faculties, introduction of new courses and, in some cases, staff redundancies to address financial pressures.
Media companies
With the media landscape evolving due to the rise of digital content and changing consumer habits, media organisations in New Zealand have restructured to focus more on digital platforms, affecting roles related to traditional print and broadcast media.
Can you use restructuring to make employees redundant?
Employers must tread carefully and ethically during restructuring, ensuring that the process is not misused as a guise for making employees redundant without just cause.
It's crucial to understand that there must be genuine business reasons driving restructuring, such as operational efficiency, adapting to market changes or financial sustainability, rather than as a means to circumvent fair labour practices and legal obligations associated with redundancies.
Misusing restructuring in this manner undermines trust and morale within the remaining workforce and exposes the organisation to legal risks and potential reputational damage.
Employers are advised to maintain transparency, communicate honestly, and adhere strictly to legal frameworks governing employee rights and redundancies.
Need expert support for restructuring and redundancies?
For businesses undergoing restructuring or considering redundancies, obtaining professional advice is crucial. Our HR and New Zealand employment law specialists can provide tailored guidance to navigate these processes effectively, ensuring legal compliance and supporting your team through transitions. Stay informed, be prepared, and take proactive steps to manage restructuring and redundancies with confidence. Contact Peninsula today to find out how we can help you.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.
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