In these challenging economic times, many businesses find they need to change the way they operate, to save money, be more efficient, or take advantage of new opportunities.
We’ve been through a heck of a ride over the past few years, and it looks like there could be considerable pressures on organisations, households, and individuals for a while to come.
A common way to refocus your business is to restructure. Restructuring is a process centred on the work being done in the business and which roles are performing which tasks. It is about modifying your organisation’s structure so it can best meet your vision and objectives.
There have been a number of high-profile companies in Australia and overseas laying off staff in an effort to cut costs, and MyHR has seen a significant uptick in requests from our members for assistance with restructures.
Now, it can be tempting to rush into a restructure without doing the due diligence work upfront, but if you propose changes that will significantly affect workers’ roles (especially if there could be redundancies), you are generally obliged to consult with them about the changes. This includes presenting them with information on the changes and your commercial justification for it.
Getting the process right, communicating clearly, and taking a best practice approach to consultation and cooperation will enable you to make the necessary changes smoothly, without opening yourself up to too much legal risk.
Before you start…
Requirements for employers to consult with employees about significant workplace changes are clearly set out in employment legislation, modern awards, and enterprise agreements.
Even for employees who are not covered by an award or agreement, we recommend consulting with them about major workplace changes as best practice.
Therefore, you should regard restructuring as a consultation process that involves 3 basic steps:
- Notifying any employees that will be impacted by the proposed changes to their employment.
- Presenting them with the change proposal for their consideration and input.
- Considering their feedback in making your decision (this includes responding to any suggestions they may make).
Restructuring isn’t about the people in the roles. There is no fault on the part of the employee(s), so don’t instigate a restructure as a pretext for getting rid of a troublesome worker or someone who’s not performing. Doing this will open you up to the risk of claims for unfair dismissal.
There are separate processes for properly handling misconduct, underperformance, or other employment issues.
Building your case
The case for restructuring should be based on getting the best possible organisational design to deliver on your strategy, to your customers and stakeholders etc. Behind it all, you need a genuine financial justification.
We stress the word ‘genuine’ here. If you are challenged, the Fair Work Ombudsman or Fair Work Commission will scrutinise your reasoning and the consultation process you followed. If they find you based your restructure on faulty or insufficient evidence or you didn’t follow the consultation clauses in the relative award or registered agreement, it could cost you a payment to your employee, a contribution to their costs, plus the potential for any lost wages (as well as any legal expenses you incur).
We always advise organisations to start by taking a step back to define your overall goals and objectives. What is driving the need to change and what do you want to achieve? What sort of enterprise do you want to be?
It could be you have cash-flow problems or other financial issues that require reducing overheads, of which salaries/wages are a major component. Or there might be opportunities you want to pounce on, technological advances, or a need for new products to meet customer demand.
Once you have done this broad, high-level analysis, you can then drill down into defining what work needs to be done to realise these aims. From there you can work out the design of your team(s), the roles within it, and the sorts of skills and aptitudes you need to ensure you get the work done.
The restructure proposal
The next step is putting together your restructure proposal for your employees, which will outline the proposed changes to the organisation’s structure, individual roles or responsibilities, pay or other terms of employment (e.g. hours of work), and the commercial reasoning behind it all.
Consultation clauses in awards and agreements require you to share written information about the changes, how they might affect employees, and measures you will take to limit the adverse effects.
If you are realigning the roles in your team, including disestablishing some positions or creating new ones, the selection process needs to be fair and transparent. We strongly recommend including draft position descriptions for the proposed new (or changed) roles in the initial consultation pack, so that you are presenting employees with as much information as possible at the start of the process. Otherwise, you're drip-feeding them information, which could slow the whole process down.
We also recommend documenting what other actions you’ve taken to genuinely try and address the challenges before considering restructuring.
For example, if your revenue is down and you’re looking to reduce costs, have you reduced discretionary spending? Tried to renegotiate your lease with your landlord? Raised prices for your customers? Stopped hiring to replace resignations? Put more money into your marketing activities to increase your revenue? Any and all of these actions will help prove you have a genuine need to restructure.
Redundancies aren’t guaranteed
Restructuring aims at ensuring your business has the right roles performing the right tasks to deliver on your objectives. It doesn’t always mean your headcount will be reduced.
In fact, for your restructure to be legally justifiable, any redundancies that result must be genuine. A genuine redundancy is defined in the Fair Work Act and occurs when:
- You no longer require a role to be performed by anyone because of changes to the business’ operational requirements.
- You have complied with any obligation (from an award or enterprise agreement) to consult on the redundancy.
- There are no other available roles within the business, or an associated business, that the employee could reasonably perform.
So, investigating options for redeployment is a necessary step in the process.
If there’s an alternative role that the employee has the skills to do, or they could do it after some retraining, you are required to offer it to them. This is more than simply offering the employee the opportunity to apply for a suitable alternative role.
You aren’t, however, obliged to offer redeployment to a position that requires a significant amount of retraining or skills and experience the employee doesn’t have.
The employee doesn’t have to accept the offer of redeployment, but this will mean they face redundancy.
Learn more about the differences between restructuring and redundancies.
From there: consultation with affected employees
Here’s the basic consultation process you need to follow:
- Notify the affected employees and present them with the restructure proposal and all the supporting documentation for their consideration and input.
- Give them time to consider the proposal and prepare their responses - we recommend allowing a minimum of 2 days.
- Meet with them to hear their feedback.
- Genuinely consider their responses and actively engage and respond to any suggestions they may make.
- Make a decision whether you will proceed with the restructure or not.
- If, after considering their feedback, your proposed org structure looks significantly different from your original proposal, you should present this afresh to your team, and restart the clock on their time to consider and provide feedback on the updated version of your proposal
- Confirm the decision and invite expressions of interest for the new roles.
- Apply selection criteria to select the successful candidates.
- Confirm redundancy or who has been successful.
Redundancy pay entitlements
When an employee is made redundant, they’re entitled to redundancy pay based on the period of continuous service with the business.
The minimum redundancy pay starts at 4 weeks (for an employee who’s worked for at least 1 year but less than 2 years) up to a maximum of 12 weeks (for an employee who’s worked for at least 10 years).
Small businesses (less than 15 employees, including regular and systematic casual employees and employees of associated entities) are excluded from paying redundancy.
Where an award has an industry-specific redundancy clause, this will apply instead of the National Employment Standard entitlement.
Any outstanding entitlements also need to be paid out, including annual leave that hasn’t been taken, and long service leave where applicable.
Work out redundancy entitlements using the Fair Work Ombudsman’s calculator
How MyHR can help
We are here to support you through the restructure process, including preparing all proposal documents and guiding you through each step.
