Restructuring and redundancies: Frequently asked questions

Nick Stanley
By Nick Stanley 22 July 2022

Answers to questions MyHR receives from its members about the major change process, restructuring, and redundancies.

We'll keep updating this page as we get more questions.

Questions covered:

Does restructuring always mean layoffs?

Not always.

Making changes to the structure of the business is a consultation process that centres around altering the way work is done or services are delivered so the company can best meet its objectives. It focuses on the roles doing the work but it doesn’t necessarily mean roles are made redundant. It can involve creating new, additional roles, or making changes to existing ones. 

Find out more about the major change process.

How do I tell workers about restructuring?

Under the Fair Work Act, you must notify employees who may be affected by the proposed restructure and do so as soon as possible after you decide to make the changes.  

You should provide the employees with information about these changes and their expected effects, including the business case for the changes and any supporting information.

If jobs are on the line, we recommend communicating the proposed changes to each affected individual first (unless they are members of a union, which will require consultation with the union). You should then hold a meeting with affected individuals as a group. As a courtesy, you may want to include other employees not affected by the changes, so they understand what is happening in the business.

How much time do I have to give my employees to seek advice and provide feedback?

We recommend giving affected employees a minimum of 2 days to consider a restructure proposal and to prepare their responses. If they request more time, it’s good practice to give it to them (up to 2 weeks is considered reasonable).

What happens if an employee provides negative feedback about changes during the consultation process?

All awards and registered agreements include a consultation process for major workplace changes. In it, you must ask for and consider ideas or suggestions from all employees whose jobs may be affected by a proposed change to the business structure. 

These obligations do not differentiate between positive or negative feedback, so if an employee raises genuine concerns about the changes in operational requirements that are behind the restructure or proposes a solution that achieves the same benefits without redundancies, we recommend you look at it closely.

You aren’t duty bound to action all feedback, but you need to take it into account when making your final decision. You should also be able to prove you have done so; documenting your response to the feedback will provide evidence of this.

Learn more about the difference between restructuring and redundancy.

What if I want to change my proposal halfway through the process?

If you make changes (other than minor ones) to a restructure proposal, including changes to the consultation or selection processes, then you should present these changes to all employees affected by them and give some additional time for feedback.

If the changes are significant, it may be best to start the change process again, starting with a new proposal.  

This is particularly important if your new proposed structure affects roles different to the ones initially identified for change.

Do I have to offer an employee whose role is redundant the newly-created role? Why?

You should always view redundancy as the last option after you’ve explored all redeployment options with your employees. Under the Fair Work Act, dismissing someone who could have reasonably been redeployed within the business (or in an associated entity) is not a case of genuine redundancy.

While there’s no hard and fast rule for determining whether a redeployment is reasonable, there are a number of matters which are relevant, including:

  • whether a job, position, or other work exists to which the employee can be redeployed;
  • the nature of any available position; 
  • qualifications required to perform the job;
  • the employee’s skills, qualifications, and experience. The employee should have the skills and competence required to perform the role to the required standard either immediately or within a reasonable period of re-training;  and
  • the location of the job in relation to the employee’s residence and the remuneration which is offered.

If the newly-created role is “substantially similar” (based on the above matters) to the employee’s current job, even if it's a more junior role, you have an obligation to offer it to your existing employee.

If the role is significantly different to the one the employee is currently doing, you can choose to invite all affected employees to apply for the position and select the best candidate. 

If you exit an employee and replace them with someone in largely the same position (even if it has a different job title), you’ll have a hard time justifying the redundancy as genuine.

Find out more about redeployment at the Fair Work Commission website..

Can I run a restructure with one employee who holds the same position as 10 others in my business?

You could, but it would open you up to an unfair dismissal claim. Restructuring focuses on the work being done in the business and by which roles, not the people performing the roles.

Any proposed restructure must be driven by genuine changes in the business’ operational requirements and in making a decision, you must ask for and consider the feedback of all employees who may be affected (in this case, this includes all the people performing the same role). 

Any selection process for redundancy must be reasonable and you need to make genuine efforts to find alternative employment for anyone in a role proposed to be made redundant.

For all these reasons, you would have a hard time justifying the redundancy was genuine if you have already singled out one person while retaining the other 10 employees.

If you are having disciplinary or performance issues with an employee, you need to address these using the proper procedures.

Read more about restructuring to get rid of an employee.

I want to get rid of a specific person, but want to keep their role in my business. Is a restructure an option?

No, it’s not a safe option. See above.

I have 5 technicians, but can only afford 3. I know who I want to keep. Do I have to consult with all of them?

Yes. Legally, you need to consult with everyone whose job may be affected by a proposed change in the business’ structure.

Even if you think you know which members of the team you’re likely to keep or make redundant, you still have to consult with all of them and then run a fair and transparent selection process to choose the most suitable people.

Leaving anyone out could give them grounds for an unfair dismissal claim or it may contravene the general protections under the Fair Work Act or state or federal anti-discrimination laws.

I don't see the point of a skills matrix, I know my staff and know who I want to keep. Why do I need this?

Some employers have landed in hot water because they aren’t fully transparent with affected employees about their assessment methods or they choose to make people redundant based on an arbitrary or biased selection process.

There are many ways to go about selecting which employees you will appoint to new or remaining roles, but whichever method you use, it should pass the test of what a ‘fair and reasonable’ employer would do. 

Using a skills matrix provides a fair way to select your best candidate(s), and it also gives you written evidence of your selection process if the decision is ever queried.

It’s good practice to provide affected employees with a copy of your proposed selection method and criteria as part of the consultation process, giving them an opportunity to comment and then considering their ideas or suggestions before you use it.

Do I have to pay employees redundancy pay?

You may need to pay redundancy pay (also known as severance pay), depending on a number of factors, including the terms and entitlements set out in the employees’ award, enterprise agreement, or employment contract.

Generally, the National Employment Standards (NES) provides the minimum redundancy entitlement. The amount of redundancy pay due is based on the person’s continuous service with the business (the length of time they've been employed, not including periods of unpaid leave or casual service). 

You don’t need to pay redundancy pay if you are a small business (less than 15 employees) or the employee has less than 12 months’ continuous service, was employed for a stated period of time (e.g. a season or project), or is a casual, trainee or apprentice. 

Find out more about redundancy pay at the Fair Work Ombudsman website.

When can a redundant position be filled?

If your circumstances have changed, and you now need a position that you had previously made redundant, we recommend waiting a minimum of 3 months before recruiting or hiring for that position.

There’s no legal timeframe, but the longer the better, to show that your business is now in a different position or facing different challenges.

If you have created a new position as part of a restructure, then you can't recruit for that position until you have completed the change process and confirmed the outcome.

How often can a company restructure?

There is no legal maximum or minimum number of times you can restructure, or how often (unless the changes affect multiple positions of a single type in your business, e.g 5 baristas at a cafe - see above).

However, anyone who has ever been through a major change process knows that it can be stressful and draining! Where possible, for the good of your company’s culture and morale, we recommend running as few restructures as possible, so that you can move through the process quickly with everyone affected, make the tough decisions, and then move forward to rebuild and refocus.

I'm closing down my business. Do I still have to go through the redundancy process?

Doing badly or being forced to close a business provides a genuine reason for making employees redundant, however, employers still have to carry out an appropriate workplace change process.

You should inform employees as soon as possible of the decision to close and take the appropriate steps to legally end people's employment.

Failing to do so could put you at risk of claims for unfair dismissal.

Find out more about terminating employment safely.

How do I do a consultation process to move salaried employees to hourly rate?

This is not a “restructure”, however, any change to a worker’s contractual terms - such as their remuneration structure - still requires consultation with the affected person / people.

The process is the same: you propose the change, explaining why you think it makes business sense. You give your employees the chance to provide a response to the proposed change, listen to and consider their feedback, then make a fair and reasonable decision.

 
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