Restructuring and redundancies: Frequently asked questions

Nick Stanley
By Nick Stanley

Answers to questions MyHR receives from its members about restructures and redundancies.

Questions covered:

Does restructuring always mean layoffs?

No, restructuring is a process of changing the way work is done or services are delivered by the business so it 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 restructuring process.

What’s the difference between disestablishment and redundancy?

Disestablishment happens to a position. Redundancy happens to a person.

If someone’s job is disestablished, and they successfully apply for another role in the business, then they aren’t made redundant.

However, if their job is disestablished, and there are no other options for them in the business, the outcome will be redundancy.

Learn more about the difference between restructuring and redundancy.

How do I tell employees about restructuring?

Informing all employees who are affected by a proposed restructure is a key part of the consultation process you are legally obliged to follow.

You should meet with all employees to tell them about the proposal, present the case for changes, and explain the overall restructure process. If your employees are members of a union, you should inform the union and include them in the proposal meeting.

If jobs are on the line, we strongly advise meeting with affected individuals first, before a wider group meeting (you may also want to inform employees not affected by the proposed changes, so that they are aware of what's going on).

Make sure you provide each employee with all the information they need to understand the proposal and give feedback, including the financial reasoning and why you’ve chosen specific roles for changes or disestablishment.

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 a consultation process?

Under the Employment Relations Act’s good faith obligations, you must ask for and genuinely consider feedback from all employees whose jobs will be affected by a proposed restructure.

These obligations do not differentiate between positive or negative feedback, so if an employee raises genuine concerns about the commercial reasoning 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.

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

If you make changes (other than minor ones) to the 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 disestablished the newly-created role? Why?

You should always view redundancy as the last option after you’ve explored all redeployment options with your employees. This is part of your good faith obligations under the Employment Relations Act.

If the newly-created role is “substantially similar” (roughly 80% or more similar) to the employee’s current job, or is a suitable alternative (i.e the person can do it with some retraining and it doesn’t involve a pay cut), 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.

Find out more about justifying a redundancy.

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 a personal grievance claim for unfair dismissal. Restructures focus on the work being done in the business and by which roles, not the people performing the roles.

The proposed changes must be driven by a genuine commercial reason and in making a decision on them, you must ask for and consider the feedback of all affected employees (so all those performing the same role, in this case).

Any selection process for redundancy must be fair and reasonable and you should explore all redeployment options before you make anyone redundant.

For all these reasons, you would have a hard time justifying the process was fair and reasonable if you have already singled out a person for redundancy 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.

Learn 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 every employee whose job could 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 or predetermining the outcome could give the person grounds for a personal grievance claim.

Read about other common mistakes companies make when restructuring.

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.

Make sure that during the consultation process you give the affected employees a copy of the selection method and criteria you propose using, you offer them an opportunity to comment, and then consider their comments before you use it.

Do I have to pay employees redundancy compensation?

In New Zealand, there is no overriding legal obligation to pay redundancy compensation, so it depends on what is written in the employee’s employment agreement or in company policies.

You must give the employee notice as detailed in their employment agreement (or ‘reasonable notice’ if there is no clause in the agreement or company policies) and provide all the redundancy support mentioned in the employment agreement, policies, or the change proposal.

When can a disestablished position be filled?

If your circumstances have changed, and you now need a position that you had previously disestablished, 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 hire for that position until you have completed the restructure 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 you have 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 the restructuring 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 go through the change process quickly with everyone affected, make the hard 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 redundancy 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 personal grievance claims for unjustified dismissal.

Find out more about terminating employment.

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

This is not a restructure, per se, but a change to the terms of the employment agreement. Even so, it still requires consultation with the affected employees and the process is the same as a restructure: you propose the change, explaining why you think it makes 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.

Find out more about employment agreements.