Restructure Process Detailed Description
Overview
A restructure consultation process is appropriate where the Employer is wishing to make changes to an employee’s role or terms and conditions of employment.
It can be commonly misunderstood that a restructure always equals disestablishment of a position or redundancy, however this is not the case.
Redundancy may occur when a position (not a person) in your business is surplus to the ongoing requirements of the business and the position is disestablished. Redundancy only occurs following a restructure which requires consultation with any affected employee, and if redeployment is not possible or appropriate.
Restructuring can happen for any number of reasons. They can be straightforward, including:
- You have recently lost a key client to a competitor, and, despite best efforts, you have not been able to find more business to replace them, so you cannot support the number of positions and people you currently have.
- You recently invested in a new piece of equipment or software which has streamlined your operation, you therefore do not need as many positions or people as you did previously.
- You are moving your office to another city or a considerable distance from the current location.
Or they may be more complex, like:
- You recently acquired a competitor’s business, and this has created a number of duplicate positions that you do not need in the new combined organisation.
The justification for a restructure and potential disestablishment of a position must be for a genuine business reason, not personal or performance based. You must be prepared to back up your decisions with supporting documents and data.
If your restructure is challenged, the employment authorities will now consider your restructure rationale to check if the reasons were valid and that your process was genuine. S4 (1A) of the Employment Relations Act prescribes that “a good faith process should be a reality not a charade”.
It is also very important to understand that a redundancy only occurs at the end of a restructure process. Entering into a restructure process does not necessarily mean that redundancy will occur; redeployment and/or retraining must be genuinely considered. In fact, recent case law has prescribed that employers actually have a duty to offer redeployment to an employee if they are capable of performing the role, even if they require training and upskilling.
Consultation with the affected person is required first.
During the consultation process, the affected person will present their views, which you must genuinely consider and potentially respond to before making a final decision. Your decisions are not final until the employee has had the chance to put forward these views.
The changes are only proposed at this stage therefore nothing has been predetermined or decided until you have heard from the employee and genuinely considered their response.
This does not mean you have to agree with them. The final decision is still yours to make. But you are legally required to take the time to hear from the employee and consider their input before deciding.
All this consultation may seem unnecessary to you. Surely if you cannot afford to pay somebody then redundancy is the obvious outcome, right?
Not so. NZ law is pretty clear around this point, and even in the most obvious situations you must seek the affected employee’s feedback before reaching a final decision.
Even your employee may find this process unnecessary and want to skip steps. You are strongly advised to follow the process in order to achieve a fair outcome (and protect your business against potential PG claims later down the line!).
The following pages provide more detail aligned to each step on the Restructure Process Map you have received. As you work through the process, use these documents as your guide to keep you on track.
We have also used our experience to outline some possible responses you may encounter.
Detailed Process Description
Step 1
Prepare relevant documentation and business case
Collate all relevant documentation that justifies your proposal for change.
You will need to provide as much detail, justifying the change so that MyHR can build a solid justification for the proposed changes that will be able to pass the test if challenged by an advocate or lawyer.
The business case should make sense to a third party and clearly outline why the roles are proposed to be impacted and how. It should take into account why the change needs to happen now and any alternatives that have been explored as disestablishment and redundancy should be the last resort.
Some key considerations to make when considering a restructure process are as follows:
- whether this role is genuinely no longer needed in the business. This is because once the role has been disestablished completely; you will not be able to safely recruit someone into the role in the near future. Doing so may undermine your case for restructuring in the first place and may result in someone being able to make a successful claim for unjustified dismissal.
- If a vacancy becomes available within 6 months following an employee being made redundant, then it may be important to notify the redundant employees first. This is considered good practice and backs up the legitimacy of your justification.
- If proposing to disestablish a lower-level role to create a higher more experienced role, case law has recently determined that an employee should be given the opportunity to upskill for the higher role if they can do this within 6 months.
Documentation should be provided as evidence to support the proposed changes, therefore the more you can provide the better. Be aware that while you may be hesitant to provide sensitive or confidential information, if formally requested to provide as part of this process you will be obligated to do so.
There has been case law that determines that information should be fully disclosed and relevant to justify your commercial reasons for making the changes.
The necessary documentation may include the following:
- A board report signing off the new strategy
- Financial statements such as profit and loss statements justifying the financial reasons
- Sales reports or forecasts
- KPIs or data relating to the area being restructured
- A current and proposed organisation chart highlighting the proposed changes
- Proposed job descriptions if new roles are being proposed as part of the restructure
- Selection criteria that will be used for the remaining positions (if reducing number of the same roles) or new positions.
If you are unsure, please get in contact with MyHR for further support or assistance.
Step 2
Notification Meetings
(Either individually or team depending on the scenario)
You explain the restructure proposal, give them their personalised letter, then adjourn for their consideration period.
Do not behave in a way that suggests you have already decided what the outcome will be. The consultation process is very important.
Individual Notification
This meeting provides the specific details of the proposed restructure and impact on the individual.
Ask them to attend a meeting with yourself and another company representative. This should be another company director or somebody with formal management seniority, not one of their work colleagues.
Do not hold the meeting in front of co-workers or in a café. The process is private and confidential - it may be embarrassing and upsetting for the employee if others hear.
When you get to the meeting room, follow the script closely. It aligns directly to the letter that you will give the employee so that there is minimal confusion. The words in the script have been carefully chosen, so make sure you say them all.
The employee is not required to give a response straight away and it is important they don’t, as they need time to prepare their response and seek advice. This meeting adjourns for their consideration period.
We recommend a consideration period of a minimum of 2 full business days, unless you mutually agree to a longer or shorter time frame. They may have this time off work if you agree to it. This would be on full pay (not taken from their leave balances).
The employee may ask for more information. It is advisable to provide as much information as you can to support your decision making.
In some cases, you may find the employee does not want to wait. They might say something like: “there is nothing to say, just tell me when I’m redundant and how much money I’ll get”. Even in this scenario, you must allow them a consideration period and give them the opportunity to present a response.
Provide the employee with all the relevant documentation (as outlined in step 1) and information for their consideration.
Team Notification
Announce the proposed restructure to the team who will be affected by the restructure. It can be helpful if everybody hears the same message at the same time, and you can control the communication delivered.
This is not the place to discuss the impact on individuals - it is simply an overview of the proposed restructure, the business reasons for it, and the process that will be followed. Answer general questions but defer any questions about individuals to the individual meetings to come.
It is not appropriate to have employees who are not affected by the restructure in this meeting – however, you can hold a general team meeting following the announcement informing everybody that a restructure is taking place and requesting their professionalism and compassion as their colleagues engage in the consultation process.
Provide the employee with all the relevant documentation (as outlined in step 1) and information for their consideration.
Step 3
Employee/s consideration period
Employee/s considers your restructure proposal, seeks advice and prepares a response. Minimum 2 full business days.
You are not required to do anything during this time other than make sure you are available if any employee has any clarifying questions to ask, or they need to get in touch with you.
Some may also request an extension of the consideration period. If the reason for the extension request is a genuine reason e.g. they need time to find a representative or they are sick, you should accept the extension.
Up to a maximum of 14 calendar days is reasonable, after this you do not have to wait and may compel the employee to attend the meeting.
Step 4
Employee/s Response Meetings
Listen to their views, then adjourn to consider before making a final decision.
This is the employee’s meeting, so they should do most of the talking. This is their opportunity to provide their views and ask any relevant questions regarding the proposed changes so that you can carefully consider them before making a final decision.
Follow the script closely (this sets the right tone for the meeting) then hand over to them.
Take notes on the notes pages provided.
Here are some examples of actual responses we’ve received in the past, and how you should handle them:
Example 1
“I don’t have anything to say. It is obvious I’m going to be made redundant, we don’t have enough business to support my salary” or “you have already made up your mind”.
Response: Refer back to the letter and remind them that their response is important, remind them that the process is not predetermined. Ask again if they have anything to say by way of a response.
If the answer is still no, then clarify their position by stating: “I confirm that following your consideration period, your formal response has provided no substantive considerations in relation to the restructure itself. We will therefore adjourn to consider our position and present you a final outcome at our next meeting”.
Provide your notes to MyHR and proceed to Step 5
Example 2
They may present a number of commercially sensible solutions to the current business issues that you had not previously considered, such as additional clients or revenue streams not previously known. They may also make suggestions about their own employment status which might save money, such as going part time and/or reducing salary.
This type of response gives you information that may change your views on the need to restructure.
Thank them for their input, provide your notes to MyHR, and move to Step 5.
Even if their ideas are good, this does not mean you must change your mind, the ideas they have provided may not be enough to change the need to restructure. The final decision is yours.
Example 3
“This is because you don’t like me. I’m being sacked.” Or “This is performance management in disguise”.
This is the more combative approach. You must still stick to your process. Reiterate the statements from the first meeting outlined in their letter. It states specifically that this does not relate to performance. Outline the business reasons for the restructure again and be prepared to back up your statements with figures.
Then request their response again, based on business reasons.
If they don’t have anything to add, then clarify their position by stating: “I confirm that following your consideration period, your formal response has provided no substantive considerations in relation to the restructure itself and the business reasons relating to this restructure. We will therefore adjourn to consider our position and present you a final outcome at our next meeting”.
Provide your notes to MyHR and proceed to Step 5.
Step 5
Your consideration period
Think about the employee/s responses and factor them into your final decision.
The length of this adjournment is open to your interpretation and depends largely on the responses given by the employees in their response meetings.
As you will have multiple responses to consider, you should allow a few days to collate all the input and include this in your decision making process.
You may also ask some (or all) of the respondents clarifying questions during this consideration period if you need to.
If the employee has asked a number of questions relating to the justification of the restructure it is important to genuinely respond and answer those. This may mean another meeting to respond and clarify or provide further information, before a final outcome is reached.
When you are ready, and after confirming the outcome and documentation with MyHR, proceed to Step 6.
either
Step 6a
Outcome Meetings
You decide not to proceed with the restructure
Communicate this decision to the employees. There is no change to their employment
Having carefully considered everything the employees have presented to you, you decide that there is another option to your planned restructure and redundancies. You present this outcome to the employees using the letter and script provided for this situation.
If the suggestions are purely commercial, such as new revenue streams, their employment may continue on their current terms and conditions, meaning the restructure finishes here and the employee remains employed with no change.
If the employees have suggested changes to their own conditions (such as working part-time or taking a salary reduction) you will need new employment documentation to reflect the changed employment relationship.
or
Step 6b
Outcome Meeting
You decide to proceed with the restructure (or a version of it)
Communicate this decision to each employee.
Communicate the potential outcomes of this decision: redundancy or redeployment.
Having carefully considered everything the employees have presented, along with all the information that you started with, you determine that the business still needs to be restructured.
As a result of this decision some (or all) of the positions currently filled by the employees will be disestablished.
As they no longer have positions in the business, they may be made redundant. At this point you can issue notice of redundancy and commence the employees notice periods or you may elect to pay out the notice periods and finish them immediately.
In either case, a search for suitable alternative employment must take place first. Such a search may not take long if you don’t have a very big business or you currently have no vacant positions, but a genuine attempt still needs to be made to look for an alternative position, including any retraining the employee may be given to help them qualify for an alternative position.
Step 7
Review alternative positions and/or retraining
Do you have another position to offer?
This step really occurs in conjunction with Step 6b above.
If there is another position/s available in your business, you will need to consider if this is something the redundant employee/s could reasonably be expected to do.
Look at any existing vacancies in your business. If you have none, then there is no alternative to offer. The employee may also offer suggestions.
You cannot force the employee to accept another job as an alternative to redundancy unless it is “substantially similar” to the job they currently perform, including: pay, benefits, hours, location, reporting lines and duties.
The employee may offer to take on a role that is not substantially similar. If they do this and they are prepared to accept the new terms and conditions associated with this position, then you should consider this request. But you do not have to accept it. It may not be appropriate for the business to have them in a different role or they may not have the right skills for this role.
If they can be reasonably retrained to perform a position, this should also be considered.
Note
An internal recruitment process may be required here to select people for positions in the new structure or determine redundancy
If the restructure has resulted in a reduction to a number of positions, then an open and transparent selection process needs to be undertaken to determine who will be redeployed and who will be made redundant. The selection criteria used should be based on what was proposed to the employees when they were notified of the potential restructure in the notification meetings.
either
Step 8a
No suitable alternative to redundancy
Redundancy applies.
Employee made redundant.
Proceed to redundancy.
You may require the employee to work out their notice period. If this is the case, you should allow reasonable time off during the notice period for the employee to attend job interviews. Provided they give you notice of an interview, and it does not cause major disruption to your business, their request should be granted. This is considered good practice and good faith.
You may elect to pay out their notice period and not require them to work. In this case, their employment ends on that day. All final payments are made as soon as possible, including the notice period and accrued annual leave.
If the employee chooses not to work their notice period and walks out, you do not have to pay the remaining notice period. Simply pay them any owed worked-hours and their accrued leave entitlements.
There is no statutory entitlement to redundancy compensation and most employment agreements in New Zealand do not require redundancy compensation to be paid, but you should check yours.
or
Step 8b
Yes an alternative position exists
It is considered a suitable alternative to redundancy and the employee moves to the new position.
If agreement is reached on an alternative position to redundancy you will need new employment documentation to reflect the changed employment relationship.