Restructuring and Redundancy, Developing a Proposal for Change: Update

The global workforce is experiencing great change – both positive and negative. When changes are necessary, it is important that employers embrace best-practice at all times. This article is an update to a previous Icehouse blog.

Redundancy is an unfortunate and very real consequence of the current economic climate but something most managers, leaders and HR professionals will encounter at some point in their careers.

Of course, in every instance where redundancy is being considered in your organisation, seek professional guidance and advice to ensure all parties are adequately protected.

Employment.govt.nz states ‘The process of redundancy, and payment of redundancy compensation (where this applies), are a last option. It should only happen after all redeployment options have been exhausted.

‘When an employer advises an employee that they have not been successful in the redeployment process they should make sure that the employee is offered at least all of the support that is mentioned in the employment agreement or policies and/or has been mentioned in the change proposal.’

Restructuring and Redundancy – How to Develop a Proposal for Change

Redundancy is generally considered to be a situation where an employee’s position is surplus to the employer’s commercial needs. Employers must be able to justify redundancies substantively (show that they are genuine) and procedurally (that a fair procedure was followed). An employer who fails to carry out a proper restructure process will be potentially liable for remedies such as compensation, penalties, lost remuneration and reinstatement.

Restructuring, change management, and redundancies are all about consultation. Before any decisions are made, an employer must first provide the affected employees with all relevant information, and an opportunity to provide feedback.

This means that employers must not predetermine the outcome, and should remain open to alternatives and suggestions that come up (if any) during the consultation process. As part of that process, the employee must also be provided with all the relevant information about the commercial reasons for proposing the change, despite how obvious those reasons may be.

Building your business case for change (restructure proposal document)

You will need to provide the affected employees with precise information about the employer's proposal, and outline the genuine commercial reasoning for the proposal.

Provide as much information as possible, provided it is relevant to the proposal. If you state a fact or make a cost-savings claim, that has to be accurate. For example, you can’t say; “this proposal will deliver cost savings of $25,000”, if in fact it only delivers $15,000.

Consider any alternatives to redundancy or redeployment opportunities, which could be discussed with the employee if the proposal proceeds. If the restructure requires a selection process, then include the proposed criteria and method for the selection in the proposal document. Find any relevant employment agreement, and check employer policies for any prescribed process.

Also look at custom and practice, where other employees have been made redundant how were those situations were handled, and how much, if any, compensation was paid?

Be careful of your language throughout the proposal document and the restructuring process – avoid sounding like it is a fait accompli. Remember to remain open and communicative, and not predetermine the outcome. Use words like it is “proposed”, “potentially”, “may”, “could” etc.

Here’s a summary of the basics:

Make sure the redundancy proposal is based on sound business reasons and those reasons are clearly articulated.

Ensure that the process and decision-making is compliant with the procedures and criteria set out in any employment agreement or employer policy.

Ensure all relevant information is disclosed to affected employees.

Give every affected employee a proper opportunity to give feedback on the proposal before a decision is made.

Consider carefully employee feedback and give reasons why that feedback is not accepted.

Ensure redundancy selection criteria are rational and clearly explained, and are consulted on.

Further advice

Employment New Zealand: Features legal and practical advice on all issues around ending employment, including constructive dismissal, abandonment of employment and, of course, redundancy. Employment New Zealand also outlines how employers can help affected employees with outplacement support which may include counselling, CV services and interview training. 

Work and Income: Work and Income has a wide range of information and advice on the type of services that will help support you if you are affected by redundancy. The agency offers 1-2-1 support, vacancy information, further training opportunities, CV advice and income support entitlement information.

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