By Vaughan Granier

Welcome to the second in our series of articles showing employers how to navigate the sensitive process of workforce restructuring and redundancy. In this article, I outline the reasons accepted for a genuine redundancy, and how to identify these before you start a workforce restructure.

When can a business restructure?

Before you begin a restructure, you must be sure that you’re doing it for the right reasons.

Firstly, there must be a genuine business reason for restructuring. A genuine business reason is one that brings a measurable benefit to your business, or one which enables your business to survive and still be profitable in changing economic circumstances.

Genuine reasons to restructure include:

  • Introducing new technology;
  • Improved business processes;
  • You’ve made changes to your products;
  • A loss of customers or changing customer requirements;
  • A loss of suppliers; and
  • A successful competitor has entered the market.

These reasons might then result in ‘structural changes’: modifications to the way the business is run or set out. These changes could be:

  • Refocussing roles to new or different areas of work;
  • Combining roles;
  • Creating new roles;
  • Reskilling or retraining; and
  • Reducing the number of positions in a company.

Here’s an example: imagine your business has decided to improve timekeeping by introducing an electronic biometric clocking-in system. Your idea is that this new timekeeping system, combined with a new payroll system that can share data with the timekeeping system, will reduce the amount of paper processing and manual payroll calculations required. As a result of implementing this system, your business will only need one of the two full-time employee payroll clerk positions. In this case, your business needs would be:

  • Less absenteeism of workers;
  • More efficient use of business hours;
  • More accurate client invoicing through better time tracking; and.
  • Reduce administration or overhead costs.

As a result, your genuine reason for restructuring would be due to the impact of new technology and improved business processes. Consequently, the structural change to your business would be the disestablishment of one position.

When should consultation start?

An important part of the restructuring process is consultation. It’s not only important, it’s a legal requirement!

The consultation process needs to start when you’ve identified the need for change, understood the benefits, considered the impact on your business and your people, but have not finalised your decision – this last part is crucial.

All the components of a possible decision might be available, like pieces of a puzzle, but it will take consultation to build the best possible outcome using all those pieces. The only decision you’ve made at this point is to start the consultation process.

Using our above example, let’s say there was a time when implementing a biometric clocking-in system was just a vague idea or thought. But then, with a bit of planning and some research, it became a meaningful idea that could be investigated and analysed. After that, the technology became a real possibility, and you analysed the numbers, including: the cost of the software, hardware, salaries, time, and also the cost of not doing it. When the numbers made sense and the benefits became clear, then it turned into a probability that the idea would work and you were ready to consider the change seriously – this is the time when consultation needs to start.

Who needs to be involved in the consultation process?

Consultation is about bringing all the stakeholders (all the people with a vested interest) into the decision-making process so that you can make the best possible decision and consider how the change will impact those affected. A person is ‘affected’ when this change might influence their role. You’ll also need to include people who might be in affected positions but aren’t in the workplace at the time, such as employees on ACC leave or parental leave, for example.

As an observation, this process should include fixed-term workers, because they’re still employees whose roles may be affected. While it’s not essential to include casuals, who don’t expect ongoing employment, it can be a good-faith gesture to ensure that they’re informed and aware of the process once it’s underway because it might realistically impact their roles.

In our example, where the change affects only the office systems and payroll workers, there would be no need to embark on company-wide consultation. In this example, you might consult with the finance and administration team, but you wouldn’t need to consult with your factory workers. Because while their timekeeping system could change, their actual jobs are not affected in any way.

Once you’ve established the genuine reason(s) for your restructuring, and who needs to be involved in the decision-making process, you can proceed to consultation. We’ll discuss the consultation process in our next article.

HR Assured is an end-to-end outsourced HR solution for SMEs combining unlimited expert workplace relations advice, award-winning HR Cloud Software, auditing and employment practice insurance. Our clients reduce the time they spend on HR by up to 70%! That’s more time for them to run their business and get on with the things that matter. Contact the HR Assured team to learn more. 

Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 10 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.

Other articles in the series: