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Redundancy - it's all about process


Published 26 Apr 2022

Unfortunately it's a sign of the times, there's a tough business climate out there right now. Very few businesses remain totally unaffected and many are having to look seriously at margins, viability, restructuring and redundancies.

Making staff redundant is arguably one of the toughest challenges as a business owner you may have to make. Conceding that the business has to change and downsize causing the termination of someone's role through no fault of their own can be morally challenging on top of the legal and procedural difficulties presented on top of defending potential grievances should you get any of the steps wrong.

The fact of the matter is that every business does have the right to restructure as needed, and in fact company Directors have a duty to act in the businesses best interest under the Companies Act.

With any termination of employment you always need a substantive reason (justification) for taking the action, and then also you must follow what is considered a fair or due process for the circumstances.

Largely, when redundancies are challenged at a formal level by way of a personal grievances it's more often the process which is alleged to be at fault rather than the justification. And as with any grievance, if fault can be found with the process, the grievance will be upheld and the Employer found to be at fault, leading to the significant fines and compensation awards we're all too used to seeing.

With a restructure or redundancy situation business should try to bring the affected employees along the decision making journey as much possible. Genuine consultation is required with a fair process and often can present unexpected or unforeseen solutions which sometimes suits all parties involved. Approaching change management with pre-determined outcomes and only feigning consultation goes entirely against what is required. An employer does not have to accept suggestions or feedback from staff during a consultation process, but does need to hear it, genuinely consider it and respond to it accordingly.

Meetings should be run formally, employees given plenty of notice and the opportunity for support, and each step documented with minutes of all meetings. But in the end the decisions of how the company is staffed comes down to the Employer's prerogative, and provided fair process is followed and any obligations under the Employment Agreement are heeded it is hard to successfully challenge an Employer's reason for downsizing.

If you are facing or considering a restructure in some form we highly recommend consulting our 'Change Management' guide. It contains all our recommended letter templates including the important initial change proposal document. It's free to our members in the document library of the Employers Toolbox, non-members can purchase it here: www.employers.co.nz/change-management-product.aspx