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Restructuring can be a necessary part of running a business, whether you're responding to financial pressures, changing operational needs or looking for ways to work more efficiently.

However, restructuring and redundancy decisions can have significant consequences for employees, and New Zealand employment law places important obligations on employers throughout the process.

A genuine business reason alone isn't enough. Employers must also follow a fair and reasonable process.

Understanding these requirements from the outset can help businesses manage change appropriately and reduce the risk of employment disputes.

What's the difference between restructuring and redundancy?

A restructure involves making changes to how a business operates, which may include changes to reporting lines, responsibilities, teams or positions.

Redundancy occurs when an employee's role is no longer required by the business. It is the position that becomes redundant, not the person.

Importantly, a restructure doesn't automatically mean employees will lose their jobs. Some changes may involve adjusting existing roles or offering employees alternative positions within the organisation.

What makes a redundancy genuine in New Zealand?

There are two key considerations when assessing whether a redundancy is justified:

• Substantive justification: The employer must have a genuine business reason for the proposed changes.
• Procedural fairness: The employer must follow a fair process before reaching a final decision.

For example, a business may need to reduce costs, remove duplicated responsibilities or change how work is delivered.

However, restructuring shouldn't be used as a way to dismiss an employee because of performance issues, misconduct or personal disagreements. Those matters require their own appropriate employment processes.

Using redundancy to address an unrelated employment concern can expose an employer to a personal grievance claim for unjustified dismissal.

Do employers need a business case for restructuring?

Yes. Employers should be able to clearly explain why changes are being considered and how those changes relate to the needs of the business.

This is generally documented in a written restructuring proposal, which outlines:

• The business reasons for considering change.
• The roles or areas potentially affected.
• The proposed changes and their likely impact.
• The information supporting the proposal.
• How employees can provide feedback.

The proposal should explain what is being considered, rather than presenting the outcome as an already-made decision.

A well-prepared proposal helps employees understand the reasons for the changes and provides a foundation for meaningful consultation.

What is a fair restructuring and redundancy process?

Employers must act in good faith and give affected employees a genuine opportunity to participate before final decisions are made.

A fair process will generally involve:

1. Preparing a proposal: Clearly explaining the proposed changes and the business reasons behind them.
2. Providing relevant information: Sharing the proposal and relevant supporting information with affected employees, subject to applicable legal limits.
3. Consulting employees: Allowing reasonable time for employees to consider the proposal, seek advice and provide feedback.
4. Considering feedback: Genuinely reviewing employee responses and remaining open to alternatives.
5. Making a decision: Reaching and communicating a final decision only after consultation has been completed.

If feedback leads to significant changes to the proposal, further consultation may be necessary.

Consultation must be genuine. Employers should not treat it as a formality after deciding which positions will be removed.

Must employers consider redeployment before redundancy?

Redeployment is an important consideration when a restructure results in a role being disestablished.

Before terminating employment, employers should consider whether suitable alternative positions are available within the business.

Depending on the circumstances, an employee may need to be offered an alternative role or given an opportunity to apply for a position.

The appropriate approach will depend on factors such as the nature of the available role, the employee's skills and experience, and the circumstances of the restructure.

Redundancy may ultimately result in termination where no suitable redeployment opportunities exist, an employee declines an appropriate offer or an employee is unsuccessful in a fair selection process.

What are the risks of getting the redundancy process wrong?

Even where a business has genuine reasons for restructuring, failing to follow a fair process can lead to employment disputes and personal grievance claims.

Common risks include:

• Making decisions before consultation is complete.
• Failing to provide employees with relevant information.
• Not genuinely considering employee feedback.
• Using redundancy to address performance or conduct concerns.
• Failing to properly consider redeployment opportunities.

Restructuring processes can also become more complicated when several roles are affected or employees are competing for a smaller number of available positions.

Seeking legal advice early can help employers identify potential risks, prepare appropriate documentation and manage consultation fairly.

Get employment law advice before making changes

Restructuring and redundancy can be challenging for businesses and employees alike. Taking the right steps from the beginning can help avoid unnecessary disputes and ensure decisions are made fairly.

Smith and Partners' Employment Law team advises employers on restructuring proposals, consultation processes, redeployment and redundancy decisions. We also assist employees who have concerns about how a restructure or redundancy is being managed.

Explore our Employment Law services to find out how our team can help.

Frequently Asked Questions about restructuring and redundancy