Restructuring your business

Consultation is key

New year, new you – new business structure? Restructuring is common in the new year when business owners feel refreshed and ready to take on the next challenge. The process however, is often shrouded in uncertainty (and stress) for employees.

Following the correct procedure for a restructure will allow your employees time to feel heard and to ensure decisions are made in good faith. They need to know your plans so they can ask the right questions and get the required support during a restructuring process.

What exactly is restructuring?

Restructuring includes anything that is the addition of new roles (not to be confused with hiring more of the same role you already have), merging two or more existing roles, losing roles that are now surplus to your business requirements or any combination of those changes.

The Ministry of Business, Innovation and Employment (MBIE) provides a recognised procedure for businesses to follow. It is documented in clear and easy to follow checklists that are available here.

Even if you follow the MBIE-approved procedures, there are common errors business owners make during a restructuring process.

Errors during the restructuring process can lead to grounds for a personal grievance (PG) being raised by one or more of your employees; dealing with a PG is a costly and time-consuming exercise for your business. In order to avoid a potential PG, you should ensure the restructuring process follows the MBIE-approved procedures and your employee’s employment agreement, as well as avoiding some of the many pitfalls that are outlined below.

Working with employees

A common mistake made during a restructure is to skip consulting with your employees and present the proposal as a finalised plan.

Your employees must have the opportunity to comment and ask questions on the proposed restructure and, where relevant, make suggestions that may change the restructure proposal. Allowing your employees space and time to consider the proposed restructure and provide feedback is critical. It will help ensure that you treat your employees fairly and take into consideration all possibilities for your restructure.

Employee rights

All employers must comply with their employees’ rights; these are set out in a number of statutes (including the Employment Relations Act 2000) and in their employment agreements. A restructure does not allow you to avoid your obligations to your employees under their employment agreements, and it must never be used as a way to avoid performance management or standard termination procedures.

You must be mindful to honour all your employees’ leave entitlements, minimum guaranteed hours and notice periods both during the restructure consultation period, and when changing or terminating an employee’s role.

Employee support

A restructure can be a stressful and uncertain time for your employees. During the process you have an obligation to consider all the possibilities for an employee, particularly if their role is being made redundant. You must consider redeployment into a new role or where their skillset can be applied in your new business model; this is critical to ensure you are not unnecessarily removing their income security.

You must also, regardless of the changes occurring in your employees’ roles, ensure you allow them plenty of time to prepare for meetings regarding the restructure. You must also make them aware they may bring a support person to any significant meetings regarding their role. A support person can be a professional, a friend or a family member of your employee. Their role is to provide comfort and support during those discussions.

Good faith

The overarching rule during the restructure is whether you are genuinely acting in ‘good faith’ with your employees. Acting in good faith also means following through on the restructure plan once it is finalised. You cannot make a role redundant, realise it was in error and then hire a new employee into that position.

Take your time

Instead of what could be a ‘knee-jerk’ reaction to a shifting market or new opportunities, ensure there is open communication and allocate plenty of time for a restructure. This will allow for a smooth transition with minimal distress to your employees, and lessen the risk of business disruption and personal grievances.

If you are considering a business restructure and are unsure if you are meeting all your employment law obligations and/or your employee’s employment agreements, please contact us.

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