2023 - The year of the “Great Restructure”?
In 2022 it felt as if everywhere we turned we were bombarded with the “Great Resignation”. A terrifying concept for many an employer in a candidate-tight market! I’m unsure if we have weathered that store yet but it’s a new year and so a new slogan is upon us. So, is 2023 to be the year of the “Great Restructure”?
Every week there seems to be a headline in the news of another company announcing a restructure that will result in positions being made redundant. Big names including Twitter, Zoom, Meta, Amazon and most recently closer to home for Kiwis, Xero have announced plans to restructure which will result in job cuts this year. At Core HR, we have noticed an increase of queries relating to restructures in the past three months from SMEs, showing that it doesn’t only affect large multinational and tech companies, and will likely be a reality for some SMEs in New Zealand this year.
So, what is driving these restructures? In short, economic conditions, including high inflation rates and a looming recession are the driving factors behind many companies looking to tighten their belts. Record low unemployment rates we have seen for the past couple of years, are set to start increasing from the middle of this year and set to peak at around 5% towards the end of the next year, according to most major banks’ predictions.
Restructuring refers to the changing of the operational set-up (structure) of a business to improve the way it runs, delivers products or services etc. It is a process which isn’t set in law; however, case law has established best practice (and has clearly defined what “bad” practice is).
So, what is exactly is a Restructure?
Restructuring refers to the changing of the operational set-up (structure) of a business to improve the way it runs, delivers products or services etc. It is a process which isn’t set in law; however, case law has established best practice (and has clearly defined what “bad” practice is).
If you are considering a restructure, or want to understand more about the process, below are the key things you should keep in mind when considering restructuring:
Review your Employment Agreements, and any internal Policies or handbooks that detail how you will run a restructure process. If you have guidelines for how restructures will run in your business in a policy or document, you must follow your own established practices, which are in place to hold both the employer and employee accountable.
Not all restructuring proposals will result in redundancy! Restructure processes can involve establishing new roles, disestablishing roles, merging two or more existing roles, or a combination of these things. If a person’s role is disestablished, they could be successful in redeployment to another (or new) role.
If you create a new role which is “substantially similar” (roughly 80% or more similarity in the Job Description) to the employee’s current job, or there is a suitable alternative, you have an obligation to offer these roles to your existing employees.
If the role is significantly different to the one the employee is currently doing, you can choose to open expressions of interest to all affected employees to apply for the position and select the best candidate, either through an application and interview process, or using selection criteria.
Restructuring is about the role(s), not the person(s)! You should never start a restructuring process with the view that a particular person or persons will be made redundant as an outcome of the restructure.
There must be a genuine business reason for a restructure, and (its worth mentioning for clarity) ‘because so and so is annoying or underperforming’ is not a genuine reason (see point 5!). A genuine business reason may include plans to outsourcing a particular department (to reduce costs or increase efficiencies) or changing your product or servicing offerings. Indeed, to reduce costs due to a difficult few years would potentially be a genuine business reason. Not having a genuine business reason or a ‘sham’ reason can be costly. In 2021 figures released by the Employment Relations Authority indicated that 83% of cases brought to the authority related to unjustified dismissal linked to redundancy were ruled in favour of the employee – that’s not great odds for any employer!
Timings in the restructure process are very important, and you must allow reasonable time for employees to provide feedback on all steps. If an employee asks for more time, it is good practice to give it to them. As always - act in haste, repent at leisure!
If 2023 is the year of the “Great Restructure”, make sure you follow a genuine and fair process, acting in good faith throughout. Restructures, especially those that may result in redundancy are emotionally, mentally, and physically taxing for both business owners and employees (both those directly impacted and those who remain in situ).
The process of restructuring can be complex, and the Core HR team are well placed to provide advice and support. Contact us to discuss your business needs by emailing info@corehr.co.nz to speak with one of the team.