Business Restructuring Continued - Understanding Compliance and Advanced Processes
Business restructuring is usually a massive project that requires a lot of attention and know-how. There are many legal intricacies at play that need to be kept in mind to pull it off successfully, as well as a general knowledge of the HR landscape in New Zealand.
In our previous blog, we laid out the basics of a business restructure, describing each essential step. Here, we take it up a notch, exploring some extra things to keep in mind, including how to come to certain conclusions and delving deeper into employee rights during restructuring. This blog will discuss managing poor performance, decision-making criteria during restructures, introducing new roles, and best practices for mergers and acquisitions—all crucial aspects that can profoundly impact both the business and its employees. Let's dive in!
Poor performance
One really, really important thing we cannot stress enough is that redundancies cannot be justified by poor performance. That is, a business cannot begin a restructuring process to get rid of a poorly performing employee. There needs to be a genuine business reason behind your restructuring. An HR manager or HR consultant in New Zealand must ensure that the employee’s rights during restructuring are protected and respected
If a poor-performing employee happens to be captured by a much larger restructure, that is explainable as it is not isolated to them. However, a small restructure capturing one poor-performing employee may look targeted. So, if this type of restructuring is taking place, ensure your business case for department restructure is robust to avoid any misunderstandings.
Decision-Making Criteria
Even after all feedback has been carefully considered, many restructures will see redundancy take place. Hopefully, by this stage, your business case conducted PRE-consultation will inform you of the areas of your organisation that need slimming down. However, within the same department (for example), when faced with having to pick between Person A and Person B, how does one choose?
When there are more candidates than available roles, you must consult (as well as on the substantive restructure) with potentially impacted employees on the selection criteria that you propose to use.
Length of service is the most straightforward way of undertaking selection, as last on, first off is well established as an understood and fair approach. You can also look to have a more customised approach of including a “skills and experience” selection criteria (that Length of Service might be one aspect of).
To give an example of decision-making during the restructuring process, let’s say a company has three supporting managers, and they need to reduce the supporting manager headcount to just two. In this case, they could consider several factors to justify their decision. Remember though, whatever determining factors you decide to use, these criteria must be clearly and transparently communicated to all people potentially affected, with the opportunity afforded for them to give input into the criteria before they are confirmed.
Introducing new roles
Some restructures will see new roles introduced in place of old positions. An example of this is the consolidation of several positions into a single role to reduce cost.
When roles are affected, and a new position is introduced in place of another (or multiple others), an HR policy consultant must ensure the affected employee/s are considered for that role. They can either get to the role by automatic redeployment (perhaps by selection criteria) or by application. The test for if they need to apply, or if they are eligible to be considered for automatic redeployment into the role is if the role is a significant change from the previous position. The generally accepted test is 70-80% similarity;
· If the role is 70-80% similar in responsibilities, employees may have a claim to automatic redeployment to the newly available role
· If the role is significantly different (i.e. 30%+ different from their original role), they may be able to apply and be considered, but not eligible for automatic redeployment.
Restructuring due to Mergers and Acquisitions
In an acquisition, an outgoing employer must “endeavour to save” the affected employee’s role. The most common way this is done is by making new owners aware of the existence of certain staff and their roles within the current business structure.
This, however, does not guarantee the employees in question will come out the other side of an acquisition with the same role they went into it with; nor does it guarantee the continuation of their employment under a different role. An employee’s Employment Agreement generally sets out the Rights and Obligations in the event of Sale or Transfer which can help guide employees and employers through this process. Ultimately, it will be the procuring employer’s decision as to who is offered employment in their new business.
Best Practices for Consultation
Going into a consultation process with a respectful and empathetic demeanour can make the world of difference in how an employee responds. Often all they want to see is the human side of you, working through the process professionally and carefully. Keep these top 5 tips in mind:
Be genuine: Approach consultation with an open mind
Be transparent: Share as much information as possible about the business's situation.
Keen an open mind: Pay attention to employee concerns and suggestions, valuing the input of your team.
Document everything: Keep detailed records of the consultation process to ensure compliance with NZ employment law.
Seek expert advice: Consider consulting with a professional to ensure you're meeting all legal obligations specific to NZ.
As businesses strive to adapt to new challenges and re-align their resources through restructuring, it's imperative to approach the changes that follow carefully. A well-conducted business restructure should have an HR strategy that is both legally sound and looks after the employees affected by the eventual redundancy process. By focusing on transparent communication, fair selection criteria, and respectful consultations, organizations can maintain trust and engagement among their employees. Remember, the goal of any restructuring should be to strengthen the organization while safeguarding the dignity and rights of its employees! Ensure your HR strategy is equipped to handle the complexities of redundancy law and safeguard employee rights during restructuring.
For any extra assistance, we’re here to give you a hand!