Restructuring and redundancies

Before you start to consider undertaking a restructure redundancy process there are some things to remember:

• The process is about a role not an individual employee
• The process should not be used to avoid a performance management process
• If you have Employment Disputes cover as part of your business insurance there is probably a notification requirement to your insurers.
• Check the impacted employees’ employment agreements to check your responsibilities under these, collective agreements usually include change management clauses as well as redundancy clauses.

A redundancy is where you no longer require a particular position and as a result you terminate that employee’s employment. For example:

• You change the way you operate your business and no longer have a need for your part-time nurse;
• Your business is shrinking and you decide that your nurse can also pick up the clerical/receptionist duties, and therefore you no longer need your medical receptionist.

In these types of circumstances you can bring the employment relationship to an end, so long as:

• the changes you have made are genuine (i.e. they are about your business and not about getting rid of the employee), and
• you have pursued a fair and reasonable process.

The process

You are entitled to consider ways in which you would like to change your business and to develop those ideas without first raising them with your employees. Indeed, you will probably not want to unsettle your employees by discussing these sorts of matters with them until you have reached a point where you would like to proceed with changes.

At that point you must, prior to making a final decision:

• explain the situation to your employees and in particular:
• explain what it means for them (e.g. “If we proceed with these changes it would mean that we would no longer need your position.  We would be looking to implement these changes on (date). If we proceed, we would give you notice (and compensation), as detailed in your employment agreement?");
• provide any other relevant information – e.g. documents setting out the desired new structure etc;
• explain that they will have an opportunity to comment on your plans/the information you have given them, prior to you making a final decision (you should provide at least a few days);
• You should arrange another meeting with your employees to hear what they have to say about your plans before you make a final decision;
• Once you have heard back from your employees and considered their response you can advise them of your final decision. (In most cases it will be best to make a final decision after the meeting and then communicate it to your employee.)

The process that should be followed may be detailed in your employment agreements.

Genuineness of the redundancy

It is not uncommon for employees who are about to be made redundant to allege that the redundancy is not genuine, but merely a device to get rid of them. If this is true, the employee could bring a case against you alleging unjustified dismissal. However, just because you have some issues with an employee’s performance, does not mean that the redundancy is not genuine. You will only have a problem if one of your reasons for commencing the process was a desire to get rid of the employee.

Because of this common allegation you should take care not to raise performance issues during the redundancy process.  Remember you are not making the employee’s position redundant because of those concerns. You are making their position redundant because you no longer need their position.

Selection process

Making a position redundant may sometimes involve a choice between employees (e.g. you have three receptionists and you have decided you only need two). In these circumstances you will have to, as part of your process, advise the employees at the outset what the selection criteria are. These may include:

• Picking the best person for the job which may or may not involve a formal interview process;
• Length of service

When deciding between employees, you must use a fair assessment criterion that takes all aspects of the employees’ contribution to the practice into account.

In some circumstances you may not need to involve all your receptionists in this process, but rather select one at the outset and make their position redundant only. For instance, one of your three receptionists may be the evening shift receptionist, and the changes you intend to implement involve closing early and therefore there is no need for a receptionist in the evening. In those circumstances you could justify disestablishing the evening receptionist's position and not involving the other two receptionists in the process.

In other circumstances, where for instance the receptionists rotate, this option would not be available to you.

Redeployment

Prior to giving notice of redundancy, you are obliged, as a good and fair employer, to consider whether there are any other options for the employee within your organisation. This does not mean that you must give a vacant position to that employee, but you at least consider what roles are available and what might be suitable.

The law supports the view that existing employees who are impacted by the new structure, who have suitable qualifications, skills and experience already, or can gain these through training, should be offered the role without the burden of going through an application or contested process.

In most circumstances where there are vacancies, the fit may not be a perfect one. In some cases, existing staff may require upskilling to meet current role vacancies, and occasionally some employees may have skills and training in excess of requirements for the roles available but you still have an obligation to your existing, and about to be redundant employee, to at least offer them that role and, the courts expectation is that an existing employee will be given preference over external candidates.

Final decision and notice of redundancy

Once you have been through the process you need provide your final decision and if there are no other roles for the employee, you can provide notice of redundancy to advise staff. Usually, the notice period for redundancy is the same as the standard notice period in your employment agreements (generally about a month). It is always best to make this clear in your employment agreements.

As with other terminations you will have a choice to have your redundant employee work out the notice period, or to pay them in lieu, whereby they leave straight away.

We have full information on the process, including template to develop your proposal and outcome letters at this link Restructure/Redundancy process (healthypractice.co.nz)

If you are considering undertaking a restructure process, please contact us on business@mas.co.nz or 0800 800 627.