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Cost of living has placed unprecedented stress upon hospitality businesses and employers across New Zealand. It is becoming more common now that business owners are discovering that they need to restructure to reduce costs in order to operate more efficiently.

Businesses are able to change their employment structure if necessary. In doing so they need to ensure that their restructure process and the outcome for employees, is carried out and justified in accordance with New Zealand employment law.

What is restructuring?

A restructure occurs when changes are made to a business structure, generally to make it run more efficiently or to cut costs.

Restructuring might involve:

• creating new roles;
• merging existing roles;
• disestablishing roles that are surplus to requirements; or
• a combination of the above.

If employees are impacted, employers need a genuine business reason for the change, i.e. financial reasons, downturns in work, changes in consumer behaviour etc.

What is redundancy?

If a role is disestablished and the employee affected is not able to be moved into another role, their employment will be terminated for redundancy.

Before deciding on redundancy, employers are required to consider potential options to keep the employee employed within their main business or other businesses that they may have, that may have similar positions.

When certain, that the role needs to be disestablished, an employer must select the employees for redundancy using a fair selection process. Alternatives should always be explored first – this is called redeployment.

It is unlawful to make an employee redundant and then replace them immediately after [or within a short period right after] or make an employee redundant due to poor performance or other issues not related to the restructure. It is not advised to restructure employees while going through a performance, medical incapacity or disciplinary process. We advise to wait until this process is over to implement your redundancy process.

Restructure Process

We advise that employers ring the helpline team to gain legal advice before they proceed with a restructure process.

Employers must act in accordance with the principle of good faith under the Employment Relations Act 2000 throughout the restructure process, meaning that employers must be communicative, act fairly, and be active and constructive in maintaining a productive employment relationship.

In terms of the restructure process, as a guideline, we set out the phases below:

Redeployment and Retraining

Employers must consider keeping employees as an alternative to redundancy, as failure to do so could result in claims of unjustified dismissal. An employer does not have to offer an employee a position that requires significant amount of training/skills or experience to keep the employee in the business. However, if there is a role that the employee would easily transfer to, the employer must offer the affected employee the role. The employee is not obliged to accept the offer of the alternative role and if the employee turns down the offer the employee will be redundant.

Mistakes to Avoid

To reduce the risk of a personal grievance claim, employers should not:

• make a predetermined decision as to the outcome of the proposed restructure process (or express an opinion on the outcome in writing! – even private emails may be discoverable);
• be unclear about the proposal or the possible consequences if implemented;
• use redundancy as a mechanism to remove staff for other reasons eg. due to poor performance.
• refuse to give relevant information in support of the rationale for the proposed restructure; and
• fail to consider redeployment as an alternative to redundancy.

ALWAYS call our helpline team if redundancy/restructure is a process you are considering.

Example – John’s Cafe

Disestablishment of role

John owns a Cafe. He has 7 staff members. 1 Cafe Manager, 4 Front of house/waitstaff and 2 Chefs. John’s wage cost is at 60% of his takings and is unsustainable. In order to keep the business afloat John looks into restructuring his business to bring down his wage costs, saving the business and most of his staff’s jobs. He figures the best way to do this would entail making the Cafe Manager redundant and John stepping in to cover that role. John invites the Restaurant Manager to a meeting to discuss the proposed restructuring and runs the Cafe Manager through the proposed consultation pack.

The Cafe Manager takes the time to go over the proposed restructuring and consultation pack and provides John with different scenarios of how they could save wage costs. John takes on board his feedback but does not agree that the scenarios would save enough money to keep the business running.

John decides to continue the proposed restructuring and invites the Cafe Manager to an outcome meeting to discuss the new structure of the business and go through the final consultation pack.

The Cafe Manager receives his letter explaining when the disestablishment of the role would take effect.

Example – Village Bistro

Redeployment

Vickie owns a restaurant, Village Bistro. It has 7 staff members. 1 Restaurant Manager, 4 Front of house/wait staff and 2 Chefs. The Bistro’s wage cost is at 60% of his takings and is unsustainable. In order to keep the business afloat Vickie must look into restructuring the company to bring down wage costs and make the restaurant run more efficiently. After careful consideration, Vickie decides the best way forward is to make the Restaurant Manager redundant and for Vickie to step in to cover that role. Vickie invites the Restaurant Manager to a meeting to discuss the proposed restructuring and runs the Restaurant Manager through the proposed consultation pack.

The Restaurant Manager takes the time to go over the proposed restructuring and consultation pack and provides Vickie with different scenarios of how they could save wage costs but keep the staff member in the business. Vickie takes on board his feedback and realises she could create a role that would be a hybrid role of Restaurant Manager and Front of house, this would redeploy the employee and keep the employee in the business on a different rate which would save costs.

Vickie decides to continue the proposed restructuring and invites the Restaurant Manager to an outcome meeting to discuss the new structure of the business and go through the final consultation pack which includes proposing the new role to the employee.

Vickie gives the Restaurant Manager 5 days to consider the new role or 10 days to the role being made redundant. The Restaurant manager decides to take the new role.

The information contained in this article is accurate at the time of publication. However, subsequent changes, such as updates to legislation or industry practices, may affect the accuracy and relevance of this information. Please note the date of any articles and if in doubt, consult our Helpline on 0800 737 827 to ensure you have the most up-to-date information.