Given the recent Job Summit, and the Business New Zealand survey indicating that 1 in 5 employers are preparing to cut staff or reduce their hours, thoughts turn to the pros and cons of preserving jobs or down sizing. Implementing redundancies frees up much needed finances and can have efficiency benefits, but employers need to be wary of the problems that redundancies can cause and the pitfalls that may be encountered in the process.

The first question is whether or not a redundancy is really necessary. Unless you can identify positions which are clearly surplus to requirements (or add little value to the business) you should consider less dramatic measures. To avoid redundancies some major employers have cut executive salaries and reduced staff hours. When faced with the alternative of losing their jobs, staff will often fully participate in measures designed to reduce costs.

However, if redundancies are necessary, you will need to carefully follow procedure to avoid exposure to a personal grievance. All decisions you make as an employer must be what a fair and reasonable employer in your position would have done. Certain procedural requirements must be followed, in particular the requirement of consultation.

The first step is to develop a proposal for the restructuring. Identify what tasks your employees do, and how these may be redistributed. You will then be able to identify positions that are potentially surplus to requirements. If the nature of the redistribution gives you a choice between employees, you will need to develop neutral and objective criteria for determining which position is proposed to be made redundant. Examples include the most highly paid employee or the employee who last joined the company. Disclosure of the selection criteria to potentially affected employees has been the subject of court cases and is essential. Due to the legal definition of redundancy, it is important not to bring disciplinary or performance issues into your selection criteria.

Following the first step, there are a number of further steps that need to be taken. We can advise you on these. They centre around consultation and good communication. It is essential to keep an open mind during the consultation process.

On a more positive note, the Government restart assistance package is in place to assist redundant workers. To be eligible, a redundant employee must:

• Be a New Zealand citizen or permanent resident and usually live in New Zealand;
• Have been working continuously for at least 6 months before they were made redundant – although they could have worked for more than one employer;
• Be looking for a fulltime job;
• Have been made redundant from a fulltime job – this means that the employer has stated that the job no longer exists, or,
• Have been self employed and have no continuing work.

The Scheme provides up to $100 extra each week, depending on the circumstances, such as where the person lives and how many children they have. Job assistance (e.g. CV and interview preparation, career planning advice) is also available.

When legal advice is taken early, redundancies can be conducted fairly with the least disruption possible in the circumstances. In the event that you need staff restructuring advice please contact Andrew Clemow or Nathan Tetzlaff.