Restructuring and redundancy
It doesn’t matter if you’re introducing new technology into your business, new business processes or even a whole new line of product – as an employer, you must always have a genuine, work-related reason for a redundancy.
You must also have a best practice policy of providing early advice on the risk of redundancy to affected employees and engaging with them in consultation before making the final decision.
On this page:
- Consulting employees
- Protection in special circumstances
- Redundancy compensation
- Personal grievances
- Confidential information
The law requires employers to provide information to employees when they are considering changes that will affect their jobs and to give them an opportunity to contribute to any decisions.
The first step is to refer to the employment agreement, because that sets out the basis for the relationship and the procedures for changing its terms.
The more significant a proposed change is, the more likely it is that it cannot be imposed without the employee’s agreement.
Even where the employment agreement states that certain changes can be introduced in the future without the employee’s consent, they should still be introduced with early advice and discussion.
Employees should have an opportunity to comment before an employer makes a decision.
The Employment Relations Act provides special rules for employees facing restructuring and/or redundancy in the following industries.
- Cleaning services and food catering services in any place of work.
- Laundry services for the education, health or age-related residential care sector.
- Orderly services for the health or age-related residential care sector.
- Caretaking services for the education sector.
There is no right to redundancy compensation unless employers and employees and/or their union have agreed to it. This can be done before or after an actual redundancy is planned. It is also up to the parties to decide what any redundancy compensation should be.
Where employees agree to a change, the terms of the employment agreement must be updated, signed by both parties and kept on file.
Find out more about What to put in employment agreements.
Employees may be able to raise a personal grievance if they believe you’ve acted unjustifiably in the event of a redundancy. For example, you cannot use redundancy as a way of dismissing someone for reasons relating to the employee personally (such as the employee’s performance).
Find out how mediation can help solve workplace issues with the Ministry of Business Innovation and Employment – Labour.
Find out about Resolving employee disputes.
When consulting employees about restructuring and redundancies, you do not have to disclose confidential information if there is good reason to maintain the confidentiality of that information. Good reasons can include:
- complying with statutory requirements to maintain confidentiality
- protecting the privacy of individuals
- protecting the commercial position of an organisation from being unreasonably prejudiced.