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Businesses need the right roles and structure to operate at their best. As your business develops and your market changes, the right roles and structure might change too.
Restructuring can be difficult for everyone involved, but it should be easier if you follow the process and act in good faith.
The process isn’t prescribed exactly, but case law has helped to establish best practice. The steps and suggested timeframes are outlined below, and also in this handy guide:
It’s important to regularly check that your business is structured the best way for success. Having the right roles structured the right way means you can meet the needs of your customers and take your business to the next level.
If things have changed and you think a new structure could improve the way your business operates, you might want to investigate restructuring. This doesn’t necessarily mean making employees redundant (though that could happen) but it might mean peoples’ roles change. Please note that employment laws protect some groups of employees in certain restructuring situations.
Restructuring can involve:
Restructuring when a business is sold or transferred(external link) — Employment New Zealand
Employment protection provision(external link) — Employment Agreement Builder
For details, see Restructuring when a business is sold or transferred(external link) — Employment New Zealand
Restructuring is about making sure you have the right roles to deliver to your customers and your strategy — it’s not a way to manage individual employee performance issues.
If you’re having an issue with an employee’s performance, you can’t ‘restructure’ to get rid of them — you need to manage their performance through the proper channels.
If you’re restructuring, you need to have a genuine business reason — otherwise you could face personal grievance cases.
You need a genuine business reason to restructure your business. You’ll need to state this clearly as you go through the process.
Genuine reasons include:
Bill found demands on his IT consultancy business were changing. His customers no longer wanted to learn how to fix their own computer problems. So Bill decided to restructure to respond to his market’s needs, with fewer trainers and more technicians.
Bill documented his proposal explaining the market drivers and indicating which jobs would go or substantially change. He set out the proposed new structure, and indicated roles that were new.
When he shared this with his team, they were able to understand that Bill had good business reasons. They also had the information they needed to help him shape the new structure to be the best it could be.
If a restructure might impact people’s jobs, there’s a process you need to follow. As with anything involving employee relations, it’s underpinned by the principle of ‘good faith’ — meaning you and your employees act fairly in your dealings with each other.
This means you:
During a restructure, ‘good faith’ means that employees who might be affected have the right to comment on and feed into the restructure. When you propose the new structure, you need to genuinely consider any feedback, including their thoughts and suggestions.
Throughout the restructuring process you can keep some information confidential — but there has to be a good reason. Examples include:
There are specific rules on redeployment — when you create a new role that isn’t substantively different from an old role. In that case, you must redeploy a person in the current role to the new one. This is a technical area, and legal advice might be valuable.
There are also specific rules on downsizing, when you’re reducing the number of a certain type of existing role. For example, if you currently have three junior hairdressers, but you think you only need one, you’ll need to set out specific details in the proposal, including the selection criteria for how you’ll choose the successful individual. If you’re not familiar with these rules and process, you should get help from an expert. This is a technical area, and legal advice might be valuable.
To cut costs in her hairdressing business, Jane proposed a restructure to cut 10% of her wage costs by replacing a senior stylist with a junior stylist.
Her staff suggested other ways to reduce costs, but she felt that they would not make enough difference and made senior stylist Alan redundant.
The savings on wages equated to 6%, not 10% as Jane’s proposal stated. When she confirmed the new structure, she didn’t state why she was rejecting the alternative measures suggested by her staff.
Alan took a personal grievance case to the Employment Court. The court upheld his claim as Jane had not genuinely considered her employees’ feedback and there was not enough justification to have made Alan redundant.
Use the task list at the top of this page to make sure you follow the correct process. It will also provide a record of what's happened.
You need to put your proposal in writing, so you can communicate it to your team.
Your proposal needs to talk about roles, not people. It needs to clearly state the reason for the restructure, and the expected benefit — though you can keep the details high level.
You need to clearly explain:
If you include specific facts, like how much money you need to cut from the business, you need to make sure those facts are right. You have to be able to back up what you’re saying if you’re asked in a grievance process.
Email or write to your employees, letting them know that you’re proposing a restructure and inviting them to a meeting to hear about it.
The meeting can be with everyone at once. It can be informal.
In the meeting, you should talk through your proposal and give your expectations on timeframes. You should:
Workplace change(external link) — Employment New Zealand
You’ll have the correct time set aside and will signal to your team that you mean what you say about timeframes. Download our task list to help you keep track.
Your employees can submit feedback in written form or in meetings with you. It’s important that you consider what they have to say about your proposal.
Give them enough time after the proposal meeting to digest your proposal, think of suggestions and get support, before you close feedback — but not so much time that it leaves them hanging.
The feedback process will usually be for at least a week (especially if there is a chance an employee will lose their employment).
You must genuinely consider the feedback that you’ve received, and whether you’d benefit from a different structure than you proposed. This process takes time — leave yourself at least a couple of days after closing feedback for consideration.
If you still think your original proposal is best, go to Step 6.
If you want to change your proposal, you should go back to Step 1. This is particularly important if your new proposed structure affects different roles.
This step assumes you’re happy with your proposed structure — if you’ve made changes to your original proposal, you need to go back to Step 1.
You must provide the outcome of your consideration in writing, to the affected people. You need to:
Schedule and hold meetings with affected employees to discuss next steps. Give them the option to have a support person or representative at the meeting, and enough time to organise them to come.
When dealing with downsizing and redeployment, legal advice might be valuable.
It’s best practice to follow a face-to-face process for restructuring. But if a meeting is going to be hard for you — logistically or emotionally — you can follow a written process for some steps.
In that case:
Leave enough time between sending the email and the proposal that they have chance to digest the news and get support in place, but not so much time that it leaves them hanging.
To reduce the risk of a personal grievance, don’t fall into these common traps:
Download our task list to help you keep track of what’s due to happen when — it will also provide a record of what's happened.