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Restructuring – Facing the business challenges head on

At present, 59% of the labour force is being supported by the government wage subsidy, and it is expected that a number of businesses won't remain viable as the impacts of COVID-19 continue to upend the business world.

There are already 30,000 new applications for job seeker benefits in 2020 and economists in New Zealand are predicting that unemployment will rise “considerably” in the coming months. The impact of this is expected to happen in waves, the first wave is happening now as people are being laid off by businesses who do not expect to survive in the short term, the second wave will be when the wage subsidy expires and businesses are unable to pay their employees. Finally, the third wave will be when the effects of a global recession hit the New Zealand’s economy.

It is expected that there will be a significant increase in the number of restructures and potential redundancies. As a business facing the reality of restructuring and redundancies, consider the following:

 

The business reality

As a business owner, you already make tough decisions for your business. This is completely your prerogative, however, it’s also important to remember the impact these decisions have on others. In our experience, many business owners prolong making tough people related decisions because of their concern about the impact on others. This often causes more pain. This is certainly a time for brave leadership, but it is also a time for whole hearts. We must see every person as an individual with their own challenges, this means noticing, being curious and prepared to really listen.

You must make those tough decisions; however, the focus must be on how you arrive at those decisions and what you do to show that the interests of your employees really matter.

 

Your responsibility as the employer

As an employer, you have a legal obligation to your employees. You must act fairly and reasonably in every interaction with your employees. Even in this significant time of uncertainty, it is important to remember that ALL employment legislation principles apply – being fair and reasonable, acting in good faith, consulting, as well as communicating transparent and honest information in a timely manner.&

Consider the situation from an employee’s perspective and tailor your communication to that perspective – what information will they need? What will they be concerned about? What questions might they have? If I was in their shoes how would I be responding? What thoughts would I have?

 

Things to consider when restructuring:

  1. All restructuring proposals must be genuine, there must be authentic and robust rationale for change.
  2. You may be open to challenge, so spend time explaining and communicating the rationale.
  3. Your reason or justification for the proposed restructure must be honest and provided with integrity.
  4. Be prepared to provide data such as financial information to justify your rationale.
  5. Any proposal must not be pre-determined – i.e. it’s going ahead anyway despite what anyone says.
  6. You must meaningfully consult, and you must provide an opportunity for all employees potentially affected to give feedback on any proposal.
  7. If you are unsure of your responsibilities seek advice before you act.
  8. Focus on your business brand and reputation, what do you want others saying about your business.

Covid-19 is not an excuse to contract out of the law

 

Unusual times having an impact

The reality is, the impact of COVID-19 will be seen throughout New Zealand and therefore employment law obligations are in the spotlight even more than they would normally be. There is so much advice out there for employees that as an employer, you must be vigilant. Do not take any shortcuts – this will cost you in the longer term.

Unfortunately, there is nothing for employees to lose when raising a personal grievance – the threat of losing a job whilst there are limited employment opportunities could put even the unlikeliest of people in a position to fight back. Just remember that the cost of a personal grievance for unjustified dismissal is not cheap.

 

Conclusion

Restructuring in today’s environment is never going to be straight forward. It is critical that all businesses are focusing on the underlying principles of the employment relationship – fairness and good faith. You need to get it right, spend the time planning, preparing and communicating. This will help you mitigate risks. Consultation and effective communication are key.

DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.

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