Reading time: 5 minutes

Change processes and redundancies are difficult situations to navigate as a business leader. Any situation where an employee is at risk of losing their job is stressful and often emotionally charged. Employers need to ensure that they follow the correct processes and comply with their good faith obligation to staff. In New Zealand, there is a range of substantive and procedural points to note whenever undergoing a process that risks employees’ jobs. This article covers three common business mistakes when making an employee redundant in New Zealand. These include:

  • making a redundancy process about people, rather than roles; 
  • failing to consult; and 
  • forgetting to consider redeployment options. 

Making Redundancy About People

Remember that change processes and redundancies are never about making individual employees leave the business through being made redundant. Under the law, redundancies in New Zealand require a change process and business case for a particular role or job in the business no longer being needed. You will need to show why a change in structure for your business is required or necessary. Likewise, you must be able to explain the expected benefits from the new structure. Consequently, the discussion around redundancies must focus on roles, even though the people in those roles may be at risk of redundancy.

Historically, many businesses have looked to use redundancy processes to shift employees who are underperforming or otherwise not meeting expectations in some way. However, it is important to note that a redundancy process is a wrong way of managing that situation. If an employee performs below expectations in terms of their work, you will need to undergo a performance improvement process with them. On the other hand, if an employee has committed some kind of problematic deed or behaviour, a misconduct process may be the right avenue. In neither situation will a redundancy suffice. As such, your business is at risk of a personal grievance if you launched the redundancy process under false pretences to move a particular staff member on. 

Failing to Consult

There are significant consultation requirements in a change process, particularly when your business is proposing cutting roles. A common mistake from employers is to deliver a proposal for a restructure or change process as a fait accompli. This is an assertion to staff that the proposal will almost certainly go through in its current form. Failing to consult is an issue as it suggests that your business is not genuinely considering feedback from employees. As such, it is not meeting its requirements under employment law for a fair process. 

When you have a proposal for a change process, you must:

  • genuinely ask for feedback from employees; 
  • give them time to consider what you are proposing and draft feedback; and 
  • allow more time for your business to consider the feedback. 

Before finalising the change process, you should draft a decision document. This document should explain whether the proposal will be changing in any way in response to employee feedback. This is an excellent opportunity to seek constructive feedback on the proposal. Likewise, it demonstrates to staff that you are genuinely engaging with them on a process that may be upsetting and stressful for many. 

Forgetting to Consider Redeployment Options

A common mistake is failing to consider redeployment options for employees whose roles are being cut from the new business structure. Your obligation is to try to redeploy employees elsewhere in the business if there is a reasonable way to do so. Of course, it may be that there is nowhere to redeploy the employee, particularly in small businesses. However, if this is the case, the best thing to do is still to genuinely see what your business can do and discuss possible options with the employee. For example, consider asking the employee in question if there is a possibility they would take on a new kind of role. 

Key Takeaways

Change processes are tricky, and no employer wants to make their employees redundant. However, if such a process does become necessary, ensure your business complies with its obligations under employment law. Common mistakes include framing the process as being about the people at risk of being made redundant rather than the roles themselves. In addition, businesses often underestimate their consultation requirements and sometimes forget to explore redeployment options for employees being made redundant. 

For more information about managing a change process, contact LegalVision’s employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

Can you use a redundancy process to move on underperforming staff members?

No, you cannot. A redundancy process is separate from a poor performance process or performance improvement process. Consequently, your business should not undergo a redundancy process to dismiss employees underperforming.

Can misconduct make an employee’s role redundant?

No, misconduct is a separate process to a redundancy situation. It may be the case where you have lost trust and confidence in an employee because of a mistake they have made or bad behaviour they are displaying. In that case, you should specifically address these concerns rather than undergo a change process.

Do businesses always have to consult when undergoing a change process?

Yes, businesses always have to consult and engage with their employees when changing the business’ structure to affect employees. 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards