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Navigating Business Restructuring and Redundancies in Compliance with New Zealand Employment Law

30 May 2024 | Brad McDonald

Navigating Business Restructuring and Redundancies in Compliance with New Zealand Employment Law

In the dynamic landscape of business, change is often inevitable. Whether prompted by economic shifts, technological advancements, or strategic realignment, companies frequently find themselves faced with the need to restructure their operations. However, along with such restructuring often comes the difficult task of managing potential redundancies, a process that requires careful consideration and adherence to legal requirements, particularly within the framework of New Zealand employment law.

Understanding New Zealand Employment Law

New Zealand has a comprehensive set of employment laws designed to protect the rights of workers and ensure fair treatment in the workplace. Key legislation includes the Employment Relations Act 2000, the Holidays Act 2003, and the Human Rights Act 1993, among others. When undertaking a business restructure that may result in redundancies, it's crucial for employers to understand and comply with these laws to avoid potential legal repercussions.

Planning and Consultation

The first step in navigating a business restructure is thorough planning. This involves assessing the reasons for the restructuring, defining the objectives, and evaluating the potential impact on employees. Importantly, employers must engage in good faith consultation with affected employees and their representatives throughout the process.

Under New Zealand law, employers are required to consult with employees who may be affected by a proposed restructuring. This consultation should be genuine and meaningful, allowing employees the opportunity to provide input, ask questions, and express concerns. Employers must provide relevant information about the proposed changes and consider any alternatives to redundancy that may mitigate the need for job losses.

Selection Criteria and Fair Process

In cases where redundancies are unavoidable, employers must follow a fair and transparent selection process. This typically involves identifying objective criteria for selecting employees for redundancy, such as skills, experience, performance, and qualifications. These criteria should be applied consistently and without bias to ensure fairness and compliance with employment law.

Employers must also provide employees with adequate notice of redundancy and, where applicable, explore alternatives such as redeployment or retraining opportunities within the company. Additionally, employers are required to consider and, where reasonable, implement any suggestions or feedback received during the consultation process.

Redundancy Compensation and Entitlements

Employees who are made redundant are entitled to certain rights and entitlements under New Zealand law. This includes notice periods and payment of accrued holiday pay. You may also be required to pay any employee who you make redundant ‘redundancy compensation’ if that is a term of their employment agreement. The amount of redundancy compensation is typically based on the employee's length of service and any contractual entitlements outlined in their employment agreement.

Employers should ensure that they calculate redundancy payments accurately and in accordance with legal requirements. Failing to provide employees with their full entitlements can lead to legal disputes and potential financial penalties.

Legal Considerations and Expert Advice

Navigating a business restructure and managing any resulting redundancies can be complex, and employers are advised to seek legal advice early in the piece to ensure compliance with New Zealand employment law and to avoid costly mistakes. Employment law specialists can provide guidance on the legal requirements, assist with drafting relevant documentation, and represent employers in negotiations or disputes if necessary.

By taking a proactive and legally compliant approach to managing business restructuring and redundancies, employers can mitigate the risk of legal challenges and maintain positive relationships with their employees. By prioritizing communication, fairness, and respect for employee rights, businesses can navigate periods of change while upholding their obligations under New Zealand employment law.

If you wish to further discuss your needs in this area then you can contact a member of our employment team here at Godfreys Law:

Brad McDonald, Director

Sally Cunneen, Director

Andy Ogilvie, Senior Associate


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Article by:

Brad McDonald

Director, & Notary Public

Determined to do the best job for his clients, Brad works tirelessly to ensure best outcomes are achieved.

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