The financial impacts of COVID-19 will undoubtedly have a significant impact on all businesses in New Zealand and will naturally result in many employers needing to look at restructuring and redundancies. However, the process is not so simple!

Before resorting to a business restructure or making an employee redundant, you must consider all other alternatives in a discussion with your employees, including:

• Working reduced hours;

• Take one or more days a week as annual leave; or

• Take leave without pay.

Restructuring Process

Even after exhausting all other options, you must first go through a restructuring process (explained below), and only proceed to a redundancy process if you decide that redundancies will be necessary.

Step 1 – Document Restructure Case and Proposal – A Genuine Business Reason?

A significant downturn in sales/revenue, a loss of customers/suppliers, and/or a shift in market requirements, could amount to a genuine reason for restructuring or redundancies. However, it’s important to ensure that an employer’s business case and reasons are documented, with supporting evidence. Example: if you say that you need to take 20% cost out of the business, then you must have the evidence to support this, although this doesn’t have to be in the proposal.

Step 2 – Invite All Relevant People and Hold A Meeting About the Proposed Restructure

Email or write to your employees inviting them to a meeting to hear about the proposal. Your meeting does not have to be in person, it could be online, although face-to-face is often better as it shows staff an open environment to raise issues and share concerns with their peers.

Step 3 – Gather Feedback from Employees

Give staff plenty of time to consider the proposal, seek advice, talk among themselves and to give feedback – the length of time that you give staff is usually dependent on the size and complexity of change proposed.

Step 4 – Consider Feedback and Make a Decision.

It is important to genuinely consider all the feedback that you receive. Take time to think about whether there is value in making changes based on the feedback.

If the above steps lead to removing employees, here’s how to handle the next steps.

Step 6. Confirm the Structure (including any proposed Redundancies)

You must confirm the final structure to employees who are being made redundant. This should be a letter should include the following:

• how much notice you’re giving them, as stated in their employment agreement;

• the end date of employment;

• whether they’ll receive any compensation, and if so, how much (as stated in their employment agreement); and

• an offer to meet with them to discuss the outcome of the restructure process.

A fair and reasonable process?

In all their dealings, employers and employees must deal with each other in good faith.

What’s a reasonable process in the light of COVID-19?

Ultimately, an employer must be able to show that its actions were “what a fair and reasonable employer could have done in all the circumstances at the time” In the current situation, that may mean:

• communicating with employees via videoconference, telephone, or in writing; and

• if change is particularly urgent, working to shortened timeframes during the consultation process.

If you are unsure about what is reasonable in the circumstances, or would like guidance throughout the process, we’re happy to assist.

For more information, please contact a member of our HR Services team.

-Eshan Gupta

For more advice on the taxation of your investment property and other accounting and business services, please contact the expert team at Tax Professionals. First consultation is FREE.

Contact the Tax Professionals team at: 09 213 7315 or online at www.taxprofessionals.co.nz