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The Human Resources Institute of New Zealand

Human Resources Institute of New Zealand (HRINZ) is the professional body for those involved in Human Resource Management and the development of people.

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Managing Redundancies with Care

I’ve seen people who are so bitter as a result of poorly managed redundancies that they’re almost unemployable, while others who’ve been managed well have found it offers a great opportunity to make positive changes in their lives.

Redundancies must be for genuine business reasons only – which can be as simple as “we can’t afford to keep operating and need to cut costs”. So, while I’m not necessarily an advocate of making people redundant, the reality is that we’re in a recession and many struggling organisations may need to face this process as an option in order to survive.

But recession or not – badly managed redundancies are damaging and detrimental to all parties. There are many issues to consider from the obvious legal requirements of the Employment Relations Act 2000 to the social conscience aspects of disestablishing someone’s job.

All employers should consider that New Zealand is like a village; word gets around and people will remember if redundancies are managed badly. Not only are organisational reputations at stake, but the long-term impact on staff whose jobs are safe of any innuendo, secrecy or shock tactics are likely to frighten them enough to leave, or, to permanently damage their trust, confidence and commitment.

So employers, large and small, must also consider their social conscience and what makes sense - how will taking their staff’s jobs away affect these people’s lives? What can they do as responsible employers/citizens to make good decisions in the first place, and if the decision is then to disestablish a job, how to mitigate the possible grief, loss of self-esteem, confidence and security for the employee?

Organisational restructuring/redundancies should be done in good faith and with respect and can even result in positive outcomes. Pacific Pharmaceuticals won the HRINZ HR Initiative of the Year Award for 2007/08 for a restructuring which involved retaining staff through the two-year closure of their manufacturing plant which would result in the loss of 160 jobs - while maintaining business-as-usual. The HR team developed a project in the face of this huge challenge which met the individual needs of each employee and gave them the support they required to take control of their future. There was no loss of remaining staff or of business over that time.

Certainly the process is not easy and smaller organisations do struggle more than larger ones. While the legislation is not ideal for every situation, it is essential to follow the guidelines and process to avoid personal grievance claims and other issues.

Expert in employment law Geoff Davenport of McBride Davenport James Barristers & Solicitors in Wellington says one of the key mistakes employers make is failure to plan. He urges employers considering restructuring/redundancy first and foremost to get professional advice specific to their own situation and to consider the following four key issues:

  1. Develop a clear framework from the outset - Don’t jump in and pre-determine a decision to disestablish a role. There needs to be a lead in process; developing a clear understanding of the steps you are going to follow is very important. Getting advice (even a 5 minute phone call) before you start the process can be immensely valuable.
  1. Consultation - In the vast majority of cases, an employer must consult with the potentially affected employee before making a decision to disestablish their role. This doesn’t need to be a long or drawn-out process. Again, the best approach is to get sound practical advice tailored to your circumstances, so that you have a clear understanding of how you will consult and over what time frame. This includes considering employment agreements and any relevant organisational policies about how consultation is to occur in your workplace. It may be, for example, that there are also consultation requirements with a union if the staff are covered by a collective employment agreement.
  1. Genuinely consider any feedback - Consultation with staff and their union, if they’re covered by a collective agreement, is a legal requirement, but it is also a very meaningful process and should not be seen as just paying lip service. Staff can have very valuable ideas about how to improve things, and cut costs. They may have ideas and alternatives to redundancy. Consultation can also contribute to staff retention – often a major issue during restructuring. It is important both legally and practically to engage in consultation in a meaningful way before the final decision on the redundancy proposal is made.
  1. Act in good faith – Follow a fair process ensuring you treat staff with respect, dignity, and be transparent.

Finally, be aware that the current economic climate will not last for ever, but whatever you do as a result of it will be set in concrete – so think of the future. Also be mindful that New Zealand is still experiencing a declining birth rate and an aging work – so our workforce is precious.

This article was written by Beverley Main, past CEO of the Human Resources Institute of New Zealand.

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Disclaimer: This information has been written for and submitted to HRINZ for publication and has been published in good faith for the general information of HRINZ Members of the Institute. HRINZ accepts no legal responsibility for the contents of the Knowledge Base and appropriate professional advice and assistance should be sought in particular cases.

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