Restructuring and Redundancy
Restructuring and Redundancy
Our premier guide to understanding how to conduct a redundancy or restructuring process and issues that should be considered.
Redundancy occurs because a position is superfluous to the needs of the employer.
Restructuring is the reorganisation of the business or a specific role to meet the changing needs of the
company.
Redundancy may result from restructuring or re-organisation of the business, or when an employer
transfers, sells or contracts out whole or part of its business.
Using redundancy to mask any other reason for terminating an employee’s employment (e.g. poor
performance) is not tolerated by the Employment Relations Authority or Court.
In the case of a company restructure that impacts on an employee’s position, if a reasonable person
would consider that there is a sufficient difference between their old positions and the new position
that results from the restructure, then the employee’s former position is redundant.
Employers are entitled to manage and organise their businesses and to determine which positions will
be selected for redundancy as long as there are genuine reasons.
A redundancy must be implemented in a procedurally fair manner which involves a consultation
process with the employees concerned.
Redundancy should be a last option therefore retraining and redeployment should be considered.
If an employment agreement is to provide for compensation for redundancy, then it should include a
provision about technical redundancy.
An employee whose employment is terminated on the grounds of redundancy may have a personal
grievance based on unjustifiable dismissal, if either the employment was terminated in a procedurally
unfair manner, or the redundancy was not genuine, or both.
Certain classes of employees (defined as “vulnerable employees” under the ERA) can transfer to a
new employer as of right in a situation where there is a restructure/sale of the business. If the new
owner then makes that employee redundant they may become eligible for redundancy compensation.
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