With the world in the grip of a recession, New Zealand is facing challenging economic times. Employers are experiencing the economic squeeze and one of the solutions they are likely to turn to is restructuring and/or redundancy. Unless employers deal with these situations carefully and comply with the legal requirements they may end up facing additional costs in the form of personal grievances raised. Legal advice at the outset may save time, stress and money. Employers are entitled to run their business as they see fit. However, they must have genuine commercial reasons for making employees redundant and they must follow a fair process. It is in the process that employers often come unstuck. As a guideline employers must be able to show: • the redundancy was based on genuine commercial reasons • the provisions of the employment agreement have been followed • the employer has been fair and reasonable in the way they have carried out the redundancy, and • the action the employer has taken is fair and reasonable in all the circumstances. Genuine commercial reasons for redundancy Genuine commercial reasons for redundancy may arise from restructuring and/or contracting out work, a decline in demand, or a sale or transfer of the employer’s business. Employers must not use redundancy as a way of dismissing an employee who is not performing. Where redundancy occurs as a result of restructuring, the employer must make sure that any new positions formed are not substantially similar to the position being made redundant. A position that has a different title, but the same duties, will most likely be substantially similar. The following are just some of the factors that will be relevant: • substantial changes to duties • change in level of seniority • changes to salary or benefits • change to the number of hours worked • increased or reduced responsibility for other staff Process Having passed the ‘genuine reason for redundancy’ hurdle, employers must follow a fair process, as required by the duty to act in good faith. This will generally involve: • consultation about any proposal that may impact on the employee’s employment • a consideration of any alternatives to dismissal e.g. redeployment, reduction in hours, job sharing • providing affected staff with information about proposed redundancies and the selection criteria for appointment to any new positions • following the terms of the employment agreement with respect to notice periods, payment and redundancy compensation • advising the employee of their right to representation and offering support, and • where possible, providing counselling, career, financial and retraining advice. Whether the process has been fair will depend on all the circumstances of the case. Employers should note that the National Government has introduced the “ReStart” package to assist redundant workers. “ReStart” provides short term relief for low to moderate income families with children and also those already receiving the maximum accommodation supplement, along with help with securing new employment. A redundancy tax credit is also available that makes taxing redundancy payments fairer when the redundancy payment has pushed the employee into a higher tax bracket as a result of receiving a lump sum redundancy payment.