Category Archives: Redundancy & Restructuring

A company was faced with the horrible decisions to downsize.  Using the HRtoolkit tools, they were working through a consultation process to make this happen.  One of the roles that was proposed as redundant was the apprentice because they didn’t have enough qualified tradesmen to meet his training needs.

They presented the proposal to all the staff, and gave them time to give feedback (as required by law).  As part of the feedback the other staff (not the apprentice himself) had gone out and found another company who was prepared to “share” the apprentice and give him the work experience that the main company couldn’t.

The apprentice’s job was saved, and he is now a qualified sparky!

And into the bargain the staff loyalty increased exponentially as they had been listened to!

Getting the restructure process wrong can be horrendously expensive ($100,000.00’s in legal bills, Personal Grievances, wasted wages…) for your business, but done right the outcomes can be amazing.

Do it right, do it once, click here now to save money and jobs.

Don’t Panic

And don’t ignore it!

Sadly, there are a lot of no-win-no-fee lawyers who understand that for employers, personal grievance claims often come down to a fiscal decision. It may be cheaper to pay money to an ex-employee, than defend a claim.

At any point during the personal grievance process, you have the right to negotiate a full-and-final settlement agreement. This means that both parties are waiving their rights to take any further legal action against the other, giving you insurance against any future court case.

Begin by assessing the case against you

• Pure chancer with no claim at all 
  Write back to the claimant with all the details you have saying ‘no claim, and this is why’. Often this will be an end to the matter
• Pushing their luck, but possibly have some good points
  You may want to think about having a ‘without prejudice’ discussion at this stage, or you may want to write back and refute the allegation.
• They have a solid case, you are in the wrong
  This is probably a good time to open a ‘without prejudice’ discussion. You are going to have to pay out anyway, so you may as well minimise the legal bill.

An alternative is to can go to mediation and have a mediator from the Department of Labour help you sort out the matter. You will be directed to mediation if you are not able to settle the claim. You have a legal obligation to attend mediation, and to seek to resolve the matter in good faith (more details at https://www.laborlawcc.com/Labor-Law-Posters/New-York-c207/).

What happens at mediation?

• A date will be agreed by the parties
• Both parties will arrive at the mediation department and will be put into separate rooms
• The mediator will brief both parties on the process and then bring them into the room together
• Without interruption both parties will state their case
• The mediator will ask some questions, and questions can be asked across the table
• Once discussions are no longer being productive the mediator will break you back into separate rooms
• The mediator will then go over the strengths and weaknesses of your cases and the possible liabilities. Most do this by going through your worst case and best case scenario.
• The average award for an employee to win in court is three months pay plus $7,ooo for hurt and humiliation
• The mediator will attempt to negotiate a settlement
• If no settlement is agreed then the parties go their separate ways

What does this mean in practice?

• You will be in mediation for 4 – 6 hours (sometimes longer)
• You don’t have to reach a settlement, but the reality is that in most cases you will end up paying over some money in order to make sure the personal grievance claim doesn’t go any further
• The employee then has two years to decide to take the matter further with the Employment Court
  Employees will not automatically take their case to the Employment Court. With weak cases, a no-win-no-fee lawyer will not waste time defending a case for which they may never be paid

Are claims always made in favour of the employee?

No, that’s not true. The rulings are about 50/50 once you get to the Employment Court.

Your main concern will be that the estimated cost to an employer to ‘win’ in the Employment Court is about $7,000 in legal fees that you can’t recover. If you are awarded ‘costs’, they are based on a set formula ‘per day in court’ and have no relation to the actual costs you have incurred. Finally, an employer then needs to recover these costs which sadly, most employers never actually manage.

The average cost to lose at the Employment Court is $35,000. And that doesn’t account for the loss of time away from your business.

Should I represent myself?

You can represent yourself at the Employment Court, but this is one of those tricky situations where we do not recommend DIY. Don’t spend thousands of dollars unnecessarily, Call us on 0800 HRtoolkit and we will talk you through the most cost effective ways to defend a Personal Grievance.

Well for all the Monty Python fans out there, hopefully, you just sang the title and it brought a wee smile to what is, frankly, a pretty bleak outlook at the moment.  Bad weather, COVID, fuel costs, inflation, winter ills and chills, staff shortages, the list goes on.

Sadly, I am already starting to get the calls from companies who are either packing up entirely, or are significantly downsizing.  And, if you aren’t doing so already, I would strongly recommend that you take a long hard look at your business and ensure you are in the best possible shape to avoid being pushed into making those hard decisions, or, worse yet, being forced into liquidation.

We can’t control the weather, but what can we control?

1. Are you paying for things you don’t need/use? – this may sound obvious, but it is amazing how quickly all those small value automatic payments add up.  I was looking at my personal outgoings and between regular charity donations, Netflix, Apps, prime video, I managed to clock up over $200 per month on things that I didn’t necessarily need.  For my business, the regular payments are much higher, so add up even quicker.
2. Are there alternative options which are more cost-effective?  NB cheaper is not always better, for example, I use Workflowmax, Xero, Mailchimp and Debtor daddy.  Yes, there are cheaper options, but these systems are all integrated with each other and the cost of actually resetting the integrations would actually negate any cost savings
3. Are my team giving the best return on their time spent?  10 minutes per day = 40 hours per year or 2% of your annual payroll spend.  If your team are spending time doing things which don’t return benefit to the company then this is a lost opportunity and money.  It is not about working harder, but about making sure what everyone is doing is providing the best return.
4. Do some clients need to be fired?  Late payers, time-intensive clients (for low return) and low margin clients may be making you busy, but are they actually contributing to/or taking away from the bottom line?
5. What are my rework and productivity rates?  If you don’t measure these things already, I would recommend you look at ways to start measuring them as the results can be quite scary (NB Point 3 above)
6. Am I having unnecessary face-to-face meetings?  With the cost of fuel and the time needed to get to and from face-to-face meetings, think carefully about whether these are truly necessary
7. Are some parts of my business profitable, but others are not?  If you answered yes, then either ditch the non-profitable, or think long and hard about what the benefit is, and when you need a return to be shown
8. Cut your payroll spend – this is the biggest cost in virtually every business, but you do need to demonstrate you have done everything to avoid it if considering redundancy.  I will be speaking more about that in the next newsletter

Business Case for Change
This month’s free webinar is about building the business case for change, and the following webinar is about Restructuring and Redundancy.  You do need to demonstrate your business case, though, with a bit of luck the process of reviewing that business case will actually create sufficient change that you avoid the need for redundancies.

Call for help
This is a tough time for everyone, but please do give me a call on 021 741 544 to chat about your situation.

Or sign up for our document library with all the templates you need for only $399 + GST per year, or the DIY expert package with unlimited phone and e-mail support for $129+ GST per month (minimum 12 months)

As a business owner restructuring and redundancies are probably the hardest thing you will ever have to do.  And, as an HR consultant who has done literally thousands of restructures, I am often asked how I cope with it mentally.  I’m not going to pretend it’s easy, it’s not, but my key focus is always on those jobs (and families) I am saving by ensuring the business can remain viable.

DIY with Caution
The good news is that all the documentation you need to go through this process is available in the document library, and I am also on hand to help you.  NB Redundancy is the most litigious point of employment law and I would therefore recommend that you contact me on 021 741 544 at the very least for a peer review

Building your business case
When considering restricting your business, you first need to present your business case to justify the changes you are proposing.  Some key pointers in this process are:

1. Demonstrate actions already taken to prevent the need to move to redundancy (see last month’s newsletter)
2. State what you are trying to achieve, and why
3. State, why you believe the proposals made, are going to achieve the desired outcomes

Double check the case presented justifies the proposal i.e. if you are proposing to disestablish X position, have you actually presented the reasons why?

What are you trying to achieve?

1. Cutting costs – is probably the most common base reason, but you need to further answer the question of why X position instead of Y position.  For example, you may be proposing to disestablish the Accounts person, but why are you doing that instead of the Receptionist?  It may be that the accounts’ function has been automated, and the residual work can be outsourced for a lower cost.  Whatever the reason, make sure you state it clearly
2. Changing the business focus – The way we do business has changed radically over the last 2 years which may mean that you need to adjust how you are doing business.  For example, previously you may have worked mainly for high-spend corporate clients who required account management style service.  But now the swing is towards lower spend, but higher volume small and private clients, so you need to focus on a customer service type model
3. Responding to technology changes – automation and streamlining processes takes time, but are you now at the point that you now need to realise the cost savings in terms of personnel that investing in the automation afforded you

Selection for Redundancy
If someone is in a unique position within the company (i.e. no one else does a significantly similar role e.g. receptionist) then you can ring-fence that role as being the one proposed as disestablished.   However, if you are proposing that 1 customer service out of 4 is disestablished, you need to consult about how you will select which one of the 4 is redundant.

Selection criteria will generally be based on a set of criteria (e.g. length of service, Performance, range of skills etc – see Document library for criteria Matrix), and then with a brief 15-minute interview to go over the scores and give them an opportunity to present their case about why they should be retained.

Remember, the role is disestablished, the person who is occupying that role is made redundant as a result of the disestablishment.  This is important as, even though the (e.g.) Receptionist may have the skills to do Customer Service, you can’t “bump” a Customer Service person in favour of the Receptionist.

Free Webinar
This months free webinar is on Restructuring and Redundancy, and you can register here, its on at 10am on Friday 9th September.

Call for help
Redundancy is the most litigious point of employment law and I would therefore recommend that you contact me on 021 741 544, at the very least for a peer review before you issue any letters

Cheers

Lisa Mackay
HRtoolkit Founder
021 741 544

My measure of the state of the economy is how much recruitment I am doing v’s how much redundancy work I am doing.  Sadly, the balance has now tipped (for the first time since COVID hit) to redundancy.

There are a multitude of reasons for this, but the bottom line for most small businesses is that any cash reserves have long been depleted, and they simply cannot carry on as they are. 

So, if you are feeling it tough, here are my top tips for keeping your business viable:

1. Act sooner rather than later – if you are already amassing debt, putting off paying bills etc, you are already acting late, and the situation is unlikely to change unless you actually make changes to right-size your expenditure v’s your income/cash flow
2. Ditch low profit-generating clients – NB high revenue-generating clients are often not actually generating a lot of profit, and sometimes may even be costing you to keep them
3. Spread your income sources are much as possible – if you have a high proportion of your income from 1 or 2 key clients, this is a very high risk if you lose one of those
4. Be prepared to act – even if you may not yet be ready to implement major changes (e.g. restructuring), be prepared so that you know when the milestones are (e.g. turnover below $X, profit below $Y) that will put your business at risk, and you know what to do if there is a sudden change (e.g. loss of a major client)
5. Know your numbers and monitor them closely – 1 bad month may be OK, but 6 bad months is generally pretty bad for a small business, so don’t wait until the 6-month mark before you realise there is a problem
6. Put up your prices – scary I know, but everyone knows costs are going up so I very much doubt any of your customers will be surprised.
7. Check your productivity/efficiency – it is easy to fall into the trap of believing that it is all due to the macro environment that things are so bad.  However, my observation is that there is a heck of a lot of lackadaisical inefficiencies around at the moment.  For example, a café owner who I know is screaming out for staff (even closing some days because of it), but when I was in the café recently there were 3 staff behind the counter gossiping, whilst I was left waiting for my order to be taken.  Another example was a company that did 3 small jobs in Opua (a 2 hour round trip from the office) on 3 separate days, rather than co-ordinating to do all 3 jobs on 1 day.  I.e. 6 hours travel time instead of 2 hours.  Work smarter, not harder, and manage the gossipers!
8. Business owners are actually allowed to earn a living!  It certainly doesn’t feel like it at times, but if you are earning lower income than your staff then don’t be ashamed to say “That’s not OK, I am allowed to earn and income”!

Payroll is the biggest cost in virtually all businesses.
And small changes can make a huge difference.

As an example, ACME Ltd employs 10 staff at an average of $50K each (NB minimum wage on a 40 hour week = $47,216 per annum).  So, their annual payroll spend is $500,000 per annum.

1. 10 minutes per day of wasted time = 40 hours per year, or 2% of your annual payroll spend or $10,000, from profit – manage the inefficiencies, they will be a lot more than 10 minutes per day
2. Rather than making people redundant, could you move to a 4.5 day week and give them each a 2.5 day weekend?  10 staff at $24.04 per hour, 4 hours a week = $50K per annum.  Though they may not necessarily want to reduce to a 4.5 day week, when this means that someone’s job is saved, and no one is made redundant, often the staff will work with you to make this happen.  This is a particularly good approach if you want to retain skills, but also weather a short to mid-term drop in work. 

Consult, Consult, Consult
If you are making any significant changes (and a change to income is significant) then you have to consult.  The templates are available in the document library, though I do recommend that you have a chat with me before going into any consultation process as this is the highest risk point of employment law.  That having been said, though it is high risk, done right, the risks are minimal, and the earlier you involve your team the better.  Ultimately, your goal needs to be to avoid having to go to redundancies, but if you have to do it, then do it to save the majority.

Open Forum with Max Whitehead
This month’s webinar is on Friday 28^th April at 10am and is an open forum with Max Whitehead where we will be discussing what is happening in employment law and what to anticipate for 2023 and beyond.

Here to help
As ever I am just a phone call away, so feel free to call me on 021 741 544

Cheers

Lisa Mackay
Founder, HRtoolkit