Search

Layoffs, Redundancies and Restructures - Your Rights and Next Steps

Our guide helps anyone recently laid off or going through a restructure understand what to do. It covers essential tips and resources for handling restructures and redundancies in New Zealand.
Updated 7 July 2024
Summary  
Important: Restructuring, redundancy and layoffs aren’t the same concepts, but for the purposes of the rest of the guide we’ll bucket them into a similar category given they are all related. For further details, we suggest reading these guides and resources:
Related MoneyHub guides:
MoneyHub Founder Christopher Walsh shares his views and suggestions:

"Experiencing a layoff or restructure can be a deeply unsettling time, filled with uncertainty and stress. I know it's happening widely in all corners of New Zealand right now - in the first week of July I received three 'I'm moving on' emails from contacts at different companies in varying industries.

If you are concerned about your future, first and foremost, ensure that you understand your rights and the legal processes involved. New Zealand law clearly states that employers must follow a fair and transparent procedure during restructures, which includes proper consultation and the opportunity for employees to provide feedback. Re-read your employment agreement and the steps your employer must take.

Remember, layoffs and restructures are often out of your control and are not a reflection of your abilities or worth. Our guide is published to walk you through what you need to know so you can take action and have more control in the process. For many, it will be the first time they have to deal with such uncertainty, but as it's happening more and more, a lot of resources are available, and help is on hand".​
Christopher Walsh
​MoneyHub Founder

Know This First: Legal considerations to be aware of:

Whatever is happening with your job and/or your workplace, please be aware of the following:

1. Your employment agreement takes priority
New Zealand Employers must adhere to the terms and conditions set out in employment agreements, including notice periods and redundancy entitlements. If they don’t, you have a legitimate claim against them in employment court. Make sure you carefully read and re-review your Individual Employment Agreement once finding out about the restructure to ensure they follow the commercial and contractual obligations they owe to you.

2. Make sure your employers are negotiating in good faith. 
Under the Employment Relations Act 2000, employers are required to act in good faith, meaning they must be open, honest, and communicative throughout the process. If they’re actively not doing so (or you expect they’re not), document the entire journey (including outlining where they are not negotiating in good faith) and take this to either an employment lawyer or a free law service (like a Community Law Centre) to progress the matter further.

3. You have options if you think you’ve been unfairly dismissed
Employees who feel they have been unfairly treated or that the process was flawed can raise a personal grievance for unjustified dismissal. These claims must be raised within 90 days of the issue arising (e.g. once you’ve realised it’s happened) - so it’s recommended to act sooner rather than later on these matters per guidance from Employment New Zealand. 

Important: Is a restructure the same as a redundancy?
  • No, a restructure is not the same as a redundancy, though they are related and often occur together. 
  • In New Zealand, a restructure involves changes to a company’s organisational structure. This can include reorganising departments, changing roles, streamlining operations and changes in strategic direction. The aim of a restructure is to enhance the overall performance and competitiveness of the business. Restructuring may not necessarily lead to job losses but often does involve changes in roles and responsibilities.
  • In contrast, redundancy in New Zealand specifically refers to the termination of an employee’s job due to the role being no longer needed. This can occur due to a business closing down, cost-cutting measures or the specific role not being needed in the wider business function.
  • Often, a company will start out with a proposed restructure, where a redundancy is the next logical step (assuming the ultimate outcome is that a redundancy is necessary). A restructure is usually high level, a redundancy is employee (or a specific segment of employees) specific.

A restructure can mean changing roles or responsibilities (and doesn’t always mean a job is lost), but a redundancy always results in job loss or a termination of employment contracts. For example: 
  • Restructure without Redundancy: A company merges two departments but retains all employees by reallocating roles.
  • Restructure leading to Redundancy: A company streamlines operations by automating tasks, leading to job redundancies in manual processing roles.

Preparing for a Layoff: Essential Strategies to Navigate Restructures Successfully

Our suggestions below are best carried out with speed, given the financial implications of not having a pay day while you're out of work. 

1. Start looking and applying for jobs ASAP
  • Don’t wait and hope your employer will keep you around. The best way to prepare for the future is to assume the worst and start updating your CV and LinkedIn profile.
  • While you’re still employed and going through the consultation process for the restructure, start networking and job searching for your next role. Reach out to your professional network for job leads and opportunities on websites like Seek and LinkedIn to find job openings. Also consider registering with recruitment agencies that specialise in your industry.
  • Update your CV with the recent highlights (including your skills, achievements, and experience that you’ve obtained from the most recent role) and try to obtain recommendations from colleagues and supervisors in advance.

2. Start cutting household costs ASAP
  • If you’re laid off, you’ll get your final payslip that includes an accrued holiday pay and leave balances (contractually based on employment law) but you’re likely to go through a severe income drop. If you’re planning trips and still have lots of discretionary spend, now is the time to taper that off. 
  • Plan to jump on the jobseeker benefit as soon as you are unemployed - it’s free money (that you partially paid for via your taxes) and that’s exactly what the jobseeker benefit is designed for - supporting New Zealanders while they’re looking for jobs.

3. Be kind to yourself
  • A restructure is an incredibly traumatic time. Almost nobody expects to be laid off and out of the job - but it happens often.
  • Whether it’s a friend who’s gone through the process or a family member that can provide a bit of support, it’s absolutely okay to lean on your network at a time like this.
  • There are also counselling services (like EAP) that your workplace might offer - it’s free to you or subsidised by your work so we’d recommend absolutely taking them up on that. Try to maintain a sense of routine, exercise, and engage in activities that you enjoy while going through the process to take your mind off things.

When Do Businesses and Organisations Go Through Restructures? Why Do They Restructure Rather Than Alternatives?

Businesses and organisations may go through restructures for a variety of reasons, often driven by the need to adapt to internal and external pressures. The most popular reasons for restructurings are:

Financial Difficulties

Businesses are notoriously cyclical. If a business goes through a tough period and experiences a significant drop in revenue or profitability, restructuring may be necessary to cut costs and remain viable. This was very common during COVID-19, where hospitality businesses effectively had their revenue drop to zero overnight (but still had high operating costs such as staff costs, office or premises leases and other financial obligations). While there were some subsidies provided (like the COVID wage subsidy), businesses were still struggling even after this support.

Another culprit for financial difficulties is debt. High levels of debt or financial obligations can prompt restructuring to manage or reduce debt. For example, businesses that took out ultra-low business loans when interest rates were near-zero in 2020 will now be paying 3X to 4X their interest payments in 2024 (as the RBNZ increased the OCR from 0.25% to 5.5% over a few years). This overleveraging or “businesses getting over their skis” can cause serious pressure on a company’s financials (prompting drastic cost-cutting measures such as restructures).

Competition and Market Changes

Business is a competitive field. As more new entrants try to compete for the same customers, it can impact on profitability. Increased competition (e.g. a new bakery opens up across the street from your own bakery) might necessitate a change in business strategy, leading to restructuring.

Additionally, if you’re in a line of business that’s particularly prone to economic downturns or recessions, it can force businesses to restructure to survive. For example, if you have two full time bakers and used to sell 100 pies a day, but due to the cost of living crisis you only sell 40 pies a day, you suddenly no longer need a second baker.

Due to New Zealand labour laws, employers can't tell the second baker to not come into work - they must follow a clear process to restructure your existing labour force. While this adds a short term cost and time sink for the business, it’s much more palatable for the employee (knowing they can’t just get fired at a moment’s notice like in other countries).

Technological Advancements

Recent advancements in AI (such as the introduction of Open AI’s Chat GPT to the mass market) in recent years have meant that many businesses (especially those operating in white collar industries) are able to be far more efficient than previously before.

For example, a company that makes $1 million in revenue with 10 employees may only need 6 employees plus a Chat GPT subscription, depending on the industry it operates in. Unfortunately, this means that many New Zealanders who are currently employed may be at risk of getting laid off (redundancy) and may struggle to find another job (if the changes are systemic and impacting all firms in the industry).

Our view is simple: As technology innovation occurs, more tools get created that streamline and operate business operations (leading to less staff requirements).

Mergers and Acquisitions

Inevitably as companies go through business cycles, some companies consolidate, merge or are acquired by rivals, leading to organisational changes. In particular, many companies choose to go through restructuring to streamline and integrate the operations of the two companies (especially if there are heavily overlapping functions, such as human resources, finance, marketing, operations, etc.).

​Mergers and acquisitions usually involve strategy refreshes and lead to new management or direction (meaning the old cultures of each respective firm can take a hit).

Government and Regulatory Changes

While uncommon, sometimes, new laws or regulations may require businesses to change their structures to comply with legal standards. Changes in industry practices or standards can also drive restructuring.

More common is a change of government, whereby a government department is informed of a headcount cap (led by legislation or ministerial direction) that limits a certain number of employees per organisation. This then leads to a headcount reduction.

​Operational Inefficiencies

Sometimes businesses let their costs get a little bloated (especially when there’s lots of business and money flowing). However, companies can sometimes overhire and realise they need to cut back on expenses.

​Identifying and eliminating inefficiencies in operations can lead to restructuring (for the ultimate purpose of creating a more profitable, lean efficient). While it may hurt the business in the short term (specifically with team culture and morale), it’s better for the business in the long term.

Management or Leadership Changes

Many new executives that come into businesses try to make drastic changes early on in their tenure to “turn the ship in the right direction”, especially if they were brought in to fix a struggling company. As a result, restructures commonly follow new management or leadership.  

Additionally, a new CEO or management team may initiate restructuring to align the organisation with their vision and strategy. Whether it’s a new market segment they want to tackle, improve profitability within a business unit or try to improve the existing products or services they provide, new CEOs are more motivated to act than CEOs that have been around for a while.

​Reshuffling Headcount

Sometimes, businesses that operate in different markets (e.g. they have products that sell/ship to New Zealand as well as Australia) find that they get more traction in one market over the other. IF the teams are hired locally, this can mean that more budget or headcount makes sense in one country rather than the other (which can lead to restructuring to redistribute headcount in the places where it makes the most sense). 

Equally, if a company is entering a new market, but doesn’t have the budget to keep the old headcount, restructuring to allow the expansion into the new geographic or product market might make sense. Unexpected crises, such as natural disasters (like the Christchurch Earthquakes) or pandemics (like COVID-19, can force businesses to restructure to adapt to new realities (like a drastic drop in revenue or an inability to maintain the existing cost structure). Equally, if a business goes through a scandal or some other issue, reputational damage or legal issues might require changes in business structure (such as a restructure).

Crisis Management

Unexpected crises, such as natural disasters (like the Christchurch Earthquakes) or pandemics (like COVID-19, can force businesses to restructure to adapt to new realities (like a drastic drop in revenue or an inability to maintain the existing cost structure). Equally, if a business goes through a scandal or some other issue, reputational damage or legal issues might require changes in business structure (such as a restructure).

Identifying Early Warning Signs That a Business Might Be Preparing for a Restructure

Often, restructures don’t come as a complete shock. There are some early warning signs that might suggest a restructure is headed your way:

Communication to Stakeholders

This is the most obvious sign that a restructure or round of layoffs are coming. Increased communication with employees and stakeholders is another sign that restructuring may be on the horizon (particularly if this news or update is focused on cost-cutting or suggests the business is struggling). Internal memos discussing upcoming changes or strategic reviews can prepare the workforce for transitions. Similarly, frequent meetings with investors, shareholders, and other key stakeholders to discuss future plans may indicate that significant organisational changes are being considered.

Often, layoffs and restructuring will occur after the new financial year goals and budgets are set (rather than halfway through the year when teams and management are still trying to deliver on the budget and plan that’s already been set).

Reduced Social Activities and Communication Within Your Team

It’s extremely difficult to lay off people you’re deeply connected to and spend a lot of time with. If you start to notice that some of your team members (particularly your direct managers) are being distant or not connecting/interacting with you as much as they previously did (e.g. less team days or coffee catch-ups), this could be a sign they are actively preparing a restructure and either feel bad (so don’t want to get too close to you while it goes on) or actively want to create some distance before they give you the bad news.

Executive Leadership Changes

When a business is gearing up for restructuring, one of the most telling signs is changes in leadership. This can include the appointment of new executives or the introduction of a turnaround specialist whose expertise lies in navigating companies through significant transitions. Additionally, the sudden or strategic departure of key executives may also indicate a shift in the company’s strategic direction, often as part of a broader plan to revitalise the business.

Financial Performance Reviews (Daily Standups, Quarterly Benchmarking, Tracking Deliverables)

Another clear indicator of impending restructuring is the frequency and intensity of financial performance reviews. Businesses may begin to scrutinise their financial health more closely, conducting detailed and frequent reporting on the efficiency of existing employees. Cost-cutting measures are often implemented to improve financial stability, suggesting that the company is preparing to make significant changes to its operations and structure.

Important: Employers cannot restructure you out specifically due to your performance in your role alone. This is a separate process known as a Performance Improvement Process (PIP) and must be strictly followed. Laying off people in a restructure as a result of poor performance is grounds for unfair dismissal (as we outline more in detail below).

Operational Changes

Reorganisation within the company’s departments can also signal restructuring. This may involve the merging of departments or the reallocation of resources to optimise efficiency. Comprehensive reviews of existing processes and systems are often conducted to identify and address inefficiencies, laying the groundwork for a more streamlined and effective operation post-restructure.

Hiring Freeze (especially at the graduate level)

Changes within the human resources department can be particularly telling. The implementation of hiring freezes or a noticeable slowdown in recruitment efforts often precedes workforce adjustments. If your current company isn’t hiring, it’s likely they aren’t confident there’s enough work or capacity required to deliver on the future workstreams (which could mean there’s excess people within your current team structure).

Additionally, offering voluntary retirement or exit programs, or announcing layoffs (similar to the news that’s come out of the 2024 National Cabinet plans), can be clear indicators that the company is restructuring its human capital to align with new strategic objectives.

When a Business Hires External Consultants

Hiring external consultants or advisory firms to assist with strategic reviews and restructuring plans is another key sign. These experts bring in an outside perspective and specialised knowledge that can guide the company through the complex process of restructuring. Industry rumours and increased speculation about potential restructuring can also provide external clues about a company’s internal plans.

New Zealanders Most at Risk of Layoffs Right Now - Our View

Certain industries are naturally more prone to restructures, redundancies, and layoffs due to various factors such as economic cycles, technological advancements, and changes in consumer behaviour:

​New Zealanders working in vulnerable industries

  • New Zealanders in industries that are particularly sensitive to economic fluctuations or technological advancements often face a higher risk of layoffs. For instance, the retail and hospitality sector, especially physical stores, is increasingly vulnerable as consumer behaviour shifts towards online shopping (E.g. Temu, Amazon, Shein, etc.), or cut back because of high interest rates limiting the amount of money to spend on non-essentials.
  • Similarly, manufacturing industries that rely heavily on manual labour can be at risk as automation and robotics become more prevalent.

Employees in support functions

  • Workers in support or non-core functions (particularly roles that do not increase a business's revenue or contribute towards the primary objectives of the organisation) within a company might find themselves at higher risk during restructuring or downsizing.
  • ​These roles, which include administrative support, human resources, and certain accounting and finance positions, are often targeted for cuts as companies look to streamline operations and reduce overhead costs. When businesses focus on retaining roles directly tied to revenue generation or core competencies, support functions may unfortunately be deemed less essential.
  • Additionally, customer service workers that may get replaced by AI chat bots or other software that’s able to deal with customer service queries without having physical people respond are also at higher risk of restructuring.

Older Workers

  • Older employees, particularly those nearing retirement age, can be more vulnerable to layoffs. This is often due to a combination of factors including higher salary costs associated with their experience, potential health-related absences, and a perception that they may be less adaptable to new technologies compared to their younger counterparts. 
  • While age discrimination is illegal in New Zealand, subtle biases can still influence decisions, making this demographic more at risk during workforce reductions. Additionally, it can be extremely difficult to prove that your employer explicitly discriminated against you in the process due to age alone (often, it will be a confluence of other factors that may mask the age discrimination).

Blue Collar Workers

  • New Zealanders in lower-skilled positions, which require minimal training or education, are often at greater risk of layoffs. These roles can be more easily automated or replaced (given there’s usually a larger pool of people that can fill these roles if hiring starts to pick back up in the future).
  • Additionally, during economic downturns, companies might eliminate entry-level or lower-skilled positions first as part of cost-saving measures, focusing resources on retaining higher-skilled and more versatile employees who can perform a wider range of tasks.

Contract, Temporary or Part Time Workers

Contract, part time and temporary workers typically face higher job insecurity compared to permanent employees. During periods of economic uncertainty or restructuring, companies and organisations often reduce their reliance on temporary staff first, as it’s a quicker and less legally complicated way to cut costs. These workers are usually not entitled to the same benefits or job protections as full-time employees, making them more vulnerable to layoffs.

Employees in Small and Medium Enterprises (SMEs)

Workers employed by small and medium enterprises can be at greater risk during economic downturns or industry disruptions. SMEs generally have fewer financial reserves and less flexibility to absorb economic shocks compared to larger corporations. As a result, they may need to reduce staff more quickly and extensively to stay afloat during challenging times.

Those newly hired

Recently hired employees (especially those within their 90 days/three month probation/trial period) may also be more vulnerable to layoffs. During restructuring, companies often operate on a "last in, first out" principle, prioritising the retention of more tenured staff who have deeper institutional knowledge and have proven their value over time. New hires, who have not yet had the chance to fully establish themselves, may be more expendable in the eyes of the organization.

Remote Workers

Employees located in remote or geographically isolated areas might face higher risks of layoffs, especially if their roles are not critical to the company's core operations (or they have far less facetime with the managers they’re working with, making them easier to “cut”). Companies might consolidate operations to more central locations to reduce logistical costs and improve efficiency, leaving those in less accessible areas more vulnerable to job cuts.

Workers in declining sectors

Employees in industries facing long-term decline or undergoing significant disruption are particularly at risk. Sectors like traditional or legacy media (e.g. Newshub and TVNZ), print publishing, and fossil fuels are examples where the demand is shrinking due to technological advancements and changing consumer preferences. Workers in these industries may find themselves more frequently facing layoffs as companies downsize or pivot to new business models.

Understanding the Restructure Process under New Zealand Law

In New Zealand, the process of restructuring involves several key steps that employers must follow to ensure compliance with employment laws (as outlined by Business.govt.nz) and to treat employees fairly. The typical restructure is broken up into six key steps:

1. Planning and Rationale
  • Identify the Business Need: The first step is identifying the need for restructuring, which could be due to financial pressures, changes in business direction, technological advancements, or other strategic reasons. Without a clear need to restructure, employers can’t just lay people off. 
  • Develop a Business Case: Employers should prepare a detailed business case outlining the reasons for the restructure, the objectives, and the proposed changes. Usually, this is a few pages in length. There’s no “minimum” business case length, but it should clearly articulate some of the key points of the business need. 

2. Consultation with Employees
  • Initial Notification: New Zealand employers must inform employees about the potential restructure and the reasons behind it. This is often done through an in-person meeting and followed up with written communication. Often, employers will put something ominous in the employee’s calendar like “Organisational Update” or “Business Update”. Employers don’t have to give you any forewarning before they come out with this proposal (with some employers anecdotally setting these initial notification meetings as soon as people come back from leave - which is particularly quite brutal).
  • Provide Proposal: A detailed proposal should be provided to employees, including information on the affected roles, the proposed changes and the potential impact on employees. 
  • Consultation Period: Employers must engage in a meaningful consultation process, allowing employees to provide feedback and ask questions. This period should be sufficient to give employees a genuine opportunity to influence the decision. Often, this period lasts for anywhere from a few weeks to a few months (depending on how extensive the nature of the restructure). 

3. Consideration of Feedback
  • Review Feedback: Employers must genuinely consider all feedback received from employees during the consultation period. This involves assessing the viability of any suggestions or alternatives proposed by employees. There will be at least one (but sometimes more) opportunities to provide feedback on the proposed restructure. 
  • Modify Proposal if Necessary: Based on the feedback, the employer may need to adjust the original proposal. This shows that the consultation was meaningful and taken seriously (however, often employers will come up with reasons why the feedback has already been taken into account or isn’t effective - especially if they are hell bent on doing the layoff). 

4. Decision Making
  • Final Decision: After considering feedback, the employer makes a final decision on the restructuring. This should be documented clearly and communicated to all employees. Often, this will happen rather swiftly once the final feedback has been incorporated into the proposed restructure.
  • Notify Employees: Employees should be informed about the final decision and how it will affect them. This includes providing information on any changes to roles, redundancy processes, and support available. At this point, you’ll likely find out whether your role is disestablished, you’ve been put on notice period or you’ll need to apply for the new role they’ve created (if applicable).

5. Implementation
  • Redundancy Process: If redundancies are necessary, the employer must follow fair processes, including offering redeployment options if possible (like moving employees into new roles under different teams or divisions - but don’t expect this as a certainty), providing notice periods as per employment agreements, and offering redundancy compensation (although this is not normally the case in New Zealand unless explicitly in your employment contract or if the employer provides this as a sign of good faith - in contrast, Australia has legislated redundancy payout provisions).
  • Sup