Struggling to keep your business afloat?
The financial impact of Covid-19 may have struck your business like the iceberg that sank the Titanic, causing you to shut stores and cut jobs.
Perhaps you are simply uncertain about the future of the economy.
Now is a difficult time to be in business, and a stressful time for both employers and employees. When times get tough, many employers will consider restructuring their business, leading to potential redundancies.
What steps should you take before restructuring your business?
Get business help
Before restructuring your business, speak to your financial adviser, accountant, or bank about how to make your business financially viable.
Can you adapt your business so that it survives? Many retailers have pivoted their business online and created solutions like click and collect. If you can pivot your business, how will your staffing needs change?
Are there other ways to make savings in your business? What resources are available for your business? Is your business eligible for Government funding?
The Covid-19 Economic Response Package includes extended wage subsidies for eligible businesses; tax loss carry-backs; and interest-free loan schemes for small businesses.
Employers must have genuine reasons to justify a restructuring proposal.
Are staff surplus to operational requirements? Are you merging roles? Has there been a significant downturn in sales or revenue?
Produce evidence supporting your claim that is sufficient and reliable. In the Employment Court, scant evidence of redundancies has led to successful claims of unjustifiable dismissal.
Speak with your employment lawyer about whether your reasons for redundancies and support evidence would withstand scrutiny in Court.
It's tempting to pick and choose staff for redundancies based on performance issues or other concerns about your staff.
Now is not the time for playing favourites. Be fair in your selection process, and open and transparent about your selection criteria. Follow policies within your organisation, such as "last on, first off" rule.
Feedback from staff
During the lockdown, some employers handed staff "their notice of redundancy" without hearing their feedback about the restructuring proposal.
Despite the unprecedented challenges, employers must deal with staff in "good faith," as required under employment law.
Be open and transparent about your reasons for the restructuring proposal. Give staff all relevant information on the restructuring proposal – memos, financial information, emails, and records of meetings.
Listen to what your staff have to say about the proposal before deciding to restructure your business. If you decide to go ahead with the proposal, consider your employees' thoughts on redeployment options.
Support your staff
The restructuring process is an uncertain and stressful time for staff concerned about losing their livelihood, identity, and social connections.
Be thoughtful in your communication with affected staff during the restructuring process.
"Stress makes it hard for people to absorb and remember information", say Elizabeth McNaughton and Jolie Wills (Co-Founders of Hummingly). "Follow up any conversations in writing so people can absorb messages when and how they need to."
"Be supportive and thoughtful but expect reactions and try not to take these personally. People will feel grief and anger and it will come out in many ways."
Give support to staff facing a restructuring proposal, such as counselling through Employee Assistance Programmes. Provide support for all staff coping with change by accessing tools like Hummingly's "Doing Well" cards.
If your staff lose their jobs to redundancy, career transitioning and CV writing services can help them find another position.
Give notice period
If an employee's position has become redundant, decide whether you can redeploy the employee. Would their skills transfer to an alternative position within your organisation?
If redeployment is not an option and you have followed proper process, you may end the staff member's employment for redundancy.
Pay staff for the notice period, and any compensation for redundancy set out in their employment agreements.
Follow wage subsidy requirements
Wage subsidies support employers impacted by Covid-19 so they can continue to pay employees during the wage subsidy period.
Employers must comply with requirements of the wage subsidy support scheme: so they must retain staff.
Did your business apply for wage subsidies after 4pm on 27 March 2020? If so, you must retain staff for the duration of the wage subsidy: you must keep staff employed until 9 June 2020.
Otherwise, if you applied for the wage subsidy before this time, you must use "best efforts" to retain staff for the duration of the wage subsidy.
Likewise, employers who seek support for extended wage subsidies must retain staff for the 8-week duration of the extended subsidy.
- For more information, see Julia's live and virtual half-day seminar through HRNZ: Restructuring and Redundancy on 23 June 2020.