An HR Manager's Guide to Restructuring Your Business in New Zealand

When facing restructuring in New Zealand, you have two paths. 

❌ Path one: rush the process because business pressures demand speed. Hold quick consultation meetings. Keep some information back to avoid 'unnecessary stress.' Make decisions before feedback closes because you already know what needs to happen. 

Result? A 65% chance of losing at the ERA and costs that dwarf whatever you hoped to save. 

✅ Path two: treat restructuring like the legally complex process it actually is. Build watertight business cases. Conduct genuine consultation. Document everything. 

Result? Redundancies that stand up to scrutiny and a team that respects how you handled difficult decisions. 

This guide walks you through how to restructure a business in NZ the right way, covering everything from your legal obligations under the Employment Relations Act to practical templates you can use. 

Let’s dive right in ⬇️

What is New Zealand Redundancy Law and the Employment Relations Act?

The Employment Relations Act 2000 is the bedrock of how restructuring works in New Zealand. 

At its core, the Act aims to ensure a positive employment relationship by incorporating good faith in every component of the employment environment. Good faith is legally mandated behaviour that requires employers to be active, not passive.

The Act requires you to demonstrate good faith through three specific behaviours. 

1. First, not being deceptive or misleading: you can't hide the real reasons behind your restructure or act with ulterior motives. 
2. Second, being responsive and communicative – raising concerns as they arise, not months later when you've already mentally made your decision. 
3. Third, providing full information. When someone's job is at risk, transparency isn't optional.

What counts as redundancy in NZ?

The term "redundancy" is not defined in the Employment Relations Act 2000. However, the courts have defined a redundancy as a situation where employment is terminated due to an employee's position becoming surplus to the needs of the employer.

What does this mean in practice? ⬇️

Redundancy must be about the role, not the person. If you're actually trying to manage out an underperformer, redundancy shouldn’t be your vehicle, performance management should. The role itself must no longer be required by the business due to operational changes, the work doesn't need to be done by anyone (or can be absorbed into other roles), and the decision must be based on genuine business needs, not individual performance.

The Employment Relations Act 2000 stipulates that before an employer and an employee agree that employment for a fixed term will end, the employer must have genuine reasons based on reasonable grounds. This principle extends to redundancy situations: your reasons must be genuine and defensible.

The Business Restructure Process in New Zealand: How to Build Your Case

Phase 1: Developing watertight commercial justification

Before you breathe a word to your team, you need watertight commercial justification. 

The Employment Relations Authority (ERA) and the Employment Court will look very closely at the commercial justification for the restructure and they penalise employers if their figures are incorrect or they don't have insufficient evidence to back their arguments.

Your business case should include several critical elements. 

1. Start with comprehensive financial analysis – your current financial position with specific figures, revenue trends over the past 12-24 months, cost analysis showing where efficiencies can be gained, and projected financial impact of the proposed changes. Don't present generalisations; use actual numbers.
2. Next, articulate your operational rationale clearly. This includes market changes affecting your business, technological shifts requiring different skill sets, strategic pivots or refocus areas, and specific efficiency improvements needed. Be concrete about what's driving the need for change.
3. Finally, build a solid evidence base. Include sales data, budget forecasts, market research, and competitor analysis. If you're claiming declining revenue, show the figures. If you're responding to market changes, demonstrate those changes with evidence.

Don't rush this stage. Hastily preparing the supporting business case and rationale, or not verifying the data you're relying on, are among the most common mistakes that lead to personal grievances. Complete due diligence before you undertake a restructure.

Phase 2: Designing your proposed structure

Map out exactly what your business will look like after the restructure. This means creating new organisational charts showing reporting lines, identifying which roles are being created, which roles are being disestablished, and which roles are changing (and exactly how they're changing). You also need to show how work will be distributed after the restructure.

Critically, identify which employees might be affected. Potentially affected employees are those who hold a position being disestablished, have roles changing substantially, may be considered for new positions, or could be redeployed elsewhere.

If the restructure involves changes to duties, assess whether the proposed changes mean that the role is same, similar or different to the employee's current role. 

Whether the role is same, similar or different has important consequences at different stages in the process – it can inform whether the role is actually being restructured, whether a person should be redeployed to a new role, and whether redundancy compensation applies.

Phase 3: Preparing proposal documentation

This is where detail matters enormously. Your restructure proposal document must include a clear explanation of why the restructure is necessary with specific business reasons supported by actual data. 

➡️ Include your proposed new structure (organisational charts help significantly), specify which positions are at risk and explain why for each one, provide a detailed timeline for the process, outline selection criteria if multiple people occupy similar roles, explain how you'll assess alternatives like redeployment, detail what support will be available, and clarify how employees can provide feedback.

Selection criteria (when applicable)

When you're reducing multiple similar roles to fewer positions, you need objective, transparent selection criteria. Examples include skills and qualifications required for the new structure, relevant experience, performance history (which must be properly documented), flexibility and adaptability, and technical competencies specific to your needs.

⚠️ Avoid criteria that could be discriminatory. Criteria must avoid potential discrimination, such as using attendance records, which could disproportionately affect employees with disabilities. Never use age, family status, or any protected characteristics.

Employee Consultation Requirements in NZ

The notification meeting

Some organisations mistakenly believe it's okay to gather their staff in a group meeting to announce they are rolling out a new team or business structure, and inform some people they will be surplus to requirements in a few weeks. This approach is fundamentally flawed.

In New Zealand, a restructure is only a proposal until employees have had a chance to give feedback and the business has genuinely considered those responses. Your first communications set the tone for everything that follows.

Best practice for notification

Meet individually with directly affected employees before any broader team communications. In these private meetings, explain their role is "at risk" (never say they "will be made redundant"), provide the complete proposal document, explain the consultation process in detail, confirm they can bring a support person to all future meetings, and give them time to absorb the information without expecting immediate responses.

For team members who aren't directly affected, hold separate team meetings where you explain the business context, share what's changing and why, be transparent about the uncertainty involved, and explain the next steps. Don't try to sugar-coat the situation, but don't catastrophise either.

The consultation period: how long is long enough?

Generally, employees should have at least 5-7 working days to consider the proposal and provide feedback. More complex situations may require longer timeframes. 

💡 We recommend starting with a period of two days between announcing the restructure proposal and getting their responses, but anything up to two weeks is considered reasonable. If employees ask for more time, it's wise to give it to them.

The consultation period must allow employees to genuinely read and understand the proposal (which means the proposal needs to be clear), seek independent advice from lawyers or unions, prepare their feedback thoughtfully, and have confidence that it will be genuinely considered.

Another common mistake when the company just wants to get on with things is failing to give employees sufficient time to prepare their responses. Part of acting in good faith and following fair, transparent process is allowing your employees time to consider things. Restructures are hard on people, so your team members will need time to adjust and get support, as well as prepare their feedback.

What "genuine consultation" means in practice

Your employer can't just consult with you as a formality after they've already made a final decision. The consultation process must be genuine, and your employer must keep an open mind about alternatives. This is perhaps the single most important principle in the entire restructuring process.

Genuine consultation requires several specific actions. 

➡️ First, full information disclosure. While you can withhold some private or sensitive information, e.g. the salaries of other employees, if it is relevant to the decision-making process, by law, you are required to share it. You must also include any criteria or tools you will use to assess team members for new positions or redundancies, and give people a chance to comment. Being transparent is crucial in these situations.

➡️ Second, real consideration of feedback. Employees may propose a different viable solution or point out oversights or errors in your plans. Not only are you duty-bound to take their feedback into account, it may help your business avoid the restructure entirely. They might suggest alternative ways to achieve your business objectives, different structural options, point out errors in your assumptions, identify redeployment opportunities you hadn't considered, or propose ways to reduce the number of redundancies.

⚠️ You must genuinely consider these suggestions. If you ultimately reject them, you need to document why and be prepared to explain your reasoning.

➡️ Third, responsiveness. This means answering questions promptly (within 2-3 business days), providing additional information when requested, holding follow-up meetings if needed, and keeping communication lines open throughout the process.

Consultation meeting template

Structure your consultation meetings with this framework:

Purpose statement: Begin by clarifying that this meeting is to consult with the employee about the proposed restructure, to hear their feedback, and to answer any questions. Emphasise that no final decisions have been made.

Agenda structure: Start with a brief recap of the proposal (5 minutes), move to employee questions where they can ask clarifying questions and you provide responses (20 minutes), then employee feedback where they share their views, alternative suggestions, and concerns (20 minutes), followed by redeployment discussion covering available alternative roles and the employee's interest (15 minutes), and finish with next steps including timeline for decision and further feedback mechanisms (5 minutes).

Key reminders to include: Note that the employee has the right to provide written feedback by a specified date, all feedback will be genuinely considered, no final decisions have been made yet, and the employee is encouraged to seek independent advice.

Support information: Provide EAP contact details, union contact details if applicable, and confirm that time off for legal advice is available upon request.

Always document these meetings thoroughly. Take notes, confirm understanding, and follow up in writing.

Resolving Redundancies: Your Legal Duty Around Redeployment Options

The redeployment imperative

Employers must follow a proper and fair process and consider redeployment options before making any positions redundant. The ERA and Employment Court have made numerous rulings against employers for not properly looking at all options for redeploying employees. Employees may just need a bit of training and development to be able to perform the new role.

Making an employee redundant should be considered the last option after all reasonable alternatives, like redeployment, have been explored. It's not unusual for businesses to invite people whose position is being disestablished to apply for new roles alongside external candidates, but if the new role is 'substantially similar' (i.e. 80% or more the same) or otherwise within the person's capability, you run the risk of a personal grievance claim if you don't offer them the role directly.

What constitutes a "suitable alternative"?

The law considers whether an alternative role is a "suitable alternative" or "substantially similar". While there isn't a strict formula, several key factors come into play.

1. Role similarity: Does the job require similar skills to the employee's current role? Is the seniority level comparable? Are the responsibilities broadly equivalent? You need to assess the overlap honestly.
2. Practical considerations: Is the location reasonable (can they commute without unreasonable burden)? Are the working hours similar? Is the remuneration level comparable? What are the implications for career progression?
3. Training requirements: Could the employee do the new job with a reasonable amount of training? If they can get up to speed in, say, under six months, the role might well be considered suitable. Recent case law has prescribed that employers actually have a duty to offer redeployment to an employee if they are capable of performing the role, even if they require training and upskilling.

An employer's duty is to genuinely investigate these options. Simply saying "there's nothing available" without actually looking is a breach of good faith and a common reason for a redundancy being challenged as unjustified.

Alternatives to redundancy beyond redeployment

Before finalising redundancies, explore these options during your consultation process ⬇️

• Role modifications such as reducing hours (could a full-time employee switch to part-time?)
• Job sharing arrangements
• Flexible working arrangements
• Temporary reduced hours
• Consider organisational changes like redistribution of work among remaining staff
• Voluntary redundancy offers to those who might welcome it
• Natural attrition (waiting for resignations or retirements)
• Cost-saving alternatives including hiring freezes, reducing discretionary spending, or even temporary measures like reduced overtime

During your consultation, you should also be genuinely discussing these possibilities with affected employees. Thinking through these options shows you're committed to your people and adds real integrity to the process.

Do You Have to Pay Redundancy in NZ? 

The truth about redundancy pay

Here's one of the biggest misconceptions in New Zealand employment law: that redundancy automatically comes with a big payout. It doesn't. 

Unlike some other countries, Under New Zealand employment law, you have no obligation as an employer to pay redundancy compensation to your employees unless you have agreed to it in your employment agreement.

There is no statutory right to redundancy compensation here. Whether or not an employer has to pay redundancy compensation comes down to one thing: is there a specific redundancy clause in your employment agreement? If it's not in the contract, they are not legally required to pay it.

This little contractual detail has massive ripple effects, especially when the economy tightens. Between 2019 and 2023, New Zealand saw significant economic changes, and by 2024, economic pressures led to more restructures across sectors from technology to retail to professional services.

What you must pay (regardless of contract)

⚠️ Even without contractual redundancy compensation, you absolutely must pay several mandatory entitlements. ⬇️

• Outstanding wages up to the termination date
• Payment for all accrued annual leave (this is non-negotiable and cannot be forfeited)
• Payment for any alternative holidays owed
• Payment for any accrued days in lieu
• The required notice period (or payment in lieu of working that notice)

Notice periods explained

If your employment agreement doesn't specify a notice period, you must provide "reasonable notice". 

The length of reasonable notice depends on several factors including length of service, seniority level, industry norms, and how easy it is to replace the employee. 

Usually 1-2 weeks for blue collar and 2+ weeks for white collar positions is standard. An analysis of collective employment agreements (CEA) by a New Zealand university in 2012 indicated that 4 weeks' notice for redundancy is the most common provision in CEAs.

Redundancy compensation: when you choose to offer it

If you decide to offer redundancy compensation (which many employers do, even without contractual obligation, as a gesture of goodwill), standard methods to calculate it include a fixed lump sum, fixed duration (three month's pay), scale (a number of weeks of pay for a number of years of service) or capped at a maximum threshold of pay.

Common calculation approaches:

A scale approach based on years of service might look like: 1-2 years = 2 weeks' pay; 3-5 years = 4 weeks' pay; 6-10 years = 6 weeks' pay; 10+ years = 8 weeks' pay.

A fixed duration approach might be 2-3 months' salary regardless of tenure.

A capped approach might be 1 week per year of service, capped at 12 weeks maximum.

⚠️ Remember this critical point: Unused annual leave and salary, along with any other entitlements, up to the end date is payable over and above any redundancy payment. This means if someone has five weeks annual leave owing and your redundancy agreement pays out six weeks, they receive a total payment of eleven weeks, not six.

6 Mistakes to Avoid When Restructuring in NZ

Mistake 1: Hidden motives and sham restructures

Don't initiate a restructure because you have a team member who isn't performing or is a bad fit for the business and you want to dismiss them. Using restructuring as a backdoor performance management process is one of the fastest ways to end up at the ERA.

The problem is that pursuing an ulterior or hidden motive, such as a restructure instead of performance management, is easily detected. Even if you have a sound business reason, if there is a hint the restructure is managing someone out because they're bad at their job or clash personally, it can seriously affect the outcome.

👍 How to avoid it

• Address performance issues through proper performance management processes
• Document performance concerns as they arise
• Use disciplinary processes for misconduct issues
• Make sure your business case is genuinely commercial, not personal.

Poor performance, bad attitude, and misconduct need to be handled using the appropriate processes, not through restructuring.

Mistake 2: Predetermined outcomes and sham consultation

Predetermining the outcome, such as going through the motions of a "sham" consultation process, or wording the proposal in a way that indicates it was predetermined is perhaps the most common fatal flaw. 

👍 How to avoid it

• Don't use language like "will be made redundant" in your proposal – always use "at risk". 
• Keep an open mind about alternatives genuinely. Don't tell some employees they're safe while others are "at risk" (this predetermines outcomes). 
• Document how you genuinely considered feedback, including which suggestions you implemented and which you rejected (with reasons).

Mistake 3: Withholding information

Withholding or drip-feeding relevant information to support the business case is a common procedural failing that leads employees to request extensions, turning straightforward restructures into laboured, 4-5 week processes.

The problem is that employees can't provide meaningful feedback without the full picture. 

👍 How to avoid it

• Provide all relevant financial data upfront (you can use confidentiality agreements if needed)
• Share your selection criteria and the weighting of each criterion
• Explain exactly why each role is at risk
• Give employees access to information about alternative roles available for redeployment.

Mistake 4: Rushing the timeline

Rushing through the process, including leaving a very short timeframe between the proposal announcement, the feedback/consultation meetings, and the final outcome meetings signals bad faith and often implies an ulterior motive.

People need time to process life-changing information, seek advice, and prepare thoughtful responses. 

👍 How to avoid it

• Allow 5-7 working days minimum for simple restructures
• Give 2+ weeks for complex changes
• Extend timeframes if employees request it
• Never schedule final decision meetings until the feedback period properly closes and you've genuinely considered all input.

Mistake 5: Ignoring redeployment obligations

This case serves as a reminder that employers must engage in thorough, good faith consultation processes, provide full information to affected employees, and actively consider redeployment options, particularly in large organisations. Failure to follow these steps can lead to claims of unjustified dismissal.

Simply saying "there's nothing available" without actually looking is not acceptable. 

How to avoid it

• Conduct a thorough search of all available roles across your organisation
• Consider roles requiring reasonable training (under six months)
• Look beyond obvious matches to roles where skills could transfer
• Document your redeployment search process properly
• Offer roles that are substantially similar directly – don't make redundant employees apply alongside external candidates.

Mistake 6: Inadequate communication throughout

Not providing clear, transparent, timely information can fuel rumours and anxiety and diminish trust. Information vacuums fill with speculation, eroding trust and morale rapidly.

How to avoid it

• Communicate regularly throughout the entire process
• Be transparent about timelines and stick to them
• Answer questions promptly (within 2-3 business days)
• Document everything properly (all meetings, decisions, and rationale)
• Keep affected employees informed of progress even when there's no major update.

Keeping Morale During Restructure in NZ: The Often-Forgotten Human Element

Restructures don't just affect people losing their jobs, they impact everyone who stays. 

Neglecting the emotional toll on all employees, not just those directly affected by job losses, requires addressing with support and reassurance.

How to support departing employees with dignity

Provide practical support including:

• Time off for job interviews (once redundancy is confirmed)
• Career counselling services
• Resume and interview preparation assistance
• Outplacement support if your budget allows
• Professional references that are timely and fair
• LinkedIn recommendations.

Offer financial support through:

• Clear explanation of all final entitlements
• Certainty about payment timing
• Redundancy compensation if applicable
• Information about accessing government support like Jobseeker Support.

Provide emotional support by ensuring access to your Employee Assistance Programme, maintaining compassionate communication throughout, preserving dignity in the process at every stage, and genuine recognition of the person's contributions to the organisation.

How to support remaining employees through uncertainty

The survivors of restructuring often experience significant anxiety, guilt about still having jobs, increased workload as they absorb departed colleagues' work, and uncertainty about future job security.

Address this through clear communication strategies: 

• Be transparent about the actual business situation
• Explain the future vision clearly and realistically
• Openly acknowledge the difficulty of the situation
• Provide regular updates even when there's nothing major to report
• Create safe forums for questions.

Implement practical measures including:

Workload redistribution planning (don't just dump extra work on people)

• Training for new responsibilities they'll be taking on
• Clear role expectations in the new structure
• Regular check-ins to monitor stress and workload
• Visible recognition of extra effort.

Focus on rebuilding trust by: 

• Delivering on every promise you made during the restructure process
• Demonstrating organisational stability through your actions
• Investing visibly in your remaining team
• Celebrating successes (even small ones)
• Focusing communication on future opportunities rather than dwelling on what was lost.

Final Thoughts

Restructuring in New Zealand comes down to three non-negotiables:

• Watertight business justification
• Genuine consultation with full information disclosure
• Thorough redeployment assessment. 

Miss any of these and you're vulnerable to personal grievance claims that succeed 65% of the time.

The process takes 6-8 weeks minimum. That feels long when you're under pressure, but it's infinitely shorter than defending your decisions at the ERA.

Treat people with dignity. Give them full information. Consult genuinely. Document everything. And when you face your team after redundancies, you'll know you handled the hardest part of your job the right way. 👏

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