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 ⬇️
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Before finalising redundancies, explore these options during your consultation process ⬇️
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.
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.
⚠️ Even without contractual redundancy compensation, you absolutely must pay several mandatory entitlements. ⬇️
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.
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.
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.
Poor performance, bad attitude, and misconduct need to be handled using the appropriate processes, not through restructuring.
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.
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.
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.
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.
Not providing clear, transparent, timely information can fuel rumours and anxiety and diminish trust. Information vacuums fill with speculation, eroding trust and morale rapidly.
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.
Provide practical support including:
Offer financial support through:
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.
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:
Implement practical measures including:
Workload redistribution planning (don't just dump extra work on people)
Focus on rebuilding trust by:
Restructuring in New Zealand comes down to three non-negotiables:
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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