Let's talk law: Businesses need to get prepared for redundancies

Some businesses may not qualify for any further assistance from the Government. Photo / Bevan Conley

Brought to you by Treadwell Gordon

The Government is working hard to keep people employed throughout the Covid-19 pandemic and consequential economic downturn. But not every job will be saved. Despite receiving wage subsidies, redundancies will be a regrettable - but very real - prospect for many businesses.

Some businesses may not qualify for any further assistance from the Government. For others, there will be significant additional expenses and, even with the Government subsidy, they may still not be able to retain all their staff.

For example, employees continue to accrue annual leave while receiving the wage subsidy, creating a significant annual leave liability for employers. This liability is not covered by the wage subsidy and must come from business' own, commonly now, shallow pockets.

It is therefore critical for businesses to review their processes and take early steps to prepare for potential redundancies and restructurings (whether they eventuate or not). Business owners should first review how much notice they must give employees who may be made redundant.

This should be set out in the employment agreement. They must then ensure they can allow sufficient time to carry out the restructuring process (that can take a few weeks) and to comply with redundancy notice periods.

Whether a business can make employees redundant while receiving the wage subsidy will depend on that business' specific situation (specific legal advice should be sought and/or inquiries made through the Ministry of Social Development).

Where a business is looking to make redundancies at the end of the wage subsidy period, they can still work through the redundancy process and give notice of redundancies during the wage subsidy period. A business could simply give a longer notice period, or time the redundancy process, such that the last day of employment will match the last day of receiving the wage subsidy. Advance planning is critical.

The more notice note>that employees have of a redundancy, the more time they have to plan their next steps, whether that be re-training or looking for alternative employment. Hopefully, some businesses may also find that, if they start a redundancy process, they will not need to complete it if profits increase in the coming weeks.

Advance planning will also help to ensure that businesses carry out fair and legal redundancy processes. A rushed process increases the likelihood of having to pay out for a personal grievance (we predict a significant increase in these claims, given the increase in the number of employees left without any income, or limited re-employment opportunities).

Sufficient time needs to be allowed for genuine consultation with employees. This includes full and frank discussions that allow employees to review any documentation and comment on the possible outcomes, an honest consideration by the business owners of alternative options and which positions may be made redundant; and then which employees filling that position should be selected (without pre-determining which positions or, even worse, which specific employees should go).

Depending on the size of the business and other circumstances, it can take several weeks (or longer) before any decision on redundancies can be made.

Now is the time for businesses to plan, prepare and seek advice on future steps relating to their work force.

Brittany Gibson is one of the law column writers from Treadwell Gordon.

Brittany Gibson, one of the law column writers from Treadwell Gordon.