As a business owner/employer, how can I navigate my duties to employees during a recession?
While we are technically now in a recession, it’s good practice for employers to consider how their business may be impacted and what that means for them and their employees. This article covers:
- How good employers act in times of recession
- Employer’s obligations to employees
- Pre-emptive strategies to minimise the risk of employment litigation
- What restructuring might look like
As a minimum, it’s important to remember that basic employer obligations underpin all dealings with employees, even in times of recession and economic downturn. These obligations apply regardless of the health of your business, and include but are not limited to:
- Duty to act in good faith
- Duty to act fairly and follow proper employment processes
- Duty to consult with your employees and keep them “in the loop”
Communication, communication, communication
A practical first step for any business that may feel the crunch of a recession is to consider which business expenses can be scaled back.
If the business is looking to scale back, this doesn’t necessarily mean a restructure. For employees, it may look like amendments to ways of working e.g. more working from home and downsizing the office, meaning a saving on overheads. Other initiatives could be to restrict overtime, reduce any recruitment and outsource operations where possible. We recommend keeping employees involved and seeking their input – they may have some great ideas here. If your employees know that costs are being cut, yet there is no prospect of a restructure at this point, it would be helpful to ensure that your employees know it. They may be feeling uncertain, and some reassurance will go a long way. Further, if your employees are kept in the loop, this can help to speed up a restructure process later, (if it gets to that).
Any proposed amendments to an employee’s role, remuneration, or hours of work will require consultation with your affected employees and their written agreement. If this cannot be obtained, we recommend reaching out to one of our lawyers for guidance.
If scaling back expenses requires a restructure of the business, being aware of the processes and your employer obligations under the Employment Relations Act 2000 is key, and it is always best to speak with a lawyer as a first step.
In brief, any restructure and/ or any subsequent redundancy of employees needs to follow a strict process, with consultation with affected employees throughout. Restructuring must be for genuine business reasons, and must be because the role is no longer required – it cannot be specific to a person. We discuss this here, however in any restructure, it’s important to communicate as openly as possible with affected employees and get the process right. In these circumstances, we strongly recommend taking legal advice to minimise the risk of employment claims.
A recession may not be all bad for your business; there is unique opportunity to reassess the business expenditure as a whole – is the workforce as streamlined as it could be? Are your other contracts and business expenses really working for the business? Being proactive and taking minor steps before the effects of a recession are felt can really pay off, and can incentivise employees if they feel they have some influence.
This is also a great time to ensure that all employment agreements are up to date and reflective of recent developments in employment law. This is particularly true in times of economic hardship – it is integral that employment agreements can be relied upon if needed.
Overall, the best advice we can give is to look after your employees. If you do need to restructure the business, consider what you can do to support your employees and minimise impacts on them. This not only retains morale among the remaining employees, but also minimises risk for you of personal grievance claims for unjustified dismissal if a restructure is necessary.
Employment Law Assistance
Our Workplace Law Team are able to assist with employment matters relating to restructuring, redundancies and any other bespoke employment queries that you may have. No query is too big or small.
Chantelle is a Senior Solicitor in our Workplace Law Team. She can be contacted on 07 958 7473.
Back to all publications
Related areas of expertise
- Developments of Tikanga Within Employment Law
- Workplace Investigations - Addressing Allegations, Complaints and Concerns in the Workplace
- Sick Leave Entitlements – The Basics, “Sickies” and Medical Incapacity - Frequently Asked Questions
- Employment Agreements – Ensuring they cover the basics