In the current climate many childcare centres have experienced a reduction in revenue and need to reduce operating costs. Administrative expenses make up a significant portion of operating costs, however, staff are the lifeblood of any business and are often the key to success. We set out steps that can be taken to preserve staff while reducing costs, and what to consider if restructuring is an unavoidable next step.
Options to explore before a restructure
While you cannot make unilateral changes to employment terms and conditions, an employer should consider the following range of options from passive steps (requiring voluntary engagement from employees) through to active steps (where the employer takes direct action):
Considerations for a restructure
If you are unable to achieve a sufficient reduction in operating costs for the centre to survive with current staffing levels, you may need to consider a restructuring proposal. You must have genuine business reasons in order to disestablish a role.
In some instances, the employment agreement may set out a process to be followed in the event of a restructure. In addition, an employer has an obligation of good faith which requires, among other things, openness, frankness, transparency and fairness. If you terminate employment by reason of redundancy the Court will inquire whether that action is what a fair and reasonable employer could have done in the all the circumstances at the time the dismissal occurred, if your actions were justified and if the process of consultation was fair.
As a rule, the essential steps required to meet your obligations include:
In a post COVID environment many centres will need to reduce costs. Your employees will continue to be your most valuable asset and there are several cost saving measures that might be considered before you rethink your organisational structure. Where restructuring is unavoidable it is essential to act in good faith and with genuine reasons.
Check out the restructure Guideline in the tools section of the ECC Website
This article was written by Susan Rowe (partner) and Eleanor Mishra (solicitor).
The ECC has a preferred supplier relationship with Buddle Findlay, who also offer up to 15 minutes free employment law advice on any one particular issue you may have. Give them a call on 0800 742 742 option 4. You may need to leave a message, but they will get back to you.