Redundancy 

What qualifies as a genuine redundancy?

It is a genuine redundancy if a person's employment has been ended because their employer has decided, for ‘genuine reasons’, that the employee’s job is no longer needed. A ‘genuine reason' could, for example, be that the employer is making changes to enable the business to operate more efficiently and cost effectively; or closing down or selling the business. The employer should try to re-deploy staff (offer them other positions within the same organisation) before making the decision to make them redundant.

For more information see the Ministry of Business, Innovation and Employment’s (MBIE's) information on redundancy.

If you think your redundancy isn't genuine see the question below.   

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What is voluntary redundancy?

During the restructuring consultation, your employer may ask some or all employees whether anyone wishes to be made redundant when the workplace is restructured. If you choose to be made redundant, then yours is a voluntary redundancy. A voluntary redundancy must still be a genuine redundancy.  

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What process should an employer follow if they are considering redundancies?

Your employer must go through a restructuring process first (see above), and only proceed to a redundancy process if they decide that redundancies will be necessary.

If there will be redundancies, the employer must write to the individual employees being made redundant. The letter to the redundant employees must include:

  • the notice period (which should the same as what it says in their employment agreement)
  • the last day of their employment
  • whether they will receive compensation and how much
  • an offer to meet with the employee to talk about it.

The meeting is a chance for the employee to ask questions about their redundancy, and they are allowed to have a representative or support person with them.

For more about what your employer should do before making employees redundant see MBIE's Employment NZ website.

You will find the restructuring and redundancy process outlined on the business.govt.nz website.

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How much notice should an employer give when making an employee redundant?

The employer must give notice to the employee who is being made redundant. The notice period for redundancy will usually be stated in the employment agreement. If the employment agreement does not mention a period of notice then “reasonable notice” is required. What is “reasonable” will depend on the circumstances, for example the employee’s length of service and seniority, and the amount of notice that other employees in similar situations have been given.

More about this is on the Employment NZ website.

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Can I expect to receive compensation or support from my employer if I am made redundant?

There is no requirement under New Zealand employment law for an employer to pay redundancy compensation. If your employment agreement mentions redundancy compensation, it will probably also state the amount of the compensation. 

Some employers offer a support package to employees who have been made redundant. This support package could include counseling, time off to look for work and attend interviews, or a retraining allowance. This provision should be in your employment agreement.

If your employment agreement does not mention redundancy compensation or support then it is unlikely you will be entitled to any.   

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What can I do if I think my redundancy was not a genuine redundancy?

If your employer gives you notice of redundancy and you have grounds for believing that it is not for genuine reasons, you may have a case for a personal grievance for unjustified dismissal. (Remember that a personal grievance must be raised within 90 days of your employment ending.)

For example, if you see your job being advertised (with no substantial changes) after you have been made redundant, then this might indicate that your redundancy was not genuine.

If you are a member of a union, speak to your union representative and tell them why you think the redundancy is not for genuine reasons. If you are not a union member, you can get advice from the Ministry of Business, Innovation and Employment by calling their Workplace Contact Centre (0800 20 90 20). Your local CAB, community law centre, or a lawyer experienced in employment law, can also help.

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What process should be followed by an employer who is considering restructuring?

A business can’t be restructured (ie sold, contracted or transferred out) unless the relevant employment agreements contain employee protection provisions. These provisions are intended to support a fair process.

This means the employer must, as a minimum, do the following:

  • Invite all of the employees to a meeting; 
  • Tell the employees how the restructuring will proceed, including the timeframes involved;
  • Tell the employees what changes are proposed, the reason for the proposed changes and which jobs will be removed or changed; 
  • Invite feedback and suggestions from the employees;
  • Consider employees’ suggestions before making any decision about proposed changes; 
  • Consider alternatives to redundancy eg by moving employees from redundant roles to roles elsewhere in the company. 
  • If no changes will be made to the proposal, write to all of the employees about the final structure of the business or organisation. 
  • If changes will be made to the proposal, the updated process must go through the consultation process.

An overview of the restructuring process is on the Employment NZ website.

There are special protections for some types of employees in the event of a restructure.

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Is there special protection for some types of employees when a business is sold, transferred or contracted out?

Employees working in the following areas are given additional protection if the organisation they work for is being restructured:

  • cleaning services and food catering services in any place of work
  • laundry services for the education, health or age-related residential care sectors
  • orderly services for the health or age-related residential care sector
  • caretaking services for the education sector.

The special protections apply to these types of restructuring:

  • where a business (or part of it) is sold or transferred to another person  
  • where a business contracts another business to perform work that was being performed in house 
  • where a contractor loses a contract to perform services and that contract is granted to another business 
  • where a contractor loses a contract because the work is now to be performed in-house

In the above circumstances, the affected employees can choose to work for the new company on the same terms and conditions they currently have if:

  • they won’t be needed to do some or all of their work for the existing employer due to the restructure; and
  • the new employer will perform same type of work or work that is very similar.

Within 15 working days of making the decision to restructure, the employer must notify all of the affected employees and tell them whether they can choose to transfer to the new employer (and if so, the date by which they must make that choice). The employer must also give the employees information about the restructure that will help them make an informed decision about whether to transfer to the new employer.
 
If employees choose not to transfer, the existing employer may make them redundant and any notice and/or payments specified in the current employment agreement will apply.

Where employees have transferred to the new employer, the new employer may subsequently decide to make some of them redundant as a result of the transfer situation, they may become eligible for redundancy entitlements:

  • If the employee’s employment agreement provides for redundancy entitlements in a restructuring situation, then this agreement continues to apply after the employee’s transfer.
  • If the employment agreement does not provide for redundancy entitlements in a restructuring situation, the employee may be eligible for redundancy entitlements as agreed with the new employer.

If redundancy terms cannot be agreed on with the employer, then the Employment Relations Authority may decide an appropriate redundancy provision.

Businesses employing 19 or fewer employers may be exempt from accepting transferred employees. For more information see the Ministry of Business, Innovation and Employment’s Employment NZ website.

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What help is available to someone who has been made redundant?

You may be eligible for help from Work and Income. They can also advise you about any income support you may be entitled to, training opportunities, and help you find another job. 

You could also be eligible for a tax refund due to your change in income. Visit the Inland Revenue website to find out more.   

You might also be eligible for Working for Families tax credits if you have children and your partner is still in paid employment. For more information, see our information on Tax Credits or go to the Working for Families website

Contact your local Citizens Advice Bureau if you want to talk to someone about how to manage this difficult period in your life.