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An employer must have a genuine work-related reason for a redundancy. You cannot make an employee’s position redundant for reasons relating to the employee personally (such as the employee’s performance).
It is important to check the employee’s employment agreement and any relevant organisational policies before pursuing a course which may result in a redundancy.
Process
Employers and employees must act in good faith throughout the process.
If you are thinking of making staff redundant, you must consult with the employees concerned and their union, if they are covered by a collective agreement. You must give the employee(s) relevant information (for example, about the problems you perceive and your goals) so they can make a meaningful contribution, and the opportunity to comment on that information before the final decision on the redundancy proposal is made.
If the employment agreement contains a process to be followed in redundancy situations, then you must follow this process.
You must follow a fair process. This could include:
- giving appropriate notice about any redundancy proposal
- being open minded to alternatives to redundancy, such as redeployment, and
- offering counselling and career advice services.
A guide on the actions an employer would generally be expected to take in a redundancy situation can be found in An Employer’s Guide to Employment Relationships. You can download this publication from our website.
Notice
When a decision to proceed with a redundancy is made, notice will need to be given to the employee. The required period of notice should be in the employment agreement.
Employees can work out the required notice period, or you can pay them for the notice period.
Compensation
Generally, there is no right to redundancy compensation unless employers and employees and/or their union have agreed to it. This can be done before or after an actual redundancy is planned. It is also up to the parties to decide what any redundancy compensation should be.
However, in some restructuring situations, employees (who do certain catering, cleaning, caretaking, laundry and orderly work) can ask the Employment Relations Authority to decide what redundancy entitlements they should receive (see the restructuring fact sheet for further information).
Payment for annual holidays
An employee’s annual leave entitlement should be included in their final pay. See our fact sheet for information on how to calculate payment for annual holidays.
Challenging redundancy
It is important to act in good faith and follow a fair process when you are considering a redundancy. You cannot use redundancy as a way of dismissing someone for reasons relating to the employee personally (such as the employee's performance).
Employees can raise a personal grievance if they believe their employer has acted unjustifiably. If the grievance is not resolved by the parties themselves or by mediation the Employment Relations Authority or the Employment Court will look at each case individually, including whether:
- the redundancy is for genuine commercial reasons
- the provisions of the relevant employment agreements have been observed, and
- the employer has acted reasonably and fairly in the way the redundancy was carried out.
Remedies
If an employer is found to have acted unjustifiably in a redundancy situation, the Employment Relations Authority or the Employment Court may decide on one or more of the following remedies for personal grievances.
Generally, the Authority and the Court do not have the power to award redundancy compensation in a genuine redundancy situation, except where the employment agreement says that a redundancy payment will be made.
Support available
If you belong to an employers’ association, they can provide you with advice on how to deal with redundancy situations. You can find contact details of employers’ associations on the Business New Zealand [External Link] website. Employers' associations are also listed in the telephone book.
Work and Income [External Link] offers support services for employers facing redundancy situations. They can work with you to help your employees find suitable jobs while allowing your business to continue its day-to-day operations up to the date of change. To find out more about their redundancy support services call their Employer Line on 0800 778 008.
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This page was last updated on:
05-Jun-2009
and is current.
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