How To Lawfully Set Redundancy Selection Pools In New Zealand

Redundancy is one of those business decisions no owner wants to make - but sometimes it’s the realistic way to keep your business sustainable.

If you’re at the point where you need to reduce headcount, it’s not enough to decide who you think should go. In New Zealand, you’ll need a fair process, genuine business reasons, and (crucially) a lawful way to decide which roles are affected.

That’s where redundancy selection pools come in.

Done properly, selection pools can help you run a structured, transparent process that reduces legal risk and keeps trust intact as much as possible. Done badly, they can create a real risk of a personal grievance for unjustified dismissal.

Below, we’ll walk through how redundancy selection pools work in NZ, how to set them up lawfully, and the practical mistakes small businesses should avoid.

What Are Redundancy Selection Pools (And Why Do They Matter)?

A redundancy selection pool is the group of employees you compare against each other when you’re deciding which role(s) will be disestablished.

Instead of picking a person, you identify a set of roles that are genuinely “like” each other (or could reasonably be reorganised into fewer roles). Then you consult with the affected employees, apply fair selection criteria, and decide which positions remain.

Selection pools matter because they connect your restructuring decision to a fair process. In a practical sense, they help you:

• Show your decision is role-based (not personal);
• Run a consistent process across comparable roles;
• Apply objective criteria if you can’t keep everyone in the pool; and
• Reduce the risk of claims that the decision was predetermined or targeted.

For small businesses, this can also make planning easier. If you know you need, say, two admin roles instead of three, the pool approach gives you a defensible way to decide which two remain.

When Do You Need A Redundancy Selection Pool?

You don’t always need a formal redundancy selection pool - but you often do when:

• There are multiple employees in similar or interchangeable roles (e.g. several retail assistants, multiple support staff, a small team of technicians);
• You are reducing the number of roles rather than removing an entire function (e.g. keeping one receptionist instead of two);
• You’re doing a restructure where roles are being changed, merged, or replaced; or
• The affected work could be performed by more than one role currently in the business.

On the other hand, if you are genuinely disestablishing a single, unique role (for example, your only warehouse manager position), a pool may not be necessary because there’s no real comparison to be made.

The key point is that you need to be able to explain (and document) why the pool is defined the way it is. If the pool looks artificially narrow (or artificially broad), it can raise questions about fairness.

If you’re unsure whether your situation calls for a pool, it’s worth getting advice early - it’s much easier (and cheaper) to design the process properly than to fix it after problems arise. This is especially true if you’re already reviewing your redundancy process and want to avoid rework.

How Do You Define A Lawful Redundancy Selection Pool?

Defining the pool is one of the most important steps - because if the pool is wrong, everything that follows can be challenged.

In NZ, there isn’t a single “one size fits all” legal rule that tells you how to set a pool. But there are clear expectations around good faith, fairness, and reasonableness in restructuring and dismissal processes.

A practical way to approach this is to ask: Which roles are genuinely comparable or interchangeable in the context of the proposed restructure?

1) Start With The Business Rationale (Not The People)

Before you even list names, be clear on:

• What is changing in the business (e.g. lost contract, reduced demand, automation, cost pressures)?
• What the business will need going forward (e.g. fewer hours, fewer positions, different skill mix)?
• Which functions or tasks will still exist and who will do them?

This is where many small businesses slip up. If the “why” isn’t clear, it can look like you’re trying to justify a predetermined outcome.

2) Group Roles By Genuine Similarity

Roles are more likely to sit in the same redundancy selection pool if they share things like:

• Core duties (what they actually do day-to-day);
• Required skills and qualifications;
• Level of responsibility (e.g. junior vs senior);
• Reporting lines and how the work fits into the team; and
• Interchangeability (can one employee reasonably do the other role with minimal training?).

Job titles can be misleading. Two people might both be “coordinators”, but one could be doing customer support while the other handles supplier relationships. Focus on the actual work performed, not the label.

3) Consider “Ring-Fencing” Where Appropriate

Sometimes, it’s reasonable to limit competition for a role to a particular group - often called “ring-fencing”. For example, if you’re reorganising a team and only current team members have the specific experience needed, you may ring-fence the opportunity to that group.

But ring-fencing needs to be defensible. If it’s used to exclude someone who should reasonably be considered, it can undermine the process.

4) Document Why Roles Are In (Or Out) Of The Pool

You don’t need to write a thesis - but you do need a clear record that explains your approach. This becomes important if an employee later questions why they were included in the pool (or why someone else wasn’t).

As a general rule, if you can’t explain the pool boundary in plain English, it’s a sign you should revisit it.

What Selection Criteria Can You Use (And What Should You Avoid)?

Once you have a lawful redundancy selection pool, you may still need to decide who stays and who goes. That’s where selection criteria come in.

Your criteria should be relevant to the future needs of the business, applied consistently, and discussed as part of consultation (not revealed at the end as a surprise).

Common Lawful Selection Criteria

Depending on your industry and the roles involved, selection criteria often include:

• Skills and competencies required for the remaining role(s);
• Qualifications and necessary licences;
• Relevant experience (particularly experience tied to your future operating model);
• Performance history based on documented and fair records; and
• Ability to perform a broader range of tasks (where the new structure genuinely requires it).

Be careful with “performance” if you haven’t previously managed performance properly. If you rely on informal or inconsistent views, it can look subjective or unfair. In many cases, a quick review of your Employment Contract and any performance documentation can help you sense-check what’s safe to rely on.

Criteria You Should Treat With Extreme Caution

Some criteria are high-risk, either because they can be discriminatory or because they tend to be too subjective. For example:

• Age or proximity to retirement;
• Health status (including mental health) or assumptions about future sick leave;
• Family responsibilities (e.g. “they have kids so they’ll be away more”);
• Length of service as the main deciding factor (it might be relevant in limited ways, but it shouldn’t replace role-related assessment);
• “Culture fit” or “attitude” when it’s not tied to measurable work requirements.

Even where you’re acting with good intentions, the wrong criteria can create serious legal exposure. If you’re planning to use any subjective criteria, get advice before you apply it.

Make Sure The Criteria Matches The New Structure

This is the “logic check” that keeps you safe.

If you’re saying the restructure is needed because you’re shifting to more online operations, then digital skills may be relevant. If you’re simply reducing volume due to reduced revenue, then it’s harder to justify suddenly requiring “new” skills that only one person has.

Selection criteria should be a bridge between:

• your genuine business reasons, and
• the capabilities you need in the remaining roles.

How Do You Consult Fairly When Using Redundancy Selection Pools?

In NZ, redundancy isn’t just about having a reason - it’s also about following a fair process. Consultation is where a lot of businesses get tripped up, especially when time is tight.

When redundancy selection pools are involved, consultation should usually cover:

• The proposed restructure and the business reasons for it;
• Which roles are in the redundancy selection pool (and why);
• The proposed selection criteria and how they’ll be applied;
• Any new or changed roles and how people can be considered for them; and
• A genuine opportunity for employees to provide feedback before decisions are final.

Two practical points matter here:

1) Keep An Open Mind (And Be Seen To Keep An Open Mind)

If you consult, but everything appears decided already, that can undermine the entire process.

Your documents, emails, meeting notes and timelines should all reflect that:

• this is a proposal until consultation is complete, and
• you are willing to consider feedback (even if the final outcome stays the same).

2) Apply Good Faith And Consistency

Good faith is a key theme in NZ employment relationships. In practice, it means being honest, not misleading, and giving employees information that’s relevant to the proposal (so they can respond meaningfully).

For example, if financial pressures are part of the rationale, employees may reasonably ask for supporting information. In many cases, it’s appropriate to provide relevant high-level information (without disclosing commercially sensitive detail). There’s a balance to strike - and getting tailored advice can help.

If your business is also managing other workforce changes (like reduced hours), be mindful that redundancy is a separate process with different risks. If you’re considering alternatives like shorter shifts or roster changes, you may want to read up on reducing staff hours so you don’t accidentally mix processes in a way that creates confusion or legal exposure.

Common Mistakes Small Businesses Make With Redundancy Selection Pools

Most redundancy issues don’t come from “bad employers”. They come from rushed decisions, unclear documentation, or a well-meaning owner trying to do the right thing without a clear roadmap.

Here are some common mistakes we see with redundancy selection pools.

Making The Pool Too Narrow (So It Looks Targeted)

If the pool includes only one employee when there are clearly others doing similar work, it can look like the pool was designed to reach a particular outcome.

This is especially risky when two roles are “different on paper” but functionally interchangeable day-to-day.

Making The Pool Too Broad (And Comparing Apples With Oranges)

On the flip side, a pool that lumps together roles that aren’t comparable can be unfair too. It can also make your criteria messy and subjective (because you’re trying to compare roles with different outputs).

The pool should reflect how the business actually operates.

Using Performance Without A Fair Paper Trail

Performance can be a legitimate factor, but it needs to be based on fair information.

If you have an employee you’ve had concerns about, redundancy is not a shortcut for a performance management process. If the real issue is capability or conduct, it’s safer to deal with it directly and properly (and to ensure your employment documentation supports you).

Not Considering Redeployment Properly

In many restructures, there may be alternative roles available (even if they’re different hours, different duties, or a step down).

If redeployment is an option, you should think through:

• what roles exist or are being created,
• who could reasonably do them (with reasonable training), and
• how you’ll run a fair process for filling them.

Skipping this step can make a redundancy look premature.

Trying To “Contract Out” Of A Proper Process

Even if your employment documents talk about restructuring, you can’t rely on a clause to avoid fairness and consultation.

Good documentation helps (a lot), but it doesn’t replace the real-world obligations of running a proper process. If you’re reviewing your paperwork as part of reducing risk, it can help to ensure you have up-to-date Workplace Policies and a clear Staff Handbook setting out how your business handles performance, restructures, and internal processes.

Key Takeaways

• Redundancy selection pools are a structured way to identify which employees should be compared when you’re reducing roles as part of a restructure.
• A lawful redundancy selection pool should be based on genuine role similarity and interchangeability, not on which individuals you prefer to keep.
• Selection criteria should be relevant to the future needs of the business, applied consistently, and discussed during consultation (not introduced after the decision is made).
• Be cautious with subjective factors like “attitude” or poorly documented “performance”, as these can quickly create disputes about fairness.
• Consultation needs to be real and meaningful - if the outcome looks predetermined, the process can be challenged.
• Common pitfalls include pools that are too narrow or too broad, weak documentation, and failing to properly consider redeployment options.

If you’d like help running a restructure, setting redundancy selection pools, or reducing the risk of a personal grievance, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.