Everything You Need To Know About Redundancy

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Redundancy of staff can be a reality faced by businesses both big and small as they encounter changes in operation, structure or growth. The term “redundancy” describes a situation where an employer no longer requires an employee’s role to be performed within the business, or the business becomes insolvent or bankrupt.

An employee’s role may become redundant as a result of a business utilising new technology or machinery, a reduced rate of sales or business growth, a change in location, or a business restructure.

It is essentially when the job itself, not the employee, becomes redundant.

What Is A Genuine Redundancy?

It is important that an employer ensures that a redundancy is genuine as, if they don’t, the redundant employee may make an unfair dismissal claim against the employer.

A redundancy is considered genuine when the person’s job no longer needs to be done, and the employer has followed the relevant consultation requirements set out in the Employment Relations Act 2000 and any applicable employment agreement.

A redundancy is not genuine if the employer:

Still requires the role to be performed;
Has failed to consult with the employee about the redundancy, as required under the Employment Relations Act 2000 or the employment agreement; or
Could have redeployed the employee to another position within the employer’s business.

Under New Zealand law, there are processes employers need to follow when their business is undergoing significant changes which may lead to redundancy. A particularly important process is consulting with employees affected by the changes. Employees must be informed of these changes, including being given information about what the changes involve and how they may be affected. Employers must also provide employees with the opportunity to share their suggestions about the change.

Redundancy Pay And Entitlements

In New Zealand, redundancy pay is not a statutory right unless it is provided for in the employment agreement. If the employment agreement includes provisions for redundancy pay, then the employer is required to follow those terms.

Redundancy pay may be given to an employee if:

The employment agreement applies to the employee and contains redundancy pay entitlements;
The employer has agreed to provide redundancy compensation in the employment agreement or through a collective agreement.

However, an employer may not be required to provide redundancy pay if:

The employment agreement does not include redundancy pay;
The employer is a small business and has not agreed to redundancy pay in the employment agreement;
The employee has engaged in serious misconduct;
The employee was employed on a casual basis;
The employee was employed for a specific project or for a finite period.

An employer may reduce their redundancy pay obligations if they make another employment arrangement for the employee, or if the employment agreement allows for alternative arrangements.

How Much Redundancy Pay Is Payable?

Employees will receive redundancy pay based on the terms set out in their employment agreement or any applicable collective agreement. It is typically calculated on their regular pay rate.

Period of Continuous Service	Redundancy Pay
As per employment agreement	As per employment agreement

What To Do If You’ve Been Made Redundant

Being made redundant is likely to be an extremely challenging event in a person’s working life. You may be faced with losing the job you enjoyed, financial instability, a loss of confidence, and the stress of finding a new job.

If you think that your redundancy was not genuine or was unlawful, seek assistance and feel free to get in touch with us to obtain advice on your rights. Or, if you need help effectuating a legal and sensitive redundancy and preparing all the documents you’ll need, we’re also here to help. Call us on 0800 002 184 for assistance.

Adam Watters

Adam is a legal intern at Sprintlaw. He is currently completing his double degree in Law and Commerce at Macquarie University. With interests in contracts and accounting, he is looking to complete further study and gain experience in the area of commercial law.

Embeth Sadie

Embeth is a lawyer at Sprintlaw. Having previously practised at a commercial litigation firm, Embeth has a deep understanding of commercial law and how to identify the legal needs of businesses.