Sick Leave During Redundancy Notice in NZ

Redundancy is rarely straightforward for a small business. Even when you’ve done the right thing (genuine business reasons, a fair process, proper notice), it can still get complicated fast - especially if an employee becomes unwell and takes sick leave during their redundancy notice period.

If you’ve been searching for something like redundancy notice sick leave, you’re not alone. Employers often wonder whether the notice period “pauses”, whether they still have to pay, whether they can require medical certificates, and whether the redundancy process is still valid.

The good news is there are clear legal principles you can follow. The key is to stay consistent, act in good faith, and document what you do (and why). This article is general information only - because the right answer can depend on the employment agreement, workplace policies, and the specific facts.

First Things First: Is The Redundancy Process Already Lawful?

Before you focus on sick leave, it’s worth checking you’ve ticked the basics of a lawful redundancy process. In New Zealand, a redundancy dismissal generally needs:

A genuine business reason (for example, restructure, downturn, loss of contract, role no longer needed).
A fair process (including consultation and considering feedback).
Compliance with the employment agreement (especially notice and redundancy clauses, if any).
Good faith behaviour, as required under the Employment Relations Act 2000.

If the process wasn’t handled properly, sick leave during notice can make the situation riskier - because any misstep after the fact can look like you’re trying to “push it through” without care.

If you want a plain-English refresher on redundancy foundations, Redundancy is a useful starting point.

Don’t Treat Sick Leave As A “Convenient Exit”

It’s important to avoid assumptions about why the employee is sick. Even if the timing feels suspicious, you should treat the sick leave request the same way you would at any other time.

From a risk management perspective, the safest approach is to:

apply your normal sick leave process consistently;
stay neutral in tone and communications;
keep the redundancy timeline aligned with the employment agreement unless there’s a clear legal reason (or mutual agreement) to change it.

Does Sick Leave Extend Or “Pause” The Redundancy Notice Period?

In most cases, sick leave does not automatically pause or extend the redundancy notice period.

That means if you have given (for example) 4 weeks’ notice of redundancy, and the employee is unwell for 1 or 2 of those weeks, the notice period will often still run. The employment relationship usually ends on the termination date stated in the notice (assuming that date was valid and the process was fair).

However, there are a few practical and legal nuances to keep in mind:

1) What Does The Employment Agreement Say?

Some employment agreements have specific wording about notice periods and leave. For example, an agreement might deal with:

whether notice can be worked or paid out;
what happens if someone is unable to work during notice;
any special benefits or obligations during notice.

If your agreement is unclear (or silent), the general approach above often applies - but it’s worth getting advice before you improvise (especially if there’s a relevant policy, past practice, or a collective agreement).

2) Are You Trying To Change The Notice Date?

If you want to change the termination date after notice has been given (for example, because the employee is away sick), you should be careful. Extending employment can affect pay, leave accrual, and can create confusion about what’s been agreed.

In many cases, the simplest and safest approach is to keep the original termination date, unless you and the employee mutually agree in writing to something different.

3) Are There Good Faith Issues?

The Employment Relations Act 2000 requires you to deal with employees in good faith. Even if the redundancy outcome is valid, you should still:

communicate clearly and respectfully;
not mislead or surprise the employee;
give them a fair chance to respond if any new issues arise.

If the employee’s illness is serious, it may be reasonable (and often wise) to allow some flexibility around meetings and communication. That won’t be necessary in every case, but it can be a sensible step to reduce conflict and protect your business.

Do You Have To Pay Sick Leave During Redundancy Notice?

Usually, yes - if the employee is entitled to sick leave and meets the criteria, sick leave can be taken (and paid) during the redundancy notice period.

In New Zealand, sick leave entitlements sit under the Holidays Act 2003. Most employees become entitled to sick leave after 6 months’ continuous employment, and they can take sick leave when they’re sick or injured (or in some cases to care for a dependent).

What This Means For Employers

When an employee is on sick leave during redundancy notice, you generally need to pay them:

paid sick leave (to the extent of their entitlement), and then
if they run out of sick leave, any further absence may be unpaid leave (unless your employment agreement or policies provide otherwise).

It can feel counterintuitive, but redundancy doesn’t remove an employee’s legal minimum entitlements while they’re still employed.

Can You Refuse Sick Leave Because They’re Leaving Anyway?

In most cases, no. If the employee is genuinely sick and has sick leave available, declining it simply because they’re in a redundancy notice period can create unnecessary legal risk.

This is exactly why these situations often escalate into disputes - employers may think they’re being practical, but the employee experiences it as unfair treatment.

Can You Ask For A Medical Certificate (And When)?

Yes - in many situations, you can request medical evidence, as long as you do it properly and consistently.

Under the Holidays Act 2003, an employer can ask an employee for proof of sickness or injury:

if the sick leave is for 3 or more consecutive calendar days, you can request proof (at the employee’s cost); or
if the sick leave is for fewer than 3 days, you can still request proof, but generally you must cover the reasonable cost of getting it (and you should tell the employee as early as possible).

Practical Tips For Handling Medical Certificates During Redundancy Notice

Be consistent. If you don’t normally ask for certificates for 1–2 day absences, doing it now may look targeted.
Be timely. If you’re going to ask for proof, do it early (not at the end of the absence).
Keep communication neutral. Focus on process (“we require medical certificates for absences of X days”), not suspicion.
Think about privacy. You generally only need confirmation they’re not fit for work, not detailed diagnoses. Handle any medical info carefully in line with the Privacy Act 2020.

If your business doesn’t already have a clear leave and evidence process, it can be a good time to tighten up your broader HR settings (and ensure your Employment Contract terms and workplace policies line up).

What Happens To Redundancy Meetings And Consultation If The Employee Is Off Sick?

This depends on timing. If the employee goes off sick after the redundancy decision is final and notice has been issued, your main focus is usually managing leave and final pay correctly.

But if the employee is sick during the consultation stage (before the redundancy is final), you need to be careful. A fair redundancy process usually includes a genuine opportunity for the employee to give feedback and for you to consider it.

If You’re Still Consulting, Consider Adjusting The Timeline

If someone is too unwell to participate in consultation, pushing ahead without them can increase the risk of a personal grievance claim. Depending on the situation, you might consider:

rescheduling meetings;
allowing written feedback instead of in-person meetings;
letting the employee have a support person or representative attend;
providing information in writing and giving reasonable response time.

This isn’t about delaying forever - it’s about showing you have acted fairly and in good faith.

Document Everything

When you’re dealing with sick leave during redundancy notice, your paper trail matters. Keep a clear record of:

when notice was issued and what it said;
when sick leave was requested and what evidence was provided (if any);
any changes you agreed to (and that they were mutually agreed);
how you handled meetings, timelines, and communication.

Pay, Annual Leave, And Payment In Lieu: Common Employer Questions

Once sick leave enters the picture, employers often start asking how other termination payments work - particularly annual leave and whether they can pay out notice instead.

Can You Pay In Lieu Of Notice If They’re Off Sick?

Sometimes, yes - but only if your employment agreement allows it, or you and the employee mutually agree.

If you’re considering this, be cautious: paying in lieu changes the dynamic (they stop being employed immediately), which affects:

their ability to take paid sick leave going forward;
how leave accrues;
final pay calculations.

If paying out notice is on the table, Payment In Lieu Of Notice is often the key concept to get right (and one that should be properly documented).

Do You Still Pay Out Annual Leave At The End?

Yes, generally. When employment ends, you must calculate and pay out any annual leave owing, in line with the Holidays Act 2003.

Sick leave during notice doesn’t usually change the requirement to pay annual leave on termination, but it can affect calculations depending on timing and pay cycles. If your payroll is not confident, it’s worth checking early rather than scrambling on the final day.

Can You Force Them To Take Annual Leave During Notice Instead Of Sick Leave?

In general, no - you can’t reclassify sick leave as annual leave just because it suits the business. If they are sick and meet sick leave requirements, that’s the relevant category.

Separately, there are rules around when and how annual leave can be directed, but it needs to be done correctly. If this issue is relevant in your workplace, Annual Leave is worth understanding before you make any calls.

What If You Suspect The Sick Leave Isn’t Genuine?

This is where many employers get into trouble. It can be tempting to jump straight to discipline or accusations, but that can quickly become a process and good faith problem.

Instead, consider:

requesting medical evidence (where lawful);
checking your internal policies and applying them consistently;
separating performance/disciplinary concerns from the redundancy process (mixing them can undermine both).

If you have serious concerns, get advice before taking action - particularly if you’re thinking about stopping pay, alleging misconduct, or changing the termination pathway.

How To Reduce Risk When Sick Leave Happens During Redundancy Notice

When an employee goes off sick during redundancy notice, your goal is to keep things steady, compliant, and calm. Even if the situation feels frustrating, a measured approach usually protects your business best.

A Simple Employer Checklist

Confirm the leave request in writing (even a short email is fine), including the dates they’ll be off.
Check sick leave entitlement and ensure payroll knows how to process it correctly.
Decide whether you need medical evidence and, if so, request it in line with Holidays Act rules.
Keep communication respectful and minimal - don’t “manage them out” in the final days.
Stick to the termination date in the notice, unless you mutually agree to change it.
Prepare final pay carefully (annual leave, alternative holiday pay, any contractual payments).
Don’t change the reason for termination mid-stream. If it’s redundancy, keep it redundancy.

Make Sure Your Business Reason Still Stacks Up

Sometimes, sickness during notice makes employers second-guess the redundancy itself - especially if the employee was key and now unavailable. If your business circumstances have changed and redundancy may no longer be required, get advice before reversing course or offering “alternative” arrangements.

If your restructure is connected to broader changes (like cutting shifts or reducing labour costs), you may also want to consider whether your workplace approach aligns with obligations around Reducing Staff Hours.

Be Clear On Whether Redundancy Is Voluntary Or Not

Confusion about whether a redundancy is “voluntary” (or whether an employee can choose redundancy to exit) can also create disputes, especially when leave and notice are involved.

As a practical safeguard, make sure your communications clearly reflect the pathway you are using. If this is part of your situation, Voluntary Vs Forced Redundancy is an important distinction.

Get Advice Early If You’re Seeing Red Flags

It’s usually time to get legal advice if:

the employee disputes the redundancy or says it’s not genuine;
the employee is on extended sick leave and you’re unsure about notice/pay obligations (including what the employment agreement allows);
there are allegations of discrimination or retaliation;
you’re considering changing the termination date, paying out notice, or offering a settlement;
there’s any risk the matter will end up in the Employment Relations Authority.

Getting support at this point can save you time, stress, and significant cost later. If you need a sounding board on the right approach, an Employment Lawyer can help you map out a compliant pathway that fits your business.

Key Takeaways

If an employee goes off sick during redundancy notice, the notice period will often still run and does not automatically pause or extend (though the employment agreement or a written agreement between you may change this).
During the notice period, employees generally keep their entitlements, so paid sick leave may still apply if they are eligible under the Holidays Act 2003.
You can request a medical certificate in certain situations, but you need to do it lawfully and consistently, and handle any medical information carefully.
If the employee is sick during the consultation stage (before redundancy is final), consider adjusting timelines so the process remains fair and in good faith.
Be cautious about changing termination dates, paying in lieu of notice, or trying to substitute annual leave for sick leave - these steps can create extra legal risk if handled incorrectly.
The best way to manage sick leave during redundancy notice is to stay calm, document everything, follow your agreement and policies, and get advice early if complications arise.

If you’d like help managing a redundancy process (including what to do when an employee takes sick leave during notice), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

What To Do If An Employee Goes On Sick Leave During Redundancy Notice In NZ