Redundancy

What redundancy is

Redundancy is when an employee loses their job because their role is no longer needed (their role is ‘disestablished’). It can happen when employers need to reduce or change their workforce. This is called a workplace change, or restructure, and employers must follow a redundancy process.

If the employee is moved into another suitable role instead, this is called ‘redeployment’ (it is also known as ‘technical redundancy’). The employer still has to follow the same redundancy process.

Redundancy can also include voluntary redundancy. This is when an employer asks employees if they want to leave their job as part of a workplace change.

If the business is sold, transferred or closed

If an employer sells a business (or part of a business) and the employee does the same role for the new owner, this is called a technical redundancy. This type of redundancy has a different set of rules.

Restructuring when a business is sold or transferred

If the employer goes into liquidation or bankruptcy

If an employer goes into liquidation or bankruptcy, an employee may lose their job. This is similar to redundancy because the role is no longer needed.

Find out what might happen to an employee’s job in this situation, what money they can claim and how much they could be paid.

When your employer goes into liquidation or bankruptcy

When a role can be made redundant

Employers can only make an employee’s role redundant when:

• there is a genuine business reason, and
• they’ve looked at other options.

Employers must have a genuine business reason

Employers must show that the workplace change they are proposing is for genuine business reasons. For example, improved technology or financial reasons.

For more information about what a genuine reason is, go to:

The basics of workplace change

Employers must have looked at other options

Before deciding to make a role redundant, employers must genuinely consider other options. This shows they are following a fair and reasonable process.

For example, employers could:

• change an employee’s hours, duties or shifts
• reduce costs in other ways
• move employees into other suitable roles (this is called ‘redeployment’).

Employers must continue to consider other options throughout the redundancy process.

When a role cannot be made redundant

Employers cannot make an employee’s role redundant because of:

• personal reasons
• discrimination
• concerns about performance (this should be handled through a performance management process), or
• concerns about behaviour (this should be handled through a disciplinary process).

Performance issues

Disciplinary process

A redundancy may not be genuine if an employer:

• makes an employee’s role redundant, and
• shortly afterwards hires someone else for an identical or sufficiently similar role.

This is because it could show that the:

• role was still needed, or
• employer did not act in good faith or as a fair and reasonable employer.

‘Sufficiently similar’ means the main tasks of the new role have not really changed and the same skills are needed.

Different rules for high income earners and trial periods

Employers do not need to have a genuine business reason or follow a workplace change process for employees who:

• earn $200,000 or more a year (unless they have opted back in to dismissal protections), or
• are on a trial period.

If one of these employees is made redundant, it could mean that other employees (who are not high income earners or on a trial period) could be affected. For example, if they report to the employee being made redundant. If so, the employer must have a genuine business reason and follow a workplace change process for those other employees.

Dismissal rules for high income earners

Trial periods

Voluntary redundancy

If a business is going through a workplace change, an employer can choose to offer voluntary redundancy. Voluntary redundancy is when an employer gives employees the option to leave their job as part of a workplace change.

If enough employees volunteer to leave their job, it could mean employers do not have to make others redundant.

How employees are selected for voluntary redundancy

If an employer decides to offer voluntary redundancy to their employees, they can decide:

• who they offer it to, and
• who is chosen for voluntary redundancy.

When an employer decides who to offer it to, they should consider how it will affect other employees and their roles.

If an employee is offered voluntary redundancy and wants to take it, they must let their employer know they’re interested. The employer will review all the ‘expressions of interest’. They can then choose a certain number of employees for voluntary redundancy.

Employers must follow a fair selection process and act in good faith when making these decisions.

Good faith

Fair process

Benefits of taking voluntary redundancy

Employees who take voluntary redundancy can usually get a similar or better redundancy package. This is an incentive for employees to take voluntary redundancy.

For example:

• the employer could offer better terms than what’s in the employment agreement
• the employee can negotiate better terms with the employer. 

The redundancy process

Employers must follow a fair workplace change process before making a role redundant. They must follow it even if they want to offer voluntary redundancy.

Before starting the workplace change process, employers should check employment agreements and workplace policies. These may set out how to carry out the workplace change process and responsibilities during the process.

Steps in the workplace change process

1. Develop a workplace change proposal (including reasons for the change).
2. Identify who may be affected.
3. Share the proposal with employees and unions.
4. Gather feedback.
5. Consider and respond to feedback.
6. Make and communicate the decision.
7. Implement the change.

For more information about the workplace change process, go to:

Workplace change process

Redundancy while an employee is on leave

Employees can still be made redundant while they’re away from work, for example, on parental leave or getting ACC. However, this itself must not be the reason for the redundancy.

Employers must follow the same redundancy process. They should take extra care to make sure these employees are involved in the process and have access to all the relevant information.

If an employee is on parental leave or certain types of defence force leave, the employer must keep their job open for them. This means if they are making an employee redundant while on this type of leave, there are some extra things they must do.

Parental leave or defence force leave

If an employee is made redundant while on parental leave or certain types of defence force leave, their employer must be able to show that:

• the employee being on leave is not the reason for the redundancy
• the redundancy situation came up after they confirmed in writing that the job would be kept open
• there is no other substantially similar job available for the employee
• the employee’s time on leave counts as length of service, if this is used to make redundancy decisions.

If redundancy happens before the employee applies for parental leave, the employer must tell them what will happen with their job.

To find out more about the employer’s obligations, go to:

What happens while on parental leave and your return

Defence force volunteers 

What happens when a role is made redundant

When a role is confirmed as redundant, the employer must:

• give the employee notice
• offer the employee support.

The employee may be able to get a redundancy compensation payment. If they can, this will be paid out in their final pay.

If an employee is on a work visa that is tied to their employer, they should contact Immigration New Zealand. Immigration New Zealand can explain how redundancy will affect their work visa.

Check or change your work visa conditions – Immigration New Zealand(external link)

Notice period

If an employee is made redundant, their employer must:

• give them the notice period stated in their employment agreement, or
• a reasonable period of notice if the agreement does not state a notice period.

A reasonable period of notice depends on a number of things, for example, the reason for redundancy.

The employer and employee can agree to make the notice period shorter or longer. For example, if the employee finds another job and wants to leave early.

Sometimes the notice period is not worked because the employer and employee agree to a different arrangement.

For more information about the notice period, go to:

Notice periods

Support through redundancy

Employers must offer the employee appropriate support as set out in the:

• employment agreement
• workplace policies
• change proposal.

Employees are encouraged to keep up to date about what’s happening and accept any support.

Supporting employees through workplace change

Support for employers

If an employer is thinking about making employees redundant, they can get support from the Ministry of Social Development.

Redundancy support for employers - Work and Income(external link)

They can also:

• contact us for information about redundancy and the process, or
• get legal advice.

Contact us

Citizens Advice Bureau(external link)

Redundancy compensation

Redundancy compensation is a payment an employee can get when they lose their job because their role is no longer needed.

When an employee can get redundancy compensation

An employer does not have to provide redundancy compensation.

Employees can only get redundancy compensation if:

• it’s in their employment agreement or
• it’s in a workplace policy, or
• they’ve agreed to it with their employer.

If the employer offers the employee another role, they can only get redundancy compensation if it’s in their employment agreement. For example, the employee may not get compensation if:

• the role is suitable, reasonable and offered in good faith, or
• they decline a suitable role and do not have a good reason.

How much redundancy compensation is

The employment agreement should say how much an employee will get for redundancy compensation.

If the agreement does not say how much this is, the employer and employee will need to agree on an amount.

When redundancy compensation is paid

The redundancy compensation payment is usually paid in the employee’s final pay. It depends on what’s in the employment agreement or agreed at the time.

Find an example of a redundancy compensation clause here:

Redundancy - Employment Agreement Builder(external link)

Final pay

When an employee is made redundant, their last pay must include their:

• final wages
• holiday pay
• redundancy compensation (if they can get this), and
• any other payments they’re owed.

Final pay

Annual holidays

Last day and reference

On the employee’s last day, the employer and employee both have tasks they need to complete. For example, organising to return company property or setting up ‘out of office’ messages.

The employee can also ask for a statement of service and a reference. The employer should provide a statement of service. They do not have to provide a reference.

On or after last day of employment

Challenging a redundancy decision

If an employee thinks their employer did not have a genuine reason or did not follow the redundancy process, they can either:

• raise a personal grievance, or
• ask for mediation to help resolve the issue.

They can also get legal advice.

Citizens Advice Bureau(external link)

Personal grievance

A personal grievance:

• is an action an employee can take against a current or former employer, and
• is raised when there is an employment issue that cannot be resolved.

In the situation of redundancy, an employee can raise a personal grievance for unjustified dismissal. For example, if they have been made redundant and then see their job advertised with no substantial changes.

Personal grievances

Mediation

Mediation is a voluntary, confidential and safe way for employers and employees to talk about the problem with an independent mediator.

Mediation