• Leah Norman

Doing Redundancy Right

Redundancy is an emotive subject for many but is quite simply another method of termination of employment. Redundancies have to be for genuine commercial reasons and not for any other underlining reasons such as capability or performance issues. 

The process of redundancy, and payment of redundancy compensation (where this applies), are a last option.  It should only happen after all redeployment options have been exhausted.  Currently there are no statutory right to redundancy compensation in New Zealand.

Under the ERA, employers need to act in "good faith" which extends to employers consulting with employees about the changes to the business for example:

  • How this affect the employees

  • Informing them clearly what the selection criteria for redundancy will be

  • Giving the employees a "reasonable" notice period if selected

  • Advising them of any assistance or resources the employer is going to offer employees being made redundant ie: redeployment, assistance finding a new role and redundancy pay.

There are processes that must be strictly adhered to as required by the Employment Relations Act and the good faith requirements. 

The employer’s good faith obligations contained in section 4(1A)(c) of the Employment Relations Act require “…an employer who is proposing to make a decision that will, or is likely to, have an adverse effect on the continuation of employment of his…employee…to provide the employee…(i) access to information, relevant to the continuation of the employee’s employment, about the decision; and (ii) an opportunity to comment on the information to their employer before the decision is made.

This means an employer considering redundancy action needs to ensure it has given the employee a copy of all information it is relying on in making the decision.

The employee must be given a genuine opportunity to comment on the possibility of redundancy. Any feedback the employee gives regarding how the redundancy may be avoided should be carefully considered by the employer before a final decision is made.

Remember that you cannot disguise a performance or disciplinary issue as a redundancy.  The reasons for the redundancy must be genuine.  It is vital that an employer be able to justify the redundancy with a genuine business reason.  All information relied on by the employer must be verifiable and factual.

Amendments to the Act now state more clearly the minimum requirements for employers proposing to make a decision that will affect their employee's employment.

Food for thought....

Another factor employers should take into consideration is the effects the redundancies will have on the existing workforce. As downsizing process can sometimes have a negative effect on staff morale, productivity etc as the 'survivors' (those who were not made redundant) may have a different view of the organisation due to their perception of how the redundancy process was carried out? How their employer treated those who lost their jobs? 

If employees have the perceived view that the employer or organisation did not treat these employees fairly during the redundancy process, they will consider moving on themselves, as they will believe the organisation will treat them in the same way, down the line.


This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.