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Many businesses, at some stage in their development, find themselves in a situation where the job of an employee is surplus to requirements. Whether because of business growth, a change in direction, or any other reason; sometimes the only option is to make an employee’s position redundant. 

In New Zealand, a redundancy requires following quite a specific and lengthy process, involving consultation and an obligation to look for redeployment opportunities before making a worker’s role redundant. It is important to take this process seriously, as failing to follow a correct process can open your company up to the risk of litigation for breach of employment law. This article will provide an overview of the process for making an employee redundant in New Zealand. Note that this is not an exhaustive list of the legal considerations and requirements, but is intended to give a sense of the process at each stage. 

Always Start With a Change Process and Business Case

You must begin with a change process before making an employee’s position redundant. In other words, you need to have a structural reason for saying why certain roles are not required. You will need to put together a business case explaining why a change in structure for your company is needed.

You will then need to prepare a workplace change proposal, and present it to your team (not just the workers facing possible redundancy). Your proposal should take the information in your business case and develop it into a proposal for consultation with employees.

Your proposal should:

  • be about outputs, jobs and functions;
  • talk about jobs, not people.
  • state the reason for the proposed workplace change, and the expected benefits; and
  • keep the details high level.

Consult with Employees 

You should then present the proposal to your team. However, for employees whose jobs will not be in the new structure, you should speak with these employees privately before speaking with other affected staff.

Give these staff the option of not attending the meeting with the rest of the staff.

It is important to not deliver the proposal as a certainty. You need to genuinely ask for and then consider feedback from your employees, and give staff a reasonable period of time to consider the proposal. This process may take several weeks.

After receiving feedback from your staff, you should take some time to consider it, and then draw up a decision document explaining whether the proposal will be changing in any way.

If not, you should clearly respond to any feedback asking for a change, explaining your reasoning.

Consider Redeployment Options

After finalising your change process, you must consider alternatives to redundancy for staff whose roles have been omitted from the new structure. You should consider whether they can be redeployed elsewhere in the business. If there is nowhere to redeploy them, you should explain this to the employee in question and offer outplacement support. This may include:

  • counselling;
  • curriculum vitae (CV) or resume support;
  • interview skills training; or
  • other training that may improve the employee’s chances of future employment.

Give Notice Of Redundancy 

After considering redeployment and outplacement options for affected employees, you should give notice that their roles are being made redundant. This notice period must be at least the length of notice referred to in the employee’s employment agreement. If the employment agreement has a specific section for redundancy, for instance including redundancy compensation, you must follow what is set out in that agreement.

If there is no specific clause in an employment agreement giving a period of notice in a redundancy situation, ‘reasonable notice’ must be given. The length of ‘reasonable notice’ depends on a variety of factors, such as the:

  • employee’s length of service;
  • reason for the redundancy;
  • employee’s seniority and pay; and
  • employee’s ability to find alternative employment.

Key Takeaways

It is complicated and often very time-consuming to go through a redundancy process. You cannot legally decide in a short space of time that an employee or their role is surplus to requirements. You must make a business case around the structure of the company, and explain why the business should go in a different direction.

This process requires genuine consultation with employees, particularly affected employees, and it must be about roles rather than the people themselves.

It is also incumbent on you as an employer to consider alternatives to redundancy, like redeploying the employee to a different part of the business. If this is not feasible, you must also consider offering the employee support, such as counselling. At that stage, you can give the employee notice that their position is becoming redundant. If you want to know more about managing an effective redundancy process, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

How long does it take to make an employee redundant?

It depends on how complicated the business is, how many staff are affected by a proposed structural time, and the employee’s notice periods. Typically the process takes several months.

Can I skip the change process or business case and just make someone redundant?

No, this would be a breach of employment law. Having a strategic process is critical, as is the opportunity for the employee to give feedback and take advice.

How much notice do I have to give if making an employee redundant?

This depends on the employee’s employment agreement. You have to give at least as much notice of redundancy as that agreement provides. You must give ‘reasonable notice’ if the agreement does not specify.

Do I have to pay redundancy compensation?

The default position in New Zealand, which is different to other countries, is no. However, some employees, particularly those represented by unions, do have redundancy compensation included in employment agreements. In that case, you would have to pay the compensation specified in the agreement.

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