Leaving or losing your job
Redundancy: When the business doesn’t need your role anymore
What is a redundancy?
Redundancy is when an employer makes changes to a workplace because a position or positions are no longer needed. It’s the position that is no longer needed, not the employee – this process can’t be used just because the employer has a problem with how you’re working.
The employer has follow a fair process with redundancy, and there are strict rules about how they should do this. They have to look at and offer all options to keep you working, including changes to your role or place of work.
The reasons for the redundancy has to be genuine, and the decision to make you redundant must be one that a fair and reasonable employer could make in that situation.
What process does my employer have to follow?
Employers have to go through a set process, called the “workplace change process,” before they can make someone redundant. This includes a process for coming up with a proposal, presenting it to employees, and genuinely considering any feedback. You can find out more about the workplace change process online – go to: employment.govt.nz/workplace-policies/workplace-change.
When will a redundancy decision be “fair and reasonable”?
Your employer must have had genuine business reasons for making you redundant. It can’t be because they were unhappy with your performance, or because they had a personal issue with you.
Even if your employer was motivated by genuine business reasons, the decision must also have been one that a fair and reasonable employer could have made.
If you challenge a redundancy on the grounds of how your employer went about making the decision, the ERA will assess whether the employer followed a fair workplace change process. Whether it was fair will depend on:
- if your employer followed the redundancy process set out in your employement agreement, if there is one, and
- if you were given a reasonable amount of notice that your job could be affected by redundancies, and
- if you were given relevant information about the redundancy proposal (including, for example, the selection criteria to be used if the proposal is for some employees to be made redundant and some not), and
- if you were given a chance to properly consider the information, and
- if you were given the chance to have input into the decision-making process, and
- if you were given any reasonable opportunities to move into a different role (“redeployment”), and
- if the employer genuinely considered any proposals that were put forward.
Your employer can’t just consult with you as a formality after they’ve already made a final decision. The consultation process must be genuine, and your employer must keep an open mind about alternatives. The duty of good faith also requires your employer to be responsive and communicative in these situations.
However, the requirement to consult doesn’t mean the employer doesn’t get the final say. They also don’t have to consult with you about whether a redundancy would be an appropriate business decision.
The ERA may also look at other issues, such as whether the employer provided you with counselling, with career and financial advice, and with retraining.
Does my employer have to pay me compensation if I’m made redundant?
Whether or not you’re entitled to compensation depends what is in your employment agreement. You can also come to a separate agreement with your employer about a redundancy payout as pay of the process, even if this isn’t set out in your original employment agreement.