Dismissal and Termination
Redundancy Guide for Employers in New Zealand
Redundancy happens when a job is no longer needed in a business. It could be because of a restructure, new technology, cost cutting, or changes in the market. In New Zealand, redundancy is a sensitive process that affects both employers and employees.
For businesses, handling redundancy the right way is important. Mistakes can lead to legal claims, damaged workplace culture, and loss of trust. For employees, redundancy means sudden change and stress about income and future work.
In this guide you’ll learn:
- What redundancy means in New Zealand
- How redundancy law works for employers
- The steps to follow in a restructure process
- What redundancy pay in NZ looks like
- The difference between disestablishment vs redundancy
- How voluntary redundancy and redundancy cover work
- Practical tips for communicating with staff
What Is Redundancy?
Redundancy means a job role is no longer needed. It is not about poor performance or misconduct. In New Zealand, redundancy is usually linked to a restructure process where positions are reviewed.
For example, a small Auckland café once told us they had to remove a front-of-house role because online ordering reduced the need for staff at the counter. That was a clear case of redundancy.
Why Redundancy Matters for NZ Employers
Redundancy affects more than just one job. It impacts morale, trust, and how the public views your business. Following redundancy law in NZ is not just about compliance. It is about treating people fairly while protecting the business from disputes. Employment Relations Authority cases often focus on whether the process was fair and reasonable.
Redundancy Law in NZ
Redundancy law in NZ does not require redundancy pay unless it is in an employment agreement or company policy. However, employers must still follow fair process. That means:
- Showing a genuine business reason for redundancy
- Consulting with employees before making final decisions
- Considering feedback from staff
- Giving proper notice based on the employment agreement
The Ministry of Business, Innovation and Employment (MBIE) offers guidance on how employers can stay compliant during restructures.
The Restructure Process in NZ
When a business reviews its structure, roles may change or disappear. This is called a restructure. Redundancy is often the outcome of a restructure. The steps include:
- Prepare a proposal – Explain why changes are needed.
- Consult staff – Share the proposal and invite feedback.
- Consider alternatives – Could retraining or redeployment work instead?
- Make decisions – After consultation, confirm the final structure.
- Communicate outcomes – Give clear redundancy notice with the agreed notice period.
One Auckland tech company told us that when they restructured, they first looked for other roles to place staff in. This helped reduce the number of redundancies and kept trust within the team.
Redundancy Pay in NZ
How much is redundancy pay in NZ? There is no legal minimum for redundancy pay unless it is written into the contract. Some agreements include redundancy payout clauses, while others do not. Employers who can afford it often offer redundancy compensation to support staff.
Employees often search for tools like a redundancy pay calculator to estimate payouts. While there is no official calculator, employers can guide staff to check their contracts and use online tools to estimate tax impacts on redundancy payments.
Voluntary Redundancy
Voluntary redundancy is when an employee chooses to leave in exchange for a redundancy payout. This option can make the process smoother, especially if several staff are affected. It gives employees more control, while helping businesses manage costs and staff transitions.
Disestablishment vs Redundancy in NZ
Disestablishment means a specific role is being removed. Redundancy is the outcome for the employee in that role. For example, if the role of Marketing Assistant is disestablished, the employee holding that role may face redundancy if no alternative work is found.
Redundancy Insurance and Income Protection
Some employees ask, does income protection cover redundancy? Standard income protection usually covers illness or injury, not redundancy. Redundancy insurance or redundancy cover is a separate product. This is often sold by banks or insurers to help cover income for a limited time if someone loses their job through redundancy.
Employers may find that staff ask about this during consultation. It is useful to be aware of income insurance redundancy options, even if it is not part of the employment agreement.
Key Takeaways for Employers
- Redundancy is about roles, not people.
- Always follow redundancy law in NZ with fair process.
- Check employment agreements for redundancy payout clauses.
- Use voluntary redundancy where it makes sense.
- Communicate clearly and treat staff with respect.
- Support affected employees with guidance and access to work and income jobs.
Not sure where to start?
Let’s have a chat.
