A good employment relationship starts with a good employment agreement; where employers and employees confirm they have the same expectation...
As an employer or business owner, at some stage a situation may occur when you need to make an employee or employees redundant. While this can be an uncomfortable predicament, you must ensure you handle the process in a fair and justified manner, while acting in good faith, and adhering to your obligations in line with New Zealand employment regulations.
While understanding your exact requirements and the entitlements of affected employees when it comes to redundancies can be difficult to navigate, we have highlighted some key factors you must consider.
There are many reasons why positions may become redundant, but generally it occurs due to company revenue declining, work levels diminishing or when a company restructures. Regardless of the reason, firstly, and perhaps most importantly, you need to ensure the redundancy is genuine.
This means the employees position is or will exceed the needs of the company, meaning it is irrelevant to the business function. When considering a position for redundancy, you must be certain that no other employee or a new employee would be required to fulfill the position.
Once you have determined the redundancy is genuine, there are processes you need to follow to ensure you not only meet your obligations as an employer, but also consider the rights of the affected employee or employees.
Factors that you must address include:
Unless you have a specific clause outlined in your individual employment agreements stipulating a notice period, you must act in good faith and provide reasonable notice to affected employees. There are many factors that contribute to notice being ‘reasonable’ such as the employees’ tenure, salary or seniority, the reason for redundancy and company norms or industry standards. In many instances, New Zealand courts have specified one months’ notice to be reasonable, however, be sure to seek professional advice prior to documenting this time frame.
There is currently no legal requirement within New Zealand to pay any redundancy compensation, however, similar to notice periods, compensation will be determined by what is outlined in employment agreements.
As defined previously, when managing a redundancy process, you must be sure to act in good faith. If you do not have any inclusions regarding redundancy in your employment agreement, it is seen as best practice to offer some form of compensation.
If faced with the daunting process of redundancy, it would be extremely beneficial to seek professional assistance to ensure you are acting in good faith and in line with legislation. Employsure is the leading workplace relations specialist and can assist with all facets of redundancy and other employment relations matters, so call us today on 0800 675 700.