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How to get a redundancy process right.

How to get a redundancy process right.

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.

Genuine redundancy

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.

Informing employees

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:

  • alerting the relevant people that their position may become redundant
  • inviting affected employees to a meeting to discuss why their position is in jeopardy and the associated selection criteria for redundancy. Each employee has the right to respond to, and provide feedback to the news. These employees are also permitted to bring a support person to all associated meetings
  • if feedback or alternate suggestions are made by the employee, you must genuinely consider them and whether they would be benefit the business
  • inform relevant employees of the final outcome in writing and outline the considerations made towards their feedback. You must also include other information such as notice periods, compensations payments etc. It is best practice to offer one on one meetings to discuss the outcome further if desired
  • make sure all processes, discussions, notifications and outcomes are recorded in writing

Notice period

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.

Compensation

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.

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