Redundancy in New Zealand: No Statutory Redundancy Pay, and the Genuine Redundancy Test

New Zealand has no law requiring an employer to pay redundancy compensation. Any redundancy payment beyond an employee's normal final pay comes only from what the employment agreement provides, and even then the employer must still show the redundancy itself was genuine.

This is general information about New Zealand law, not legal advice. For your own situation, consult a lawyer or your local Community Law centre.

No statutory redundancy pay in New Zealand

New Zealand has no legislation setting a minimum redundancy payment. Whether an employee who is made redundant receives any redundancy compensation depends entirely on their applicable employment agreement and any negotiation with their employer. Some individual or collective employment agreements include a redundancy clause, often a formula based on length of service; many say nothing about it at all.

Where the agreement is silent, the employee is not automatically owed a redundancy payment. They are still owed their ordinary final pay, covered further below, but any extra redundancy payment is a matter of agreement or negotiation, not a legal entitlement.

The genuine redundancy test

A redundancy must be genuine. The reasons for it need to reflect a real commercial or operational cause, such as restructuring the business, new technology making a role unnecessary, the loss of a contract, or closing part of the operation. A redundancy driven instead by dissatisfaction with an individual employee, used as a way around performance management or a disciplinary process, is not genuine.

One clear warning sign is replacement. If a role is disestablished as redundant and someone else is then hired into a role doing essentially the same work, that is very likely to be treated as an unjustified dismissal rather than a genuine redundancy.

Consultation: what a fair process requires

Even where the underlying commercial reason is real, the employer still has to follow a fair and proper process before making the final decision. In practice this generally means giving affected employees a written proposal explaining the situation and why their role may be disestablished, genuinely considering any feedback or alternatives they raise, and only then making a final decision.

Consultation has to happen before the decision is made, with the employer genuinely open to being persuaded otherwise. A process where the decision has effectively already been made before employees are consulted, sometimes called a sham consultation, can make an otherwise genuine redundancy unjustified.

Redeployment before redundancy

Before finalising a redundancy, an employer is expected to have explored whether the employee could be redeployed into another position within the business. Redundancy is meant to be a last resort once other options, including alternative roles, have genuinely been considered.

When redundancy is not genuine: an unjustified dismissal

An employee who believes their redundancy was not genuine, or that the process leading to it was unfair, can raise a personal grievance for unjustified dismissal, generally within 90 days of the dismissal or of the problem coming to their attention.

If the Employment Relations Authority or the courts find that a redundancy was not genuine, or that a fair process was not followed, the dismissal can be found unjustified even though the employer labelled it a redundancy.

Notice, final pay, and any agreed redundancy payment

Being made redundant does not remove the ordinary rules about notice and final pay. The employee is still entitled to their notice period under the employment agreement, or reasonable notice if the agreement is silent, and to a final pay that covers outstanding wages and any accrued but untaken annual leave. Any redundancy compensation set out in the employment agreement comes on top of that; it is not a substitute for it.

Related pages

For the wider picture on ending employment in New Zealand, see the employment law guide. If a business is retrenching rather than dismissing for cause, the required notice period still applies in the usual way.