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This means an employer considering redundancy action needs to ensure it has given the employee a copy of all information it is relying on … Any authorised deductions can be taken from the final pay. Employers cannot make a fair and reasonable decision without consulting with their employees about a redundancy proposal, and be willing to reconsider matters. He also said it protects older employees having to find work at a time when this is likely to be particularly hard. A practice sometimes adopted to terminate the employment of employees on the grounds of redundancy is the "last on-first off" rule. I have been made redundant. The employer then decided that one driver would be redundant, selecting her on a ‘last on/first off’ basis and because she was on extended sick leave at the time. Therefore there are processes that must be strictly adhered to as required by the Employment Relations Act and the good faith requirements. Under New Zealand law it is not compulsory for an Employer to pay redundancy compensation. An experienced lawyer can help you design a process that will withstand scrutiny. In some countries, redundancy pay is mandatory. In this event, you cannot give an employee notice of termination of redundancy until you have carried out this selection process. An employer can require an employee to work out their notice. If they do not, you’re responsible for paying that tax yourself. An employer has to be able to justify the basis for any proposed action such as a restructure or redundancy and why any particular position is being potentially disestablished. If you've been with an employer for 20 years, most people would say you deserve to keep your job more than someone who has been there less than a year. If your employer then decides to make you redundant, they must re-activate your contract in order to dismiss you on grounds of redundancy. Employers cannot make a fair and reasonable decision without consulting with their employees about a redundancy proposal, and be willing to reconsider matters. So it's whatever works best for your business and when they're actually sending your business under, so to speak. In November 1992, the special redundancy stand-down was removed and a 10 week High Income stand down was introduced. So hopefully, that's out. It is best if you can use objective criteria (e.g. If your business is facing economic hardship, first look at all of your expenses and see what you can trim. Advertisement Advertise with NZME. Redundancy payments are taxed at the lump sum rate. Some cases are from the last few … Find out what to do if you're being made redundant. Before 1991, redundancy payments didn't affect stand-downs; From March 1991 until November 1992, there was a special redundancy stand-down of up to 26 weeks for people who got redundancy payments. As against that, in many roles, performance criteria are difficult to apply fairly, and are not infrequently used to dispense with people that management simply do not like. “last on, first off”). However, the employee is under no obligation to accept the offer to withdraw the redundancy; they must bear in mind that if they refuse the offer, this may affect their entitlement to a statutory redundancy payment. The financial crisis is extending out into the "real" economy, resulting in major restructurings, which on a global scale affect hundreds of thousands of employees. If you don’t have any, that’s the time to bargain for something to see you on your way if you lose your role to restructuring. If a “redundant” person is replaced by someone else in the same position, the redundancy is very unlikely to be justifiable. This raises the question of whether such policies discriminate indirectly against younger staff. This can impact your: income tax; Working for Families tax credits entitlements; KiwiSaver; student loan; child support. One of the favoured devices, both here and overseas, is the time-honoured "last on, first off" test. The other problem with LIFO policies (and to a lesser extent, policies that take into account both service and other factors), is that they tend to favour older employees - given that an employee benefits from simply being employed for a longer period. Health and Disability Cautionary notes. Check with IR what tax you should have paid — you may have paid too much tax or not enough. But under New Zealand law, there is no basic right to redundancy pay. It was decided that, Ms Brake’s position would be made redundant based on a “last on/first off” approach. If you have to reduce wages, it is important to use a fair process, and we encourage you to seek legal advice to ensure that you act fairly and reasonably towards your employees, and can justify any restructuring or redundancy. Whatever the rights and wrongs, the New Zealand courts are unlikely to take a different view. Redundancy, health condition or disability or another reason you can’t work. However, if an employment agreement doesn't mention any such clause, an employee isn't legally entitled to redundancy … We help people to understand their rights and obligations, and give people the support they need to take action. Savage said the speed and scale of redundancies meant pre-MUCA crew would also face redundancies on a largely last on first off basis. The Court said that even if the service criterion does favour older workers, that is justified for other reasons (a defence in both New Zealand and the UK). Food, school costs, power, accommodation or other living expenses you need help with. It is important to remember that it is the position that is surplus, not the employee. Money Editor, NZ Herald tamsyn.parker@nzherald.co.nz Average income earners could face losing up to a third of their redundancy payout in tax as the Government mulls whether to introduce tax relief. A redundancy payment is taxable income. As the comments responding to the Times  article on this decision demonstrate, this is not an easy issue. The focus is on the position, not the person, and you may have to cast your net wider than the most obvious candidate for redundancy to ensure that you are being fair. While a redundancy notice is legally binding, it can still be withdrawn, but only with the express consent of the employees in question. Whether service is the sole criterion or one of several, the arguments are very similar. You contribute 3% of your income to KiwiSaver and you receive a final pay of: $1,000 wages. Section 4 of the Employment Relations Act 2000 requires employers to act in good faith when making employees redundant. Another question, regarding the COVID-19 wage subsidy, how should pay slips look? That means unless your employment agreement provides for redundancy pay, you don’t get any. Redundancy and income tax First, you must have been given a reasonable amount of notice that your job could be affected by redundancies. The employee was called into a meeting and informed that due to the recession impacting on the business, they were considering a restructure proposal in which Ms Brake’s position may be surplus to their requirements. The starting point is good advice so you need some assistance is this area please call Louise Foley at Le Pine & Co on (07) 378 5030. In New Zealand, unlike Australia, Canada and several other OECD countries, there is no legal requirement to pay workers redundancy compensation, leaving unions and workers to negotiate redundancy clauses in their contracts. Mary* … The NZ Government website Employment has a free tool for creating employment agreements - help yourself. Some employers, however, dislike LIFO because it allows them no room to consider factors such as whether an employee has skills and experience relevant to the business moving forward, and in particular, whether they are a good performer. This would take into account any agreement reached to extend the standard two month period of notice for redundancy and redeployment enabling staff to continue to provide support to the University during the transition period. A cleaner made redundant because of Covid-19 says her redundancy payout means she can't get a benefit and will leave her worse off in six months time. Living expenses. New Zealand businesses must adapt to a fragmented post-COVID global economy, The businesswoman on $2.2 million a day - the largest pay packet in UK history, Christopher Niesche: Australian house prices surge back up, Junior-preneur series: Why children can be taught entrepreneurship, White Ferns fall to defeat as Australia set world record, Radioactive wastewater leak prompts evacuation in Florida. Above all, you must have a fair process. When is a redundancy not a redundancy? Employers need to prove that they acted in a fair and legal way or face legal consequences. In this post-lockdown-Covid-19 world, employers are reflecting on how to ensure their business is financially viable. In Moore v Carter Holt Harvey Ltd an employee was made redundant only 8 days after the restructuring was first proposed. A redundant employee may have difficulty finding a new job and, therefore, may have little to lose by trying on a personal grievance – unfortunately that is the sad reality. $200 of unused annual leave. Full and final redundancy calculations will be provided to staff as part of ongoing discussion regarding their expression of interest in voluntary redundancy. These may be included in the employment agreement or negotiated as part of a leaving package. payment for annual holidays, public and alternative holidays owing. Your employer should take the tax from your redundancy payment and pay it to IR for you. And we did have some clients who look for redundancies straightaway, and we've got clients who've tried to hold off on redundancy. For many businesses, the wages bill is the biggest expense and, naturally, employers start to consider whether they can reduce staff numbers in order to be financially viable in the future. take 10% less for a few months, or look at specific positions as being surplus to requirements or needing restructuring. Employers can consider asking staff to take voluntary redundancy; agree to vary their employment agreements, i.e. On or before your employee’s last payday, you must: pay out any final pay owing; pay any redundancy compensation, if it is included in their employment agreement; provide a certificate of employment, if your employee requests one; provide a final pay slip, if they requested one. From then until 2007, redundancy payments were included when calculating the … These rationales also play a part in many redundancy pay formulae, which generally reward those with longer service. Redundancy Payments. You pay $36 of KiwiSaver contributions from your wages and unused leave — that is, 3% of $1200 ($1000 + $200). If you challenge a redundancy on the grounds of how your employer went about making the decision, the Employment Relations Authority will assess whether the process was one that a fair and reasonable employer could have followed. Where an employer decides to lay off a large proportion of its workforce, how does it decide who has to go? The judge in this case said that the length of service criterion respects loyalty and experience. While length of service is an objective criterion unrelated to capacity or conduct, it may give rise to unfair and/or discriminatory behaviour by an employer. However, all employees whose employment is ending due to redundancy must be given notice in terms of the employment agreement. Redundancy is an emotive subject for many but is quite simply another method of termination of employment. My husband has been made redundant twice. If an employment agreement mentions redundancy pay, the employer will have to pay for the redundancy. 0800669466; Home; Blog. You should take specific advice from a lawyer before taking any action based on this information. any additional lump sum or other payments owing. payment for all the hours worked since the last pay until the end of employment. You might make a redundancy payment to: an employee whose position is no longer needed a seasonal worker whose usual seasonal position is no longer needed (this only applies if the employee works for you at a regular time each year and does not work year round). Employees and unions tend to favour the "LIFO" test, because it is (arguably) fairer. The UK High Court has just ruled that taking into account service is not age discrimination. Whilst personal grievances cannot always be avoided, you can put yourself in a strong position to defend one. At the moment there seem to be several mass redundancy announcements every week, here and overseas. RNZ has been contacted by scores of people who believe they are in a similar situation to the hotel worker. Tax on redundancy payments. There may be some attraction to a simple policy like last on, first off, but is that fair and reasonable? Notice when on lay-off or short time: If you have been laid off or put on short-time work, this means that your contract of employment is temporarily suspended. Click Here: www.nowinnofee.co.nz. If there is no mention of the amount it could be up for negotiation. Greg Cain Greg Cain is an employment lawyer at Minter Ellison Rudd Watts. It also requires an employer who is proposing to mak… In New Zealand, this is frequently the sole redundancy selection criterion, although often it is mixed in with other factors such as performance. Redundancy Law NZ. Many young people are priced out of the housing market, and might well say that all staff are entitled to be judged on their performance and ability to do the job. The ACC earners’ levy does not apply to redundancy payments. In this case, the service criterion was just one of a number of factors - not the only one. The tribunal noted that the “last in, first out” criterion for redundancy selection tends to result in indirect sex discrimination against women, because women tend to have shorter employments than men, in particular by reason of breaks for childcare. Check Your Employment Agreement: If your employment agreement mentions redundancy compensation, it will probably also show what the amount of compensation will be. The payments are taxed at 33 percent, and if a business goes into receivership, employees' back-pay and redundancy payments are capped at about $22,000 - regardless of how long they've worked for the company or what redundancy … This would take into account any agreement reached to extend the standard two month period of notice for redundancy and redeployment enabling staff to continue to provide support to the University during the transition period. Your redundancy was in September so you could only pursue a personal grievance now if the Employment Relations Authority granted you leave to do so. You’ve had a relationship break-up, family breakdown or violent relationship end. Legal advice suggests it has been unlawful since 1991 to include redundancy as part of the calculation for a benefit stand-down. Redundancy is generally considered to be a situation where an employee’s position is surplus to the employer’s commercial needs. There may be some attraction to a simple policy like last on, first off, but is that fair and reasonable? "If you work for a large company they're very often always restructuring and somewhere there is a division that's laying someone off. 90 day trial period; When is a redundancy not a redundancy? Disclaimer:  This article does not constitute legal or business advice. I also had to make some of my own staff redundant when I was an employer, so I have a good idea about what it feels like from all sides. Are you looking to make redundancies in your business? Redundancy may mean you earn more, or less, than you would normally expect in a financial year. An employer might be forced to keep an employee who is in the bottom 10% judged on performance, and pay someone to leave who is in the top 10% - just because of their service history. Which positions get made redundant needs to be objectively justifiable. Unfortunately, due to the economic situation, phrases such as "last in first out" will acquire a lot more meaning for many New Zealanders in the coming months. One of the favoured devices, both here and overseas, is the time-honoured "last on, first off" test. So when signing up to a new job, it pays to check your redundancy entitlements. $2500 redundancy payment. The Authority noted that the process leading to that redundancy was very rapid, which could raise doubt about whether it was as thorough as it could be. It is possible to propose selection criteria as part of your initial letter in step 1 above. Redundancy focuses on the role itself and not the individual. Redundancy arises where the role becomes superfluous to the requirements of a business. Relationship changes. Photo: Image from the New Zealand documentary film 'In the Land of Plenty' made by Alister Barry. 8 weeks. Above all, you must have a fair process. This was sufficient to justify using length of service, in combination with other factors. Also, many older workers find it hard to secure new employment. Full and final redundancy calculations will be provided to staff as part of ongoing discussion regarding their expression of interest in voluntary redundancy. The Authority held that 4 days was not enough time for ‘a good and fair employer’ to have provided a group of employees to engage with each other about its proposals. Contact; View Larger Image. I have seen first-hand how devastating redundancy is, and how devastating it can be, for those workers who get laid off with nothing.

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