Employer tips for making staff redundant
Redundancy decisions are often difficult, but there are times when change is essential for organisational sustainability. When roles genuinely no longer fit the structure or strategy of the business, a careful approach helps maintain trust, meet legal obligations and protect workplace culture.
What is the meaning of redundancy?
A redundancy arises when a role is disestablished because it is no longer needed. This may occur due to a restructure, new technology, operational efficiency changes, financial pressures, or adjustments to the organisation’s strategic direction. The focus must always be on the position, never the person.
When redundancy can be considered
A redundancy must be grounded in clear evidence, supported by a reasonable process and communicated in good faith. Common business drivers include:
- Restructure process where teams are realigned or merged
- Changes to operational efficiency or service delivery
- Technology replacing, reducing or consolidating tasks
- Budget constraints or financial pressures affecting sustainability
- A project, service or function coming to an end
- Work is being absorbed by another area of the business
When making a position redundant, employers must show that the change is tied to genuine business needs and not influenced by poor performance, bad behaviour or personal factors. If redundancy is applied to an individual rather than the role itself, it may be considered an unjustified dismissal.
Legal obligations for employers
Under New Zealand employment law, employers must follow a fair and reasonable process before making employees redundant. While redundancy compensation is not legally required unless stated in the employment agreement or collective agreement, the overall process is still heavily regulated through the Employment Relations Act 2000.
Key legal requirements include:
- Providing affected employees with written details of the restructuring proposal
- Giving a reasonable time for employees to provide feedback
- Genuinely considering that feedback before making a final decision
- Demonstrating that the employer acted as a fair and reasonable employer
- Exploring redeployment options and alternative employment where feasible
- Ensuring the redundancy notice period aligns with the employment agreement
Redundancy process steps
1. Confirm the business rationale
Identify the genuine business needs driving the change. Document why the employee’s role is no longer required and how the proposal improves operational efficiency or addresses job losses.
2. Review legal obligations
Check the employment agreement, any collective agreement and your internal policies. Confirm legal requirement obligations around consultation, notice period and redundancy pay (if included in the contract).
3. Prepare a restructuring proposal
Outline the reasons for change, which roles are affected, and potential impacts. Ensure the proposal is balanced and includes valuable insights, not a predetermined outcome.
4. Share the proposal in writing
Provide written notification to each employee whose role may be affected. This step must occur before making an employee redundant, and the document should clearly invite their input.
5. Consult in good faith
Hold meetings to explain the proposal, answer questions, and genuinely engage with suggestions. Good faith requires employers to remain open to alternatives and demonstrate that the process is not merely for show.
6. Explore redeployment options
Assess whether redeployment options exist within the organisation or associated entities. Employers must show they have considered suitable alternative employment, not simply confirmed the role no longer fits.
7. Make the final decision
After reviewing all feedback, confirm your final decision. If the role is disestablished, this outcome must be communicated respectfully (preferably face-to-face) and followed by written notice.
8. Issue a written notice of termination;
Provide formal notice outlining the termination date, redundancy notice requirements and any entitlements the employee receives on final pay.
9. Calculate payments accurately
In New Zealand, redundancy pay only applies if stated in the employment agreement or established through custom or practice. Final pay must include unused leave, public holiday entitlements, and any contractual redundancy compensation.
10. Support the employee leaving
Offering references, outplacement support or transition assistance helps minimise the impact and demonstrates that the employer acted reasonably throughout the process.
11. Communicate with the remaining team
After a redundancy announcement, reassure remaining staff, explain how work will be allocated, and reinforce stability. This avoids the risk of people feeling targeted or uncertain.
Tips for handling redundancies
Do
- Provide clear documentation about the restructuring proposal
- Communicate calmly, honestly and in person where possible
- Explore alternative employment options
- Check all obligations in the employment agreement
- Brief managers so the message is consistent and accurate
- Offer support such as references or guidance
- Consider the impact on teams staying with the organisation
Don’t
- Make a final decision before the consultation has finished
- Provide incomplete or vague information
- Select employees based on personal circumstances rather than business need
- Move quickly to hire for a similar role after redundancy
- Deliver all communication via email without a conversation
- Overlook legal obligations or proper process
Supporting your remaining workforce
Restructuring affects more than the people whose roles are disestablished. Remaining employees may experience uncertainty, reduced confidence or concern about future changes. Employers can help stabilise the workplace by:
- Explaining the purpose of the restructure clearly
- Reinforcing how the team’s work contributes to future goals
- Providing opportunities for employees to ask questions
- Supporting managers to lead through change
- Re-establishing role clarity and priorities quickly
A thoughtful approach helps rebuild trust and ensures the employment relationship remains strong.
Final considerations for employers
Making staff redundant is a significant responsibility that must be handled with care. Ensuring a fair process, acting in good faith and following all employment relations requirements will help protect employees and the organisation. Clear communication, proper planning and supportive leadership make a challenging transition more manageable.
If your organisation is planning structural change, Hays offers guidance, talent insights and practical support to help you move forward confidently.
FAQs
Is redundancy pay compulsory in New Zealand?
No. Redundancy pay is not compulsory under New Zealand law. There is no statutory requirement to provide redundancy compensation unless:
- It is written into the employment agreement or collective agreement, or
- It has become an established practice in the organisation.
However, all employees are entitled to:
- Their notice period (or pay in lieu of notice)
- Payment for unused annual leave and other contractual entitlements
- Any agreed redundancy compensation,if specified in their contract
Because redundancy compensation varies across industries and roles, employers must check contractual terms carefully.
Is redundancy pay taxable in NZ?
Yes. Redundancy payments are taxable, and any taxable amount will be included in the employee’s earnings for the period. Unused leave and other final payments are also taxed according to Inland Revenue rules.
What is a reasonable notice period for a redundancy?
In New Zealand, the notice period for redundancy is usually the timeframe stated in the employment agreement, often around two to four weeks. If the contract doesn’t specify a period, employers must give reasonable notice, which depends on the role, seniority, industry norms and past practice. Notice must be provided in writing and only after a fair consultation process has finished.