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Employee redundancy

After going through a full and sound restructure process, you may have to make some roles redundant.

Although redundancy is about roles, not people, people are affected. It can be a difficult and upsetting process. Follow these steps to make sure you’re being fair, following best practice and doing everything you’re legally required to.

Checklist

You can’t make someone redundant without going through the full restructure process first. That process has five steps. The steps for redundancy pick up at the end of that process.

The process isn’t prescribed exactly, but case law has helped to establish best practice. The steps and suggested timeframes are outlined below, and also in these handy guides:

Redundancy steps – checklist [PDF, 95 KB]

Redundancy steps and timeframes - task list [PDF, 101 KB]

Redundancy steps and timeframes – task list [DOCX, 51 KB]

Making someone redundant — the step-by-step process

Steps 1 to 5

Follow the first five steps set out on our Team restructuring page, where you’ll find a task list outlining the steps and suggested timeframes. 

If this leads to making roles redundant, here’s how to handle the next steps.

Step 6. Confirm the structure

You must confirm the final structure to employees who are being made redundant in writing. This letter must include:

  • how much notice you’re giving them, as stated in their employment agreement
  • the end date of employment
  • whether they’ll receive any compensation, and if so, how much (as stated in their employment agreement)
  • an offer to meet with them to discuss the outcome of the restructure process.

You could also include:

  • an acknowledgement of their service to your company
  • an offer to give them a reference, and/or act as a referee
  • the option of letting them take some or all of their notice period to start looking for other work — you’ll pay them as usual, but they don’t need to come in to work.

Redundancy clause (external link) — Employment Agreement Builder

Step 7. Meet to discuss the redundancy

You only need this step if your employee asks for a meeting to discuss the restructure and redundancy. At this meeting, you should:

  • allow them to bring a support person (this can be anyone from a partner or friend to a lawyer or union delegate)
  • reconfirm the details of the letter
  • answer any questions your employee might have.
Payroll article 6

Case study

Paid time for job hunting

Marama wants to take a new direction with her business, so she restructures her team. Phil’s role is to be made redundant. Marama offers to let Phil not work during the last two weeks of his redundancy notice period. Phil accepts.

Phil is grateful because he gets the satisfaction of completing critical tasks before those last two weeks — and he has time to get his CV ready and start applying for other jobs before being without pay.

Managing the transition

There are ways to make the redundancy easier for you and your employee, in the lead up to them finishing. You can:

  • Offer to let them take their notice period off, and be paid as normal.
  • Provide time off during the day to attend interviews for new roles.
  • Get them help to decide what they want to do next, and to retrain for a new role outside of your business.
  • Hold a morning tea to celebrate and thank them for their time in the business.

On their last payday

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.

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