The Employment Act 2001 deals specifically with redundancy — the right to redundancy payment, the meaning of redundancy, and recovery of redundancy payments.
Who is entitled
Employees with at least 12 months of continuous service who are dismissed for redundancy under the Employment Act 2001.
The Act also covers employees whose fixed-term contracts are ended early without a valid contractual or statutory reason and without proper notice, and non-probationary employees terminated without the required notice where pay in lieu is owed.
The calculation
Entitlements are generally based on length of continuous service and the employee's basic pay at termination.
Remember the two scales: two weeks per year for non-managerial staff capped at 24 weeks, and one month per year for managerial and supervisory staff capped at 48 weeks.
The dismissal-then-contractor loophole
The 2017 Employment Amendment addressed a practice where employers would terminate someone for redundancy and immediately re-engage them as an independent contractor doing the same work.
If re-engagement happens within 12 months of redundancy, the arrangement is deemed employment unless the terms are more favourable to the worker.
If that has happened to you, it is worth raising.
If the payment does not come
Failure to pay severance or redundancy entitlements correctly exposes the employer to statutory claims and orders from the Industrial Tribunal.
Complaints go to the Department of Labour, and claims to the Tribunal.
The cost of getting it wrong
Consider a manager with eight years of service at $1,200 per week. Severance at one month per year comes to eight months of basic pay — roughly $41,600. Add notice pay and the figure passes $46,000 before any legal costs.
If the Tribunal then adds up to 26 weeks of additional compensation for an unfair dismissal, the exposure grows substantially.
What to check
Your category — managerial or not — your continuous service in years, whether basic pay or the full package was used, and whether allowances were included in pay in lieu of notice.