Redundancy: one of three routes to severance

The Act deals specifically with termination of employment due to redundancy as one of the situations giving rise to severance.

The three routes

Severance pay applies in cases of:

• Redundancy
• Mutual consent
• Termination for good and sufficient cause

The calculation

The same three-tier formula applies: one week per year for the first five, two weeks per year for years six to ten, three weeks per year beyond ten, capped at 52 weeks.

Requires at least one year of continuous employment.

Continuity of employment

The Act contains specific provisions on continuity of employment and on successor employers.

Where a business is sold and the successor agrees to honour the previous employer's obligations under the Act, those obligations bind the successor.

Your accrued service is not automatically reset by a change of ownership.

The lay-off limit

No lay-off shall exceed six weeks. If you have been laid off longer than that, the position changes and it is worth raising.

Records the employer must keep

The Act requires records to be kept. That obligation works in your favour: where a dispute arises about service length or wages, the absence of employer records is itself a problem for the employer.

Enforcement and penalties

The Chief Labour Officer may institute prosecutions. An employer convicted of failing to pay severance faces a fine of $31,250 and up to one year's imprisonment, and the court must additionally order payment of the allowance.

That combination — criminal penalty plus mandatory payment order — is stronger than in most jurisdictions.

Before you accept a settlement

1. Confirm your completed years of continuous employment
2. Check the tier boundaries — the rate changes at year five and year ten
3. Verify the 52-week cap was applied only if genuinely reached
4. Ask whether severance is being paid instead of a gratuity
5. Get the certificate of termination