Redundancy in New Zealand – Your Rights & What to Expect
If your role is being disestablished, you may be facing redundancy. In New Zealand, redundancy is not a dismissal for poor performance or misconduct – it happens when your employer genuinely no longer needs your job to be done by anyone. This guide explains your rights under the Employment Relations Act 2000 (ERA 2000), what a fair process looks like, and what you are entitled to. It is current as of May 2026.
Key rule: Redundancy must be genuine. Your employer must have a real business reason – not a hidden agenda to get rid of you personally. The test is objective: would a reasonable employer have made the same decision? (ERA 2000, s 103A)
1. What is a genuine redundancy?
A genuine redundancy happens when your position is surplus to the employer’s needs. Common reasons include:
- Restructuring or reorganisation
- Technology replacing your role
- Business downturn or financial pressure
- Merger or acquisition
The key is that the role disappears, not just you. If your employer hires someone else to do the same job soon after, the redundancy may not be genuine – and you could have a personal grievance claim.
Warning: If you suspect your redundancy is a sham (e.g., you are replaced by a relative or a cheaper worker), you can challenge it. The Employment Relations Authority can award reinstatement, lost wages, or compensation. Get legal advice quickly – you have 90 days to raise a personal grievance.
2. Fair selection process
When multiple roles are affected, your employer must use a fair and objective selection criteria. Examples of fair criteria:
- Skills, qualifications, and experience
- Performance history (with documented evidence)
- Length of service (last on, first off – but only if consistently applied)
Unfair criteria include: personal favouritism, discrimination (age, gender, disability, etc.), or using unsubstantiated performance issues. The selection process must be transparent – you have the right to know the criteria and how they were applied to you.
Key rule: Your employer must give you a reasonable opportunity to comment on the proposed selection criteria and the list of affected employees before any final decision. (ERA 2000, s 103A(1)(c))
3. The obligation to redeploy
Before making you redundant, your employer must consider whether there is suitable alternative employment within the organisation (or a related company). This is called the redeployment obligation. It applies even if the alternative role is at a lower level or different location – as long as it is reasonable in the circumstances.
If a suitable vacancy exists and your employer does not offer it to you, the redundancy may be procedurally unfair. You should be given first right of refusal for any role you are qualified for.
Warning: If you unreasonably refuse a genuine offer of redeployment, you may lose your entitlement to redundancy compensation (if any) and your notice period may be reduced. Always consider the offer carefully and get advice before declining.
4. Redundancy compensation – is it guaranteed?
New Zealand law does not require employers to pay redundancy compensation. Unlike some countries, there is no statutory entitlement to a redundancy payout. You are only entitled to compensation if:
- Your employment agreement or company policy says so, or
- You have a collective agreement that provides for it, or
- Your employer has a consistent past practice of paying it (and you can prove it).
Typical redundancy compensation in NZ is 1–4 weeks’ pay per year of service, but this varies widely. Check your employment agreement carefully. If there is no clause, you may still negotiate a severance package as part of the exit process – but your employer is not obliged to agree.
Key rule: Even if you are not entitled to compensation, you are still entitled to notice (or pay in lieu of notice) and any outstanding annual leave, alternative holidays, and other entitlements.
5. Notice periods
Your employer must give you reasonable notice of redundancy. The minimum notice period is usually set out in your employment agreement. Common periods are 2–4 weeks for permanent employees, but longer for long‑serving staff or senior roles.
If your agreement is silent, the ERA 2000 implies a reasonable notice period (usually at least 2 weeks). During the notice period, you are still an employee – you must be paid your normal wages, and you can use any accrued sick or annual leave (subject to your employer’s approval).
Your employer can choose to pay you in lieu of notice (i.e., pay you for the notice period without requiring you to work). This is common when the employer wants to avoid disruption.
6. What to do if you are made redundant
- Read your employment agreement – check for redundancy clauses, notice periods, and compensation.
- Ask for the reasons in writing – your employer must provide a written explanation of why your role is redundant.
- Request the selection criteria – if you were in a pool, ask how you were selected.
- Ask about redeployment – confirm that no suitable alternative roles were available.
- Get legal advice – if you think the process was unfair, contact an employment lawyer or the Ministry of Business, Innovation and Employment (MBIE) for free guidance.
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7. Summary of your rights
| Right | What it means |
|---|
| Genuine reason | Employer must prove the role is surplus, not a pretext. |
| Fair process | You must be consulted, given information, and allowed to comment. |
| Fair selection | Criteria must be objective and applied consistently. |
| Redeployment | Employer must offer suitable alternative roles if available. |
| Notice | You are entitled to notice (or pay in lieu) as per your agreement. |
| Compensation | Only if your agreement or policy provides it – not automatic. |
Important: This guide is for general information only and does not constitute legal advice. Employment law can be complex. If you are facing redundancy, consult a qualified employment lawyer or contact MBIE’s Employment Services on 0800 20 90 20.
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Frequently asked questions
Can I be made redundant while on sick leave or parental leave?
Yes, you can be made redundant while on leave, but only if the redundancy is genuine and the same decision would have been made if you were at work. Your employer cannot target you because of your leave. If you are on parental leave, you have special protection – your role must be kept open for you unless the business genuinely cannot sustain it. Always get advice if you suspect discrimination.
Do I have to accept a redeployment offer?
No, you are not forced to accept a redeployment offer. However, if you unreasonably refuse a suitable alternative role, you may lose your right to redundancy compensation (if any) and your notice period may be reduced. 'Suitable' means the role is within your skills, location, and pay range (or close to it). Get advice before declining.
What is the difference between redundancy and dismissal for poor performance?
Redundancy is about the role disappearing – not about you. Dismissal for poor performance is about your conduct or capability. If your employer uses redundancy to get rid of a low performer without following a proper performance management process, that is likely an unjustified dismissal. You can challenge it as a personal grievance.
How long do I have to challenge a redundancy?
You have 90 days from the date the redundancy takes effect (or from when you became aware of it) to raise a personal grievance with your employer. If you miss that deadline, you can apply for an extension, but it is not guaranteed. Act quickly – talk to a lawyer or MBIE as soon as possible.
Is redundancy compensation taxable in New Zealand?
Yes, redundancy compensation is treated as income and is subject to PAYE tax. Your employer will deduct tax before paying you. There is no special tax-free threshold for redundancy pay in NZ. The amount is added to your other income for the year and taxed at your marginal rate.