HR Practice For Payroll Practitioners

HR Practice for Payroll Practitioners

Redundancy

The last mention of redundancy in statute law was in the Labour Relations Act 1987 (repealed), so there is no current legislative requirement for redundancy, but there is a duty of good faith. If an employee’s employment agreement contains redundancy clauses, that is an agreed-upon term, and payroll needs to follow that agreement. The repealed Labour Relations Act had the following definition that can be seen in references, policies and even in employment agreements if a redundancy process is mentioned: “A worker’s is terminated by the employer, the termination being attributable, wholly or mainly, to the fact that the position filled by that worker is, or will become superfluous to the needs of the employer”.

What does redundancy mean for payroll?

Redundancy is a form of termination, meaning all the stated components of a final pay are processed and paid (if applicable) to the employer. However, payroll may also be involved in making a redundancy compensation payment to the employee as well based on what was agreed.

How does redundancy impact payroll?

• Management may develop a business case and want to find out from payroll what the cost is if an employee is made redundant (leave liability, other payments by agreement and if there is a redundancy compensation calculation). • The redundancy business case is provided to the employee, and the employer consults with the employee on all options (redeployment, retaining, etc.). Redundancy is the last option. • Part of the business case may be where the employer asks for voluntary redundancy, where an employee decides now that they would be happy to be made redundant without going through the formal process. If this is the case, payroll would be involved in developing the voluntary redundancy package.

• Payroll may be involved in developing potential redundancy payment figures and what else would be paid on termination.

© New Zealand Payroll Practitioners Association, Sep 2024, Ver 12

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