By Claire Mansell - 7 Jun 2018
One of the lesser known policies of the current government was
the promise to consider the reintroduction of minimum redundancy
compensation for employees affected by restructuring.
Currently, there is no legislative requirement
to provide redundancy compensation (except to vulnerable employees
as defined under section 6A of the Employment Relations Act 2000).
Practically, redundancy compensation clauses are becoming
increasingly more uncommon. However, this may change.
The Minister for Work Place Relations and
Safety has confirmed that within the next 12 months he will
consider improving minimum redundancy protection for workers,
having regard to the recommendations of the 2008 Ministerial
Advisory Group Report on redundancy and restructure. That report
recommended the introduction of the statutory requirement for
redundancy compensation, including:
- Notice of redundancy termination to the affected worker;
- Compensation based on length of service;
- A maximum level of statutory compensation; and
- A provision of redundancy support to the affected workers and
organisations.
The report also noted a number of different ways that this could
be implemented; including a voluntary code, a legal right to
redundancy compensation with no specific formula, a statutory
formula (which would be set out in legislation for determining
redundancy and compensation) and an introduction of an insurance
scheme to provide for redundancy compensation.
We will not know what shape the redundancy compensation scheme
will take (if at all) until after consultation has been completed.
However, we will provide an update once the government has
finalised how it wants to move forward on this issue.
Nevertheless, employers should bear in mind that when hiring new
staff that they may be required to provide redundancy compensation
in the not too distant future and plan their business
accordingly.
Contact
Claire
Mansell
Currently, there is no legislative requirement
to provide redundancy compensation (except to vulnerable employees
as defined under section 6A of the Employment Relations Act 2000).
Practically, redundancy compensation clauses are becoming
increasingly more uncommon. However, this may change.
The Minister for Work Place Relations and
Safety has confirmed that within the next 12 months he will
consider improving minimum redundancy protection for workers,
having regard to the recommendations of the 2008 Ministerial
Advisory Group Report on redundancy and restructure. That report
recommended the introduction of the statutory requirement for
redundancy compensation, including:
1.
Notice of redundancy termination to the
affected worker;
2.
Compensation based on length of
service;
3.
A maximum level of statutory compensation;
and
4.
A provision of redundancy support to the
affected workers and organisations.
The report also noted a number of different ways that
this could be implemented; including a voluntary code, a legal
right to redundancy compensation with no specific formula, a
statutory formula (which would be set out in legislation for
determining redundancy and compensation) and an introduction of an
insurance scheme to provide for redundancy
compensation.
We will not know what shape the redundancy compensation
scheme will take (if at all) until after consultation has been
completed. However, we will provide an update once the government
has finalised how it wants to move forward on this
issue.
Nevertheless, employers should bear in mind that when
hiring new staff that they may be required to provide redundancy
compensation in the not too distant future and plan their business
accordingly.