You are being offered voluntary redundancy. What’s next?

KiwiRail is offering voluntary redundancy to all employees. What does this mean?
Photo: Supplied/ KiwiRail

From Monday, KiwiRail will offer voluntary redundancy to all employees.

But what does this mean, what are the rules for a voluntary redundancy offer and what do employees need to know?

RNZ asked two labor law experts for explanations.

There are rules for employers

Alison Maelzer, partner at law firm Hesketh Henry, said offers of voluntary redundancy to all employees were relatively uncommon.

But she said that when voluntary redundancy was offered, it would normally be covered by an individual or collective employment agreement or an employer’s redundancy policy.

“Essentially, once an employer has consulted employees about a proposal to destabilize a number of roles, and has decided to destabilize a number of roles, it may choose to call for ‘voluntary redundancies’ – that is, employees must put their hands up and volunteering to have your employment terminated by dismissal.

“This usually occurs in the circumstance where an employer is reducing a number of the same or similar positions – we have 100 process workers and only need 50 – and before a selection process has taken place.”

KiwiRail has been proposing job cuts for some time to reduce costs and previously offered some staff the opportunity to resign. But the broader offering was designed, in part, to help reshape the business.

Maelzer said a voluntary redundancy process would not eliminate the need for a full consultation process on whether redundancies were necessary, how many and in what parts of the company.

“If there is a union involved, the employer should be careful to communicate with the union about its proposal.”

Jeremy Ansell, senior associate at Duncan Cotterill, said business reasons for voluntary redundancy could be things like financial pressure, a slowdown in work or even government guidance if it is a public service entity employer.

“They will still have to explain all of this and follow a fair process.”

But employers can add conditions

Maelzer said an employer could add its own conditions to the process.

“For example, who can volunteer, who can’t, whether the employer reserves the right to refuse a volunteer, what happens if there are too many volunteers or not enough volunteers. Employers often reserve the right to refuse a request for voluntary redundancy if that person’s skills/experience are required for the ongoing business.”

She said her experience was that the employees most likely to volunteer for redundancy were those with more experience or seniority and more likely to find employment elsewhere.

“This could result in the employer losing senior and experienced employees, which could harm its operations in the future.”

The team needs to understand how your offering can work.
Photo: 123RF

What does the team need to know?

Maelzer said employees would need to be clear about the conditions of the voluntary redundancy offer and understand whether they were actually being offered redundancy or just the opportunity to express interest.

“Employees should also be clear about their rights if they are accepted for redundancy – are they entitled to compensation? What would be their notice period? Will they sort this out? Is there any outplacement support available?”

Who is chosen?

There is sometimes a feeling in some companies that the people selected for voluntary redundancy are those who are “cheaper” to fire – who don’t have generous clauses in their contracts, for example, or a lot of leave due.

Maelzer said employers’ duty of good faith would require them to be transparent and explain the factors that would be taken into consideration when deciding which voluntary redundancy request would be accepted.

“Ideally, the employer would propose this before making any decision.”

“Ultimately, any termination for redundancy will need to meet the legal justification test, which includes both substantive justification and procedural fairness.

“An employer who makes arbitrary, discriminatory or unfair/irrational decisions about who to select for dismissal, or who is otherwise deceptive, could find itself in hot water.”

Ansell said employers could run into problems if they select people to fire based on the size of the potential pay involved.

What does this bring to the team?

Ansell said there would have to be some kind of incentive to encourage people to accept voluntary redundancy.

“Employees will want to know they are getting more than just their contractual notice period and any final holiday period – that’s a legal right they should get anyway. They will want to know there is a more generous way to resignation being offered and how much is that.”

Redundancy clauses are rarer in the private sector than in the public workforce.

Maelzer said it was more common in industries where there was a strong union presence and for very senior employees with more negotiating power in their employment contracts.