What is Redundancy Pay? Why Redundancy Insurance?

Redundancy pay and redundancy insurance are two quite different sides of the same issue. We often confuse one with the other because there really isn’t a lot out there to help us tell the difference. Redundancy isn’t a topic many of us would like to think about, but it’s a reality that unfortunately many of us do have to face. When something so drastically altering our life is possible through any number of unfortunate circumstances, it pays to make sure your contingency plan is in place. So, if you are wondering “what is redundancy pay?” or “what’s the difference between redundancy pay and redundancy insurance?” you’ll have all your questions answered here!

Redundancy in a Nutshell

what is redundancy pay

The definition of a position of work being made redundant is quite different from that of simple termination. Being fired is generally as a result of unfavorable behavior (of which there are many variants) leading to the dismissal of the employee. Redundancy, however, speaks more to the inability of the company to hold said employee in the role, for what could be a host of reasons.

Generally, in redundancy, an employer will need to take extra steps to ensure that the redundancy is unavoidable as it should only be considered as a final option. Some such steps include trying to redistribute the employee’s role and responsibilities in order to keep them within the business if it is the role itself that is in question. If this, outplacement or redeployment are not viable options, this is when redundancy becomes an option.

Redundancy Payments


Payments resulting from redundancy can vary depending on a few criteria and factors that must be considered. For example, unused annual leave, salary, and any other entitlements up to the end date of employment are to be paid to the employee. Sometimes, the company may need the role vacated immediately – however, the employee has the right to notice before their source of income is gone, and therefore the employer will have to pay the employee as they normally would during the notice period. The general rule to keep in mind though is that “whether employees receive redundancy payments is dependent on the applicable employment agreements and is a matter for negotiation between the parties”.

So, now you know why redundancy insurance from a reliable broker is an important complement to whatever redundancy pay you may receive from an employer. For more information on redundancy, visit Employment New Zealand. If you are looking for support in the troublesome world of redundancy, give us a call on 0800 141 889.