Should you take voluntary redundancy? How to decide in New Zealand

No law sets redundancy pay

There is no statutory redundancy payment in New Zealand. Employment New Zealand says you are only entitled to redundancy compensation if it is stated in your employment agreement, and if the agreement does not mention it, there may be none. Where an agreement or policy does provide for it, it sets the formula, for example a number of weeks' pay for each year of service, sometimes with a cap. That formula, and whatever the employer chooses to offer on top, is the whole of it.

Voluntary redundancy usually comes up in a restructure, when an employer asks for volunteers before it decides who goes. Employment New Zealand notes that some agreements and policies require voluntary redundancy to be offered before a selection process, and in the way they describe. Whether it is offered, on what terms, and whether your application is accepted, depends on those documents and on your employer's decision. Your employer may decline a volunteer, for example to keep skills it needs.

Two things apply whatever the package says. You are still owed notice, worked or paid, and your final pay must include your unused holiday pay. Our guide to redundancy in New Zealand covers your rights through the whole process.

Tax, and what it means for Jobseeker Support

A redundancy payment is taxed as a lump sum. Inland Revenue's method for payments when employment ends takes the pay from your last two pay periods, multiplies it up to a year (by 13 if you are paid fortnightly), adds the payment, and uses the band the total falls in for the whole payment. Redundancy payments carry no ACC earners' levy, so for 2026/27 the rates are 10.5%, 17.5%, 30%, 33% or 39%. Holiday pay and other lump sums paid when you leave are worked out together with it.

For example, on an $80,000 salary paid fortnightly, a $30,000 redundancy payment brings the total to $110,000, in the 33% band. That is $9,900 of PAYE, leaving $20,100. No KiwiSaver comes off a redundancy payment, but a student loan deduction does: at 12%, another $3,600, leaving $16,500. If you leave partway through the tax year and earn less afterwards, Inland Revenue's year-end assessment may show a refund. Our redundancy pay calculator puts your agreement's formula, notice and holiday pay together after tax.

Then there is Jobseeker Support, if you need it before the next job starts:

• The stand-down. Work and Income says redundancy pay means a stand-down of 1 or 2 weeks, depending on the amount, and that you can ask it to check the stand-down was worked out correctly.
• The 13-week rule. Leaving work voluntarily without a good and sufficient reason can mean waiting up to 13 weeks. Work and Income's own policy says that period does not apply when you take voluntary redundancy and staying in your role would mean another employee may lose their job. Ask your employer to confirm that in writing.

Work and Income also says it can start helping before your job finishes, so you do not need to wait for the last day to talk to it.

The runway sum: payout against months to your next job

The real question is how long the money lasts. Add what you would receive after tax to the savings you are willing to use, then divide by the gap each month between what you spend and any income you will still have. That is your runway in months.

In a made-up example, $20,100 after tax plus $6,000 of savings, against a shortfall of $4,000 a month, lasts about six and a half months. If people in your line of work usually find something in three, the payout is a cushion and some of it may be a windfall. If the last search took nine months, it runs out before the job arrives. Be honest about your notice period, the time before a new employer's first pay, and any stand-down.

A good offer also looks different if you already have a job lined up, or a strong lead. Money in hand with a start date to go to is the best case; money in hand with nothing in view is a bet on the market.

What you give up by going

The payout is the visible part. The cost is often in things that do not appear on the offer letter:

• Redeployment. Employers must consider moving affected people into other roles before making them redundant. Volunteer, and you may step away from a job you would have been offered.
• Unvested shares and options. Scheme rules decide what happens to anything not yet vested when you leave. Read them, or ask, before you apply.
• Parental leave. Job-protected parental leave depends on time with the same employer: 26 weeks of primary carer leave after six months, and up to 52 weeks after twelve. A new job starts that clock again. Paid parental leave is separate, and depends on your hours of work in the year before the due date, not on one employer.
• KiwiSaver. Your contributions from pay stop when the job ends, and so does your employer's, a compulsory minimum of 3.5%: $2,800 a year on an $80,000 salary.
• Sick and bereavement leave. Both need six months with a new employer before they apply.

Questions to put to HR before you sign

Get the answers in writing, and take advice from your union, an employment lawyer or Employment New Zealand on 0800 20 90 20 if anything is unclear.

1. What exactly will be paid: the redundancy compensation and its formula, notice worked or paid, final holiday pay, and any bonus or commission owed?
2. When would the last day be, and could it come earlier if a new job comes up?
3. Will you confirm in writing that my going means another employee keeps their role?
4. What happens to my unvested shares or options, and this year's bonus?
5. Is there outplacement support, and will you provide a certificate of service and a reference?
6. Can the application be withdrawn, and by when?
7. Is there anything else to sign, such as a settlement agreement, and how long is there to take advice?

Your Career has these questions ready in its If things change section, with what your final pay must include. Its Incentives section shows the value of any unvested shares you would give up by leaving now, and when the job ends, its pay record, wins and notes are kept and Your Job Hunt is one tap away.

Decide with your own numbers in front of you