Redundancy law

Susan Hornsby-Geluk from Chen Palmer writes in the Dom Post:

 Employees, listen up – here is something you may not know. If you are made redundant you will not be entitled to payment of any redundancy compensation unless you have an employment agreement which provides for this. It does not matter how long you have worked for a particular employer: no contract – no entitlement.

Harsh? Well, Labour MP Sue Moroney clearly thinks so. She recently introduced a member’s bill to Parliament which provides for minimum entitlements for employees if they are made redundant.

If the bill becomes law, every employee would be entitled to at least four weeks’ notice of their redundancy. They would also be entitled to redundancy compensation of four weeks’ pay for the first year of employment plus two weeks’ pay for every subsequent year, up to a maximum of 26 weeks’ pay in total. A similar bill was voted down by the National-led government in 2010.

This is trying to turn the clock back to the 1980s. Redundancy provisions should be negotiated on a case by case basis in collective or individual contracts. One size fits all laws are bad and kill jobs.

Employees may need greater protection in tough economic times, but introducing mandatory redundancy compensation to the level envisaged by Moroney could have unintended consequences.

In most cases the impact of such legislation would be felt by small employers. In the case of large employers, including government agencies, most of these businesses already provide for redundancy compensation in their employment agreements. So, for these employers the legislation will make little or no difference.

However, take your local dairy employing a handful of people. If the business has to restructure to prevent it going under, requiring the employer to pay significant redundancy compensation will only hasten the demise. The knock-on effect is the loss of employment of the other staff.

Exactly.  When a business is already struggling, onerous redundancy provisions can send it under. Labour wails about the lack of jobs on the one hand, yet keeps putting job destroying measures up.

Interestingly, a recent United States study indicated about 57 per cent of men negotiated employment agreement offers, whereas only 9 per cent of women did. In other words, they just accepted what was offered.

This is a fascinating statistic and in my opinion is the largest factor by far in the gender pay gap.