Why is my employer still making me redundant?

by Anna Mickell - Mar 30, 2020

Anna Mickell is CEO of the Queenstown Chamber of Commerce. She is getting a lot of questions from local workers who have been made redundant. She has written this explanation to provide a business owner's perspective on why redundancies are still being made, in spite of the Government's moves to provide wage subsidies.

I have had a lot of emails from people who are angry and confused that their employer has made them redundant and is not taking advantage of the business wage subsidy offered to the business for them.  Here is a general description of some of the reasons why some employers may need to do this. All of this will not make someone who has just lost their job feel any better, nor the business manager who made them redundant feel less gutted.  But as Grant Robertson says  “not every job will be saved”. Sadly, many of those not saved, will be in tourism …

Anna Mickell - CEO of the Queenstown Chamber of Commerce

Grant Robertson appears to be using a ‘test and respond’ approach to delivering aid to businesses over this period, assessing the business response to each and then tweaking. This ‘test and respond’ approach has been very effective, many jobs have been saved, redundancies have been delayed. However it has also left business owners, and their professional advisors, confused and reliant on acting in the ‘spirit’ of the subsidies announced, interpreting as best they can his intent, guessing to try and stay within the law. Robertson has been explicit however in one area, he expects business managers to be honest and trustworthy.  As a result, business owners are assessing whether they meet Robertson’s criteria for “a focus on keeping businesses and workers connected through this unprecedented time”, as well as meeting all their other legal obligations.

For many non-tourism businesses last Friday’s clarification will be greatly appreciated by employers and employees and, like the other tweaks, will save many more jobs or delay redundancy. The issue arises in tourism where, employers know that there is no work for all the staff they once had, for well beyond 12 weeks.  They are moving now to ‘right size’ their business for what they are estimating will be there new post Covid19 norm. They know they cannot, in good faith, claim to need to keep “connected” to all their staff, that the size of the business they once had is now much reduced and as such so is their staffing requirements. 

Employers also know that wages are only one cost of keeping staff on their books. More staff means more overhead and more managers employed to manage them.  Leave accruals continue - holiday, sick or bereavement leave still must be paid and managed. Kiwisaver, ACC and other insurance premiums also continue. Staff may have car, fuel or cell phone charges to pay, as well as per person software licencing costs. Health and safety laws will still also apply and all the inherent risk this presents to the business if they get it wrong.  Employers cannot easily just reduce people’s hours or wages on a permanent contract, this is a complex process which generally requires an employment professional to be paid for, another cost and an area of enormous potential risk if poorly handled.

Most businesses reliant on tourism will be borrowing now to top up their remaining staff salaries and benefits, to pay their rent or maintain their assets. Reducing staff numbers is one way to ensure that the entire business is sustainable and able to continue to employ others for as long as possible.   Small business owners are likely borrowing against their homes, putting them at increased personal risk too. Larger businesses will be managing shareholder expectations, as well as their bank and other creditors (all of whom have staff that need paying too), knowing their responsibility is also to them, as well as their staff.

Ultimately, each business manager has to decide how much risk and debt their business and shareholders can handle and will act accordingly to minimise both.

Finally, a weird, perverse situation appears to be occurring, where those employers with staff with casual contracts may be more likely to keep these staff employed because of the subsidy. Typically, casual contracts offer the employee less employment security, however as people on casual contracts do not accrue leave and a range of other benefits offered to permanent employers, some employers are happy to take the subsidy for them based on their forecast requirements for this period.

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