Public Sector Redundancy: What the Collective Agreements Actually Pay
There is no statutory redundancy payment in New Zealand. The money is in your agreement, and this guide works one public service collective agreement through clause by clause: the surplus staffing process, three months' pay under ten years and six months over, leave on top, and the section of the Public Service Act that can cancel the payment when a comparable role is offered.
There is no statutory redundancy pay
New Zealand law does not set a redundancy payment. Employment New Zealand's guidance is that whether an employee receives one depends on their employment agreement and any negotiation with the employer, and that if the agreement has no redundancy pay terms, none is required. The Employment Relations Act governs the process, in section 4 on consultation and section 103A on justification. The money is in the agreement, which is why this guide opens a collective agreement rather than the Act.
Which document to open depends on your position. If you are covered by a collective agreement, its restructuring clause is the answer. If you are on an individual agreement, the redundancy clause in it applies, and in the public service the letter of appointment can matter as much: the agreement worked through below says in clause 10.16.2 that a letter of appointment providing a greater entitlement takes precedence over the formula. Many individual agreements in the public sector mirror the collective's terms, and many do not.
The agreement used here is the Toitu Te Whenua Land Information New Zealand and PSA collective employment agreement for 2023 to 2025, released under the Official Information Act. It is one agency's agreement. It is worked through because it is public, recent and typical in structure, not because every agency uses it; there is no formula every agency uses, and the figures in yours will differ.
Every figure in this guide is from the LINZ and PSA agreement or from an Act. Nothing here says what your agency pays. Before you plan around a number, read clause by clause the restructuring provisions of the agreement that covers you, and ask your union to confirm how they have been applied in earlier rounds.
The agreement, clause by clause
Clause 10.4.1 defines the surplus staffing situation: after a review and the consultation, the employer requires fewer employees, or employees can no longer be employed in their current position, at their current grade or at their current work location. Clause 10.5 gives the employer two options before redundancy, reconfirmation and reassignment, each following consultation and agreement with the PSA. Clause 10.6 sets the reconfirmation criteria: the same or very nearly the same position description, the same salary, terms no less favourable including career prospects, and the same location. The redeployment guide in this series covers those in detail.
Clause 10.15 deals with voluntary redundancy: when a surplus staffing situation is identified, affected employees may be asked to express an interest, the employer will consider any expressions of interest, and agreement is at the employer's discretion. Clause 10.16 is the money. Under 10.16.1 an employee whose employment must be terminated because of redundancy receives three months' pay as full severance compensation with less than ten years' service, or six months' pay with more than ten years' service. Clause 10.16.4 adds that outstanding leave entitlements are paid, and 10.16.5 says there is no entitlement to any other compensation for the termination, except payment in lieu of notice under the agreement's notice provisions.
Clause 10.17 is the employee protection clause for a restructuring where the business or part of it is sold, transferred or contracted out: the employer must notify affected employees and their representatives as soon as practicable, consult before final decisions, endeavour to obtain employment with the new employer on substantially the same terms, and advise employees what opportunities exist. That is the clause section 69OJ of the Employment Relations Act requires every agreement to contain.
| Clause | What it does | What to check in yours |
|---|---|---|
| 10.4 | Defines when a surplus staffing situation exists | Whether a change of grade or location alone triggers it |
| 10.5 and 10.6 | Reconfirmation and reassignment, with criteria | The reconfirmation criteria and any salary protection on reassignment |
| 10.15 | Voluntary redundancy at the employer's discretion | Whether an incentive above the formula is offered |
| 10.16 | Three months' pay under ten years, six months over ten; leave paid; nothing else but notice in lieu | The formula, the service threshold, and whether the letter of appointment gives more |
| 10.17 | Employee protection on sale, transfer or contracting out | What happens if the work moves to another employer |
The rule that cancels it
In the public service the agreement is read with section 88 of the Public Service Act 2020. A public service employee who has received a notice of termination by reason of redundancy is not entitled to a redundancy payment if, before their employment ends, they are offered and accept another State services position on terms no less favourable that treats service as continuous, or are offered an alternative State services position that begins on or immediately after the current one ends, has comparable duties and responsibilities, is in substantially the same general locality or within reasonable commuting distance, is on terms no less favourable, and treats service as continuous. Under section 87(2), a redundancy payment for this purpose includes any payment or benefit provided because the position was disestablished.
Two things follow. In a public service round, the redundancy payment in clause 10.16 is conditional on there being no comparable role anywhere in the State services that the employer can offer you before your last day. And because the second limb turns on the offer rather than acceptance, refusing a comparable role does not preserve the payment. The redeployment guide in this series works through what comparable means.
The wording of the formula itself deserves a careful read. Clause 10.16.1 gives three months' pay for less than ten years' service and six months' pay for more than ten years' service. It does not say what an employee with exactly ten years receives. Most readers, and the calculator paired with this guide, treat ten completed years as reaching the higher tier, but the clause leaves it open, and an employee at that boundary should ask the employer in writing how it will be applied.
The order of the questions
Is there a comparable role in the State services the employer can offer before the last day? If yes, section 88 may remove the payment entirely. If no, what does the agreement's formula give, what does the letter of appointment give, and which is higher? Only then does the tax question in the next step matter.
Worked through, and the round in numbers
The sums below use the calculator paired with this guide with notice worked rather than paid in lieu, so the payment is the formula alone. Redundancy compensation is taxed as an extra pay under Inland Revenue's method: the annualised pay and the lump sum are added and one rate from the extra pay table applies to the whole payment, using the column without the ACC earners' levy, which does not apply to redundancy payments. Leave is paid out on top under clause 10.16.4 and is taxed as an extra pay as well.
The round these guides were written for is measured by the Public Service Commission. Its workforce data showed 64,535 full-time equivalent public service staff at 31 March 2026, a quarterly increase of 1.4 percent from December 2025 and 2.1 percent more than a year earlier, and 1.8 percent below the peak of 65,699 in December 2023. Those are the official figures, and they are smaller and slower than the numbers in the news, because they count the public service only and count what has happened rather than what has been announced. The Commission publishes its June year workforce data on 15 October 2026 and the September quarter data on 10 December 2026.
The Commission's workforce data counts public service departments. Health New Zealand, the other Crown entities and the wider State services are counted separately or not at all in that series, so an agency's own announcement of role reductions can be true and absent from the total at the same time. Cite the release, with its date, rather than the headline.
Related guides and tools
- Redeployment vs Redundancy Calculator, the formula, the tax and the comparison with a redeployed salary
- Redeployment Rights, what comparable means under section 88, and what refusing costs
- Voluntary Redundancy, whether to express interest, and what service near ten years is worth
- Negotiating Your Redundancy, what moves when the formula does not
- Lump Sum and Redundancy Tax Calculator, the full extra pay method with student loan and KiwiSaver options
Test Your Knowledge
Ten questions on where the formula lives, what one agreement pays, what is paid on top, and the rule that cancels the payment.
Sources: Toitu Te Whenua Land Information New Zealand and PSA Collective Employment Agreement 2023 to 2025, clauses 10.4 to 10.17, released under the Official Information Act; Public Service Act 2020 sections 87 and 88, read on legislation.govt.nz 3 September 2026; Employment New Zealand, redundancy, last updated 26 November 2025; Inland Revenue, calculate PAYE for a lump sum payment, read 3 September 2026; Public Service Commission, workforce size to 31 March 2026 and data releases calendar, read 3 September 2026.