Voluntary Redundancy: Should You Put Your Hand Up?
An expression of interest in voluntary redundancy is not a right: the employer decides, and under the agreement worked through here it pays the same three or six months as a compulsory one. It suits some people well and a few very badly, and the published insurance wordings and the visa rules are where the bad cases sit. Run the sums first.
It is an expression of interest, not a right
Voluntary redundancy in a restructure is usually an invitation, and it stays the employer's decision. The Land Information New Zealand and PSA collective agreement puts it in one clause: when a surplus staffing situation is identified, affected employees may be asked to express an interest in voluntary redundancy, the employer will consider any expressions of interest, and agreement is at the discretion of the employer. Your agreement may word it differently, but the shape is common across the public sector. Asking does not commit you, and being declined changes nothing about your position in the restructure.
The reason the employer keeps the discretion is that it is trying to keep particular skills. An expression of interest from someone whose role is being disestablished anyway costs the employer nothing to accept. An expression of interest from someone whose role continues is a request to be made redundant from a role the employer still needs, and it will usually be declined. Knowing which of those you are tells you what the answer is likely to be before you ask.
An expression of interest is not a resignation, and it should not be treated as one. If the employer accepts it, the termination is by reason of redundancy, and the payment, the notice and the tax all follow the redundancy rules. If you are asked to resign instead, or to sign anything that describes the exit as a resignation, stop and get advice, because a resignation carries no redundancy payment and changes how insurers and Work and Income treat what follows.
Whether to express interest depends on your agreement, your service, your visa, your insurance and your plans, and this page can only set those out. A union, an employment lawyer or a Community Law centre can advise on your case. Do it before the expressions of interest close, not after.
What it pays
Usually the same as compulsory redundancy. In the LINZ and PSA agreement, an accepted expression of interest ends in a termination by reason of redundancy, so clause 10.16 applies: three months' pay for less than ten years' service, six months' pay for more than ten, outstanding leave paid on top, and nothing else except payment in lieu of notice. Some employers add an incentive above the formula to encourage volunteers; if yours does, it should be in writing before you express interest, not after.
The tax is the same too. A voluntary redundancy payment is an extra pay, taxed under Inland Revenue's method by adding it to your annualised pay and applying one rate from the extra pay table to the whole payment, using the column without the ACC earners' levy, which does not apply to redundancy payments. KiwiSaver is not deducted from it. Student loan deductions are, at 12 percent, if you have a loan.
The difference is often in the notice. A compulsory redundancy usually carries a notice period, worked or paid in lieu. A voluntary one is often agreed with an exit date instead, and if that date is inside the notice period there may be no payment in lieu unless you negotiate one. Under clause 10.16.5 of the agreement quoted, payment in lieu of notice is the only thing payable beyond the formula and leave, so it is worth asking for expressly.
When it makes sense, and when it does not
It can make sense when your role is being disestablished anyway and volunteering brings an incentive or an earlier exit date you want; when you have a job to go to and the payment is a bonus; when your service is just past a formula threshold, so the payment is at its highest; or when the restructure has made the role one you no longer want. In each case the comparison is the one the redeployment guide in this series sets out: the net payment against the salary you would otherwise earn, over the time it will take to replace it.
It rarely makes sense when you hold a work visa tied to the employer, because an Accredited Employer Work Visa lets you work only in the job, for the employer and in the location on it, and the visa guide in this series explains what ending that employment means. It rarely makes sense when a mortgage application is in progress, when your service is just short of a threshold, or when the plan for the gap is a KiwiSaver hardship withdrawal, which requires the supervisor to be satisfied that other sources of funding have been exhausted.
Insurance is the quiet reason not to volunteer. The published redundancy cover wordings exclude voluntary redundancy: AIA's definition of redundancy does not include a situation where the life assured voluntarily elects redundancy, and Chubb's brochure lists a voluntary resignation, redundancy or retirement among the things not covered. If you hold a policy with a redundancy benefit, expressing interest may be the difference between a claim and no claim. Read the wording before you put your hand up.
| Situation | Volunteer? | Why |
|---|---|---|
| Role being disestablished anyway | Often | The payment is coming; volunteering may add an incentive or a better date |
| Service just past a formula threshold | Consider | The payment is at its highest point |
| Service just short of a threshold | Rarely | Months of service can double the formula |
| Work visa tied to the employer | Rarely | The visa's conditions end with the employment |
| Policy with a redundancy benefit | Rarely | Voluntary redundancy is excluded by the published wordings |
| Mortgage application in progress | Rarely | The lender assesses income, and a redundancy ends it |
The numbers to run first
Three calculations, in this order. The payment after tax, from the lump sum calculator paired with this guide, using your salary and the formula in your agreement. The stand-down at Work and Income, because a voluntary redundancy is treated as a redundancy: Work and Income's own page says that if you are made redundant and get redundancy pay, you will have a stand-down of one or two weeks, set by your average weekly income before tax over the 26 or 52 weeks before you apply, with the redundancy payment itself counted in that average. And the runway, which is the payment after tax divided by your essential weekly spend, less the weeks the stand-down and the arrears week take before the first benefit payment.
Run them with the exit date the employer is offering, not the one you would prefer, and with the search taking twice as long as you expect. If the sums still work, express interest in writing, ask for the payment in lieu of notice and any incentive to be confirmed in writing, and ask whether the payment date can fall in the tax year that suits you. If they do not work, the redeployment and negotiation guides in this series are the next two steps.
The extra pay method annualises your recent pay and adds the payment. A payment made in a low-earning period, or after a change in the tax year, can land in a lower row of the table. The lump sum calculator lets you test both dates.
Related guides and tools
- Lump Sum and Redundancy Tax Calculator, the payment after tax under the extra pay method
- Work and Income Stand-Down Calculator, the stand-down, the first payment date and the cash to bridge the gap
- Public Sector Redundancy, the formula clause by clause and the rule that can cancel it
- Redundancy Insurance, why the published wordings exclude a voluntary exit
- Redundancy on a Work Visa, what ending the employment on your visa means
Test Your Knowledge
Ten questions on what an expression of interest is, what voluntary redundancy pays, who should not ask, and the sums to run first.
Sources: Toitu Te Whenua Land Information New Zealand and PSA Collective Employment Agreement 2023 to 2025, clauses 10.15 and 10.16, released under the Official Information Act; Work and Income, stand-down periods, read 3 September 2026; Inland Revenue, calculate PAYE for a lump sum payment, read 3 September 2026; AIA Living Personal Redundancy Benefit policy wording 1113 AL-RED version 1 and Chubb Assurance Extra Redundancy Cover brochure CIG0015 V3, read 3 September 2026; Immigration New Zealand, Accredited Employer Work Visa conditions, read 3 September 2026.