Redundancy law

November 29th, 2012 at 7:00 am by David Farrar

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.

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54 Responses to “Redundancy law”

  1. thedavincimode (6,759 comments) says:

    Hmm. And I guess if you forget to include your pay in the agreement you won’t get paid anything either.

    Maybe Susan Hornsby-Geluk used to be an Associate Professor at Massey.

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  2. swan (665 comments) says:

    “largest factor by far in the gender pay gap.”

    I’ll stick with childbearing.

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  3. somewhatthoughtful (465 comments) says:

    You sure seem to love increasing the size of the welfare state.

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  4. jakejakejake (134 comments) says:

    I don’t support it but I also don’t like the idea of tax payers footing the bill through the unemployment benefit where employers are unwilling but able to pay some form of redundancy entitlements.

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  5. Hamnida (905 comments) says:

    With Hobbit-mania and Traitor Jackson in the Capital, I guess it is no surprise to find another attack on workers posted on a a Right wing blog. In this case, a post that totally ignores the power imbalance between employer and employee. Can you imagine a cleaner at a four star hotel who has English as a second language negotiating a redundancy provision with the CEO or head of HR?

    Here are some questions for you Neolibs:

    1. You really don’t think four weeks redundancy should be a minimum requirement when a worker’s employment is terminated through no fault of their own? I mean we are not talking months or years. This could be around $2000 until a minimum wage worker finds new employment. Is this “onerous”?

    2. Does the percentage difference between male and females with redundancy provisions if their employment agreements not concern you? 57% v 9% in the U.S.

    3. If a business goes bust, do you really think they will pay the redundancy? Or do you think workers will be the last creditors on the list?

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  6. RRM (9,915 comments) says:

    Yes, a constantly changing playing field, that’s what industries need to help them keep people employed in making stuff and selling stuff.

    Good on you Sue, you know what my employment contract should have in it better than my boss and I do.

    (Incidentally we are both happy with it the way it is, and it has been in place for a long time.)

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  7. scrubone (3,099 comments) says:

    Hamnida:

    1. No. It is not the fault of the employer if the employee does not plan their personal finances. Seriously, it’s not.
    2. No. Men and women are different, that doesn’t justify making a law.
    3. You’re missing the point. The point is that redundancies can place struggling businesses in a no-win situation because it is too expensive to let people go. So the entire business goes down rather than just a few people.

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  8. RRM (9,915 comments) says:

    1. No. I’d rather just get paid the money now while I’m actually working.
    2. No.
    3. No, if they fall into the hole big time, it’s conceivable they may not have cash to pay staff redundancies. All the more reason for my answer to 1.

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  9. Reid (16,440 comments) says:

    As I’ve said before, what should happen with redundancy is that the tax on it should be reduced to 5% which is what it used to be in the 80’s and 90’s. This gives a massive boost to the net payout without affecting the employer and has a completely negligible effect on the consolidated account.

    I don’t expect the Nats to have picked up this obvious solution but I’m surprised not one of the lefties has ever suggested it, despite this becoming since 2008 one of the electorate’s hot button issues which would get a lot of support and which would be quite difficult for the Nats to argue against, if one of the lefty parties decided to make it a media issue.

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  10. Manolo (13,735 comments) says:

    1. No.
    2. No.
    3. No.

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  11. scrubone (3,099 comments) says:

    Oh, and can we stop this stupid trator nonsense. Your accusation that he paid his legally mandated tax, hired people as contractors and had a company he hired have an accident with a horse is treason is beyond silly.

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  12. Hamnida (905 comments) says:

    Reid – could be an idea. I have always thought the model many Western European Nations use would work well here. An extra tax, or employer/employee levy like ACC, that can be accessed if someone is made redundant.

    It would work like an insurance policy against being made redundant and provide long-term stability for employers and employees.

    scrubone – All I am suggesting is that Jackson and his cronies pay the standard New Zealand tax rates. I and many others pay them, so why shouldn’t Jackson.

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  13. RRM (9,915 comments) says:

    A superb post from another thread that bears repeating here.

    Strike out “Ross69″ wherever you see it and insert “Hamnida”

    thedavincimode (3,942) Says:
    November 29th, 2012 at 7:40 am

    ross69

    You clearly don’t understand the point that I was making but then I wouldn’t expect you to. Your take on this is constrained by a nineteenth century class struggle. I’ve had a union rep like you. It was never about me; it was about the class struggle: them and us. And irrespective of what was in my interests, the only thing that counted was perpetuating that “struggle” with maximum bitterness and mistrust that reflected an embittered outlook forged by bad employers that allowed no room to good employers (mine).

    You are clinging to your imagined motivation of Warners like a rat to driftwood. Anyone here who has worked and lived in different countries at a senior level or who has had any involvement with multi-national organisations and the way they operate in a global economy in which countries compete with each other for tax and business would know that it is entirely plausible that Warners have taken their business elsewhere for reasons that in reality had nothing to do with this film in isolation.

    You talk glibly of “subsidies”, yet you refuse to acknowledge what what they mean in this context, or that we have historically “subsidised” foreign investment in order to attract foreign investment. You have a very over-inflated view of NZ’s relevance to the rest of the world. You need to understand something. We are fuck all and virtually irrelevant.

    Your point about about housing subsidies is remarkable for the stupidity that it reveals. That is a hard subsidy. It takes money from citizen X and gives it to citizen Y. Concessional taxation of a NZ film production that occurs here and brings economic benefit here that would not otherwise arise, is nothing like the subsidies that we provide at a domestic level, including your bullshit slum-building policy. Even more so having regard to the fact that all the profits come from the global marketing and franchising of the film which occurs elsewhere and is taxed elsewhere.

    But there we are. You have succeeded in getting me to waste my time by responding to you – a futile and pointless act. Hence my earlier and more efficient suggestion that you are full of shit and should fuck off.

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  14. dime (9,972 comments) says:

    “An extra tax, or employer/employee levy like ACC, that can be accessed if someone is made redundant. ” – lmao new taxes! they solve EVERYTHING!

    wouldnt a new tax hurt the “worker”? i know, how bout we only tax the rich blah blah blah

    must suck being poor hammy, i think you should do some training and make yourself for valuable to an employer. you will get further than dreaming about socialism and how to tax those evil rich fellas.

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  15. scrubone (3,099 comments) says:

    scrubone – All I am suggesting is that Jackson and his cronies pay the standard New Zealand tax rates. I and many others pay them, so why shouldn’t Jackson.

    If Jackson was breaking the law and not paying his tax, the IRD would be chasing him. Or are you suggesting he has somehow bribed the IRD?

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  16. berend (1,708 comments) says:

    Susan: Employees may need greater protection in tough economic times,

    Why are most people in NZ so incredibly naive on economic matters? It should be just the opposite. In tough times you want to give employers the ability to take people on without burdening them with the problem they can’t be sacked if the business doesn’t go so well.

    If you don’t do that, people only hire when in very great need. So less people employed, less skills being transfered, and fewer people in the workforce.

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  17. berend (1,708 comments) says:

    Hamnida: In this case, a post that totally ignores the power imbalance between employer and employee.

    Who is stopping the employee from becoming an employer?

    NZ is apparently top in the ease of starting a company.

    Please tell me I pray.

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  18. scrubone (3,099 comments) says:

    Why are most people in NZ so incredibly naive on economic matters?

    Because we have had people in power that think like Sue Moroney for far, far too long.

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  19. Sadu (129 comments) says:

    Labour can’t have their cake and eat it – either they want to promote the creation of jobs, or they want more complicance costs for employers. Can’t have it both ways sorry.

    Personally I’d support a minimum 4 week notice period for redundancy, which seems fair and reasonable, but that’s it. Having to pay 4 weeks extra wages in exchange for no work at a time when my business was struggling would sink me, just like the article says.

    People bitch and moan about the lack of jobs in this country. I happen to disagree – you learn a lot of skills with the internet + time. But as a small employer I see Labour spouting ideas like this and I think “fuck it, it’s too hard to employ people”. Rules like this make me more cautious about taking on the next employee. I’m less inclined to hire someone and give it a go, knowing I’m going to get reamed if it doesn’t work out.

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  20. scrubone (3,099 comments) says:

    Here’s a novel idea: (seriously, it’s novel)

    Let’s have our left-wing commenters here propose an idea to help workers that we can all agree would actually help workers and not hurt other workers.

    Seriously, let’s have some ideas.

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  21. YesWeDid (1,048 comments) says:

    Being an employer and an owner of a small business I agree with Sadu, 4 weeks minimum would be fair, anything more than that would put a strain on the business and possibly push it under.

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  22. Hamnida (905 comments) says:

    berend – “capital”

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  23. graham (2,335 comments) says:

    Hamnida:

    I guess it is no surprise to find another attack on workers posted on a a Right wing blog.

    One slight point you may have overlooked there, Hamnida – just about everyone on this blog IS a worker.

    Anyway, re your suggestion that “four weeks redundancy should be a minimum requirement when a worker’s employment is terminated through no fault of their own.” Couple of points occur to me:

    1. This has got be paid from somewhere, so where should the employer find it from? The money they already contribute to my Kiwisaver account, maybe? Or they could reduce my current wage and put the money towards that day when I *might* be made redundant? Hmm, what a choice …

    2. If you want the employer to pay the employee four weeks redundancy when they terminate their employment, does it work the other way around? If an employee decides to leave the company for some reason (they want to head over to Australia, they’ve found a better job, whatever) and thus leaves the employer – through no fault of the employer’s – in the lurch, having to reassign that employee’s tasks to someone else, alter pay sheets, go through the long and complicated process or hiring somebody new, getting that new employee settled in and trained up, coping with the inevitable downtime while the new employee comes up to speed – isn’t it fair that the employee should pay the employer for that massive inconvenience they’ve just caused him?

    How much do you reckon is fair for the employee to pay the employer, Hamnida? $2000 sound about right?

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  24. Luc Hansen (4,573 comments) says:

    Sadu and others…

    Four weeks notice gives a lot of time to get revenge on an employer if the employee feels hard done by. One aspect of the employment relationship oft forgot is that, when in the mood, employees can give capitalism a good run for its money in the black art of creative destruction!

    More seriously, it’s the role of government to set the rules for the business environment and for said businesses to chose whether or not to dip their toes in that paddling pool. Abdicating from that responsibility, as is the case with the last succession of governments in regards to this particular aspect, is not governance.

    There are already quite stringent (although, in practice, easily negotiated) rules around redundancy, and the addition of the requirement of minimum of four weeks pay in addition to existing entitlements is not as onerous as some here would like to make it.

    In addition, employees make a serious commitment when they agree to take on a position and if the employer doesn’t have his/her ducks in a row then the employee deserves to be compensated for that failure.

    A final point is that, as mentioned above, we are rated as one of the easiest start-up environments in the advanced world, so a minor tweak in favour of employees after a couple of decades of hollowing out employee protections will not bring the sky down upon our heads. In fact, recent IMF research shows the opposite would probably be the case.

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  25. Sadu (129 comments) says:

    “In addition, employees make a serious commitment when they agree to take on a position and if the employer doesn’t have his/her ducks in a row then the employee deserves to be compensated for that failure.”

    It’s a serious commitment on both parts. More so on the part of the employer who gets far less exit rights and wears substantial risk if the employee is not suitable for whatever reason. There is no compensation for the employer if the employee leaves after a few months, after all the training and getting-up-to-speed time that happens with a new employee.

    Anyway – my main point still stands. You can’t champion more compliance costs for employers and at the same time complain about there not being enough jobs going around. So which is more important?

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  26. Hamnida (905 comments) says:

    graham – I think the employee needs to give appropriate notice if they wish to resign their position. Four weeks seems about right unless another period is mentioned in their employment agreement.

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  27. OTGO (548 comments) says:

    This in addition to 4 weeks paid annual leave, bereavement leave, sick leave and god knows what other entitlements previous governments have bought votes with over the years. I have been an employer since 1987 and I still can’t get my head around paying people NOT to come to work.

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  28. queenstfarmer (782 comments) says:

    @Hamnida – you obviously know very little about creating jobs or paying for them, so let me educate you on at least one point:

    3. If a business goes bust, do you really think they will pay the redundancy? Or do you think workers will be the last creditors on the list?

    Unpaid wages and redundancy pay rank above unsecured creditors, even ahead of unpaid taxes. So no, workers are far from the last creditor on the list.

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  29. YesWeDid (1,048 comments) says:

    Luc there is a hell of a lot more to running a business than just getting your ‘ducks in a row’. Most businesses will be at the mercy of a large number of external factors that they can’t control; customers who don’t pay, earthquakes that destroy your business or your customers business, commodity prices that fluctuate up and down.

    Making someone redundant isn’t easy, but you do it to help safeguard the jobs of others. Forcing employers to pay out large redundancy payments when you are already cash constrained would mean you would act earlier in a downturn to reduce staff numbers or not make people redundant and let the company go into receivership, and then everyone loses.

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  30. graham (2,335 comments) says:

    Hamnida: And I would expect the employer to give reasonable notice when making an employee redundant.

    Good. We agree on that principle. Both an employer and an employee should behave reasonably.

    Now … if an employer, despite giving reasonable notice of making someone redundant, should still be required to pay that person redundancy, how about the employee paying the employer for the inconvenience when they quit? How much do you think it costs an employer to go through all the rigmarole of making sure all the correct processes are followed when an employee leaves (advising IRD, altering their payroll records, ensuring that the employee’s access to company premises, IT systems, network, etc is properly revoked, calculating leave entitlements, assigning their tasks to someone else, and so on) and hiring a new employee (placing ads, interviewing candidates, making the decision, bringing the new employee on board, training them, acquiring new computer, H&S induction, setting up payroll, advising IRD, Kiwisaver …)? Any idea Hamnida? I don’t know how much the above costs an employer, but I’m willing to bet it’s a sizeable amount.

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  31. Weihana (4,537 comments) says:

    OTGO (305) Says:
    November 29th, 2012 at 11:03 am

    This in addition to 4 weeks paid annual leave, bereavement leave, sick leave and god knows what other entitlements previous governments have bought votes with over the years. I have been an employer since 1987 and I still can’t get my head around paying people NOT to come to work.

    Think of it as paying to keep the spit out of your morning coffee.

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  32. OTGO (548 comments) says:

    Weihana,
    I still have my very first employee working for me in fact over 70% of my employees have worked here for over 10 years. I have had some bad eggs over the years but generally employing people has been a rewarding experience.
    I’d trust any one of my staff to make me a coffee and they frequently do sans spit.

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  33. graham (2,335 comments) says:

    Weihana: Cool. So an employee who hands in his notice because “I can’t be arsed getting up at 6:00 in the morning to come to work any more and want to bugger off to Australia” should be happy to pay his employer 4 weeks compensation.

    Think of it as paying to avoid that “anonymous” tip-off to the police about the suspected drug-dealer fleeing the country on Air NZ flight xxx. And the further “anonymous” tip-off as to where his own stash might be hidden (“break out the latex gloves boys, we’re going in!”)

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  34. Weihana (4,537 comments) says:

    OTGO,

    And all your employees are entitled to sick leave, bereavement leave and four weeks annual leave. A correlation perhaps.

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  35. scrubone (3,099 comments) says:

    Weird comment by Luc, who seems to have forgotten that the unions pretty much wrote our employment legislation for 9 years.

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  36. scrubone (3,099 comments) says:

    There are already quite stringent (although, in practice, easily negotiated) rules around redundancy, and the addition of the requirement of minimum of four weeks pay in addition to existing entitlements is not as onerous as some here would like to make it.

    That’s always the excuse, isn’t it?

    Oh, it’s just a little thing. Along with the hundred other little things that someone thought of previously.

    It’s a little thing that takes responsiblity away from the employee. Sorry, but my employer is not my nanny and I deplore any attempt to make them such.

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  37. Weihana (4,537 comments) says:

    graham,

    I don’t see the need for that or for requiring redundancy compensation.

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  38. graham (2,335 comments) says:

    Weihana, fair’s fair.

    If the employer should have to pay to avoid the extra froth on top of the coffee, why shouldn’t the employee have to pay to avoid the cavity search?

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  39. big bruv (13,880 comments) says:

    Redundancy clauses can damage businesses at a time when we need them to have every advantage so as to help rebuild our economy.

    A classic example of how this is the case is happening at my workplace right now. We have an employee (let’s call him Bruce) who has been with the company for over twenty years. Until recently not one of the general managers Bruce has worked under in those twenty years has ever had the balls to address Bruce’s temper and sometimes appalling customer relations.
    I suspect that the previous general managers have looked at what he produced every month and thought that they would put up with his behaviour (despite numerous complaints from fellow staff members) because he produced what they considered to be an acceptable result.

    Where things become difficult is that earlier this year Bruce went overseas for a month on holiday, during that time his replacement more than doubled what Bruce would normally produce in a month. This replacement has now been made a full time staff member and consistently out performs Bruce each and every month. What makes things more difficult is that the new General Manager has had at least half of the staff come to him and mention that they far prefer to deal with the replacement than Bruce.

    The replacement is more than capable of doing the job on his own, as a result Bruce is surplus to requirements. The plan was to make Bruce redundant, however Bruce has an employment contract that goes right back to the days of redundancy clauses and it would cost the business close to $110,000 to get rid of him.

    This is a problem that many businesses face, it is time for Bruce to move on yet the company is saddled with an under performer simply because of a clause in his employment contract that makes moving him on a very expensive option.

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  40. Weihana (4,537 comments) says:

    graham (1,475) Says:
    November 29th, 2012 at 12:13 pm

    Weihana, fair’s fair.

    If the employer should have to pay to avoid the extra froth on top of the coffee, why shouldn’t the employee have to pay to avoid the cavity search?

    I’m not sure why cavity searches are on your mind, but it may interest you to know that an anonymous tip does not allow the police to go searching in people’s rectums. People who go to the airport implicitly consent to be searched and to undergo an X-ray. Though that still doesn’t mean the police can go fishing inside someone’s asshole even if they’re at the airport and even if the informant leaves their name and number.

    While you’ve been dreaming about latex gloves and lube you’ve missed the obvious incentive for employee’s to give notice: the employer reference.

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  41. graham (2,335 comments) says:

    Why is spitting into somebody’s coffee on your mind?

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  42. Weihana (4,537 comments) says:

    graham,

    It’s something worth avoiding, obviously. Not only literally but metaphorically as well. I think you get more out of people when you don’t treat them like serfs.

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  43. infused (654 comments) says:

    I struggle enough with annual leave.

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  44. Hamnida (905 comments) says:

    I thought annual leave would be easy for you Neolibs – 8% or 4 weeks.

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  45. graham (2,335 comments) says:

    Weihana, I agree you get more out of people when you don’t treat them like serfs. You also get more out of people when you don’t take advantage of them and say, in effect, “Thanks for paying my wages, and Kiwisaver contributions, and providing me with an office and a computer and a chair and a desk and a phone and tea and coffee facilities and a microwave and fridge, and maybe some perks like a subsidised healthcare membership or subsidised gym membership … but I’ve got a better job offer, so I’m leaving. Yeah, I know that you’ll have to find someone else to do my job and take the hit in lost productivity while they come up to speed and learn the ropes and maybe undertake the induction training (which you pay for), but that’s life. See ya. Oh, and of course I expect a glowing reference from you, okay?”

    As I said before, works both ways. If you want employers to treat employees with respect, let’s have employees treat their employers with respect also.

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  46. graham (2,335 comments) says:

    Oh, and I would NEVER spit into my boss’ cup of coffee. I have no idea why you would consider that an acceptable thing to do.

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  47. RRM (9,915 comments) says:

    You make it sound like employing somebody is positively an act of charity graham :-)

    There is some merit to what you’re saying though…

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  48. graham (2,335 comments) says:

    I’m just damned if I can understand why some people consider that they’re the greatest thing since sliced bread, God’s gift to women AND their employer, and the boss is damn lucky to have them because they’re so wonderful and the boss had better get with it and treat them like their sh!t doesn’t stink …

    If somebody really is that brilliant, then why haven’t they started their own business, made a million and retired by the time they’re 30?

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  49. Weihana (4,537 comments) says:

    graham,

    I never endorsed spitting into someone’s cup of coffee.

    Further, some regulations are necessary not because some workers are so brilliant, but because they are so ordinary and thus lack any real bargaining power to negotiate reasonable conditions.

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  50. David Garrett (7,270 comments) says:

    Hamnida: (Someone actually knows who this clown is don’t they?)

    As soon as you read the words “capital” “worker” or “tory” you know you are dealing with a complete f…wit….sadly, they can be quite old…apparently Yoza is over 50….

    Let me break something to you…”the workers” – of whom I was one for half of my working life – don’t spend their evenings writing poetry by candlelight in their garrets…in this country at least, many of them aspire to being self-employed, perhaps with one or two others they know and trust as employees…totally contrary to the law, most such people dont bother with written employment agreements because they all know and trust each other…the rest – who dont want the hassles of self employment – havent the slightest interest in carrying on the class war even the Brits have abandoned…

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  51. Viking2 (11,467 comments) says:

    big bruv (10,843) Says:
    November 29th, 2012 at 12:30 pm

    Redundancy clauses can damage businesses at a time when we need them to have every advantage so as to help rebuild our economy.

    Comes down to using discipliary procedures along with kpi and job specs ( jobs change and that’s a discussion to have), etc to sort this out. Warnings about behavoir being no longer acceptable etc etc.

    Unacceptable behavoir, good record keeping, absolute manical sticking to the correct process and bingo its over.

    Or just move him to a new position that he won’t like.

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  52. big bruv (13,880 comments) says:

    V2

    Thanks, that is what they are doing as far as I am aware. Personally I favour the “here is a cheque for eight grand, now fuck off” option.

    While it would cost us a bit of money up front we would make far more than that with him not being there.

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  53. Viking2 (11,467 comments) says:

    Often you find that the person actually doesn’t like things either and is releived when it happens.
    Seen that a few times.

    With the current crop of socialist Nats don’t be surprised if it makes it into employment law. They can’t deal with youth unemployment and youth rates which anyone with any age on them will tell you needs fixing. Expecting youth employment to rise when an employer has to pay for people with no skills let alone work skills is brain functionless territory.
    That apparently is very prevelant among the advisors to the employment class.

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  54. Sponge (176 comments) says:

    Well Hamnida,

    This vile capitalist pig gives my staff 5 weeks leave, full comprehensive health care for them, their spouse and their kids, a week in a resort in Wanaka each year (all costs apart from food and booze paid) and time off (within reason) whenever they want it – Your kids in a school play? – you go to it.

    I have no clause in our contracts regarding redundancy but everyone knows that if we all work together thee will be no risk of it. The contracts have specified hours and I have never once asked one of my staff to work more then is required in the contract (they get paid normal rates for overtime) but after the earthquakes we have done a huge amount of hours. What you suggest it a barrier to having me employ one or two more people this year – which I plan to do.

    Do you think making me provide for redundancy will make me a better employer?

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