Coping with redundancy

Redundancy is in the news with the Qantas NZ collapse. MATHEW DEARNALEY looks at workers' entitlements and where to turn for help if the worst happens.

Redundant. No longer needed. Surplus to requirements.

It's a cruel world, and the notion of jobs for life in the public service or key industries bit the dust in the restructuring upheavals of the 1980s.

Employment law remains founded on the principle that it is the job, not the worker, that becomes redundant, so blameless victims of bad economic times or poor management decisions can at least hold their heads up to the world.

But try telling that to the 1100 Qantas New Zealand workers and hundreds of subcontracting staff hit by the company's sudden receivership last weekend.

Or the more than 1200 Deka department store workers facing redundancy in coming months with no compensation entitlements to fall back on, after provisions for these disappeared for all but 149 long-serving staff.

Many Qantas workers were covered by redundancy agreements, but these mean little when they have to line up with other unsecured creditors believed to be owed tens of millions.

That is a predicament from which the Engineering, Printing and Manufacturing Union hopes to protect employees of other firms, with a proposal for a new scheme to keep redundancy money out of the hands of receivers.

Why do we have redundancy agreements?

Engineering union secretary Andrew Little says redundancy agreements came about not because of any largesse by employers, but in response to industrial action taken in the 1960s and 1970s against dismissals.

Such agreements took on lives of their own over the years, and employers complained that gold-plated schemes prevented them from restructuring struggling businesses.

Many, therefore, took advantage of the old Employment Contracts Act to take the pruning shears to such agreements, including one which guaranteed 21 weeks' salary to employees of the former Auckland Regional Authority.

But Mr Little says the extension of personal grievance provisions to all employees, including executives, under the contracts act led to the most notable redundancy payouts. Executives were previously assumed to be capable of looking after themselves in negotiating exit payments, and their inclusion defeated the purpose of redundancy provisions.

Service and Food Workers' Union secretary Darien Fenton calls redundancy money a mixed blessing, because it opens workers to the possibility of losing jobs they once would have fought tooth and nail to keep.

Redundancy deals at top levels of the public service, including six-figure payouts to Fire Service, health and accident insurance officials, have attained great notoriety.

The largest known deal is the $6.5 million which an arbitrator ordered Television New Zealand to pay sacked presenter John Hawkesby.

Unfortunately for Qantas employees, they are likely to end up close to the bottom of the scale.

How prevalent are redundancy agreements?

They are most common in the unionised workforce, with about 70 per cent of members covered. But unions represent only about 17 per cent of all employees.

A Labour Department survey late in 1999 also found redundancy provisions in 45 per cent of contracts covering workers with no union or other bargaining agents representing them.

But its data base included only collective contracts covering 20 or more workers, and most wage earners on individual deals are unlikely to have any redundancy compensation.

I thought I had a perfectly good redundancy deal. So why do I need a new scheme?

Workers are treated as preferential creditors under the 1967 Insolvency Act, but only for unpaid wages and holidays up to a maximum of $6000 before tax. Unionists believe it could be months before Qantas receivers release the money.

Their members rank third in line behind the receivers or liquidators and the winding-up creditor, who receives preference for legal and other associated costs.

Redundancy entitlements and unclaimed sick pay are given no greater preference than any other unsecured creditors, over whom the Inland Revenue Department always takes priority.

How can that be rectified if a firm finds itself with no way of paying its bills?

The engineering union, which represents about 600 Qantas workers, wants employers to set up trusts into which they would make regular payments as contingency reserves in case of any redundancies down the track.

Independent trustees would control the money, which Auckland accountant and insolvency specialist Jeff Meltzer says would be off-limits to receivers or liquidators without any need for new empowering legislation.

What about super? Will my entitlements be at risk if my employer goes broke?

Not unless your employer resorts to fraud, as British newspaper tycoon Robert Maxwell did when he looted $1.55 billion from his employees' pension fund before jumping or falling from his luxury yacht to his death in 1991.

Superannuation trusts remain protected from any receiverships, as would the union's new redundancy scheme, and there are indications that early interim payouts will be made to members from the one covering Qantas staff.

Surely a new redundancy scheme would be an added cost to business? Why would my employer want to remove money from cashflow when it may never be needed?

Mr Little accepts that people do not set up businesses expecting to fail. But he says businesses reserve the right to restructure their operations to improve profitability, and the union is simply inviting them to make orderly provisions to meet already-negotiated contractual obligations to staff.

Mr Little says people setting up in business should always provide for exit costs in the event of failure, and his union intends including redundancy trust proposals in its negotiations for future work agreements under the new Employment Relations Act.

He suggests that if Qantas had set up such a trust, its directors would not be facing public scorn for leaving workers without any means of support.

If the business takes off and there is no need for any redundancies, each worker's contingency allocation would be returned to the company's general funds when that person left for another job, or retired.

That sounds fine in an ideal world, but will employers accept that logic?

Canterbury employers' leader Peter Townsend was firmly against the scheme on National Radio this week, saying it would be yet another compliance cost to business and would dampen job growth.

But that was before he was told the union was proposing it as a voluntary scheme, rather than as a statutory obligation. Despite remaining unenthusiastic, he quickly adopted the stance of supporting any agreement entered into voluntarily by employers and workers.

Employers' Federation chief executive Anne Knowles seconded the motion when phoned by the Herald yesterday, but said employers needed to consider a range of issues such as the added drain on cash flow and how a scheme would be treated for tax purposes. "It might not be cost effective to have a lot of money tied up on the off-chance you might go out of business."

Will the Government help me if my employer's cupboard is bare?

Laid-off workers who cannot find other jobs are entitled to unemployment benefits after stand-down periods of between one and 10 weeks, depending on how much paid holiday leave or redundancy compensation they receive.

The Department of Work and Income has told redundant Qantas staff that emergency benefits are not automatically available to single people who have earned more than $21,500 in the past year. For those with children, the limit is between $27,300 and $31,000.

But Winz says it has wide discretion to grant assistance if people are having trouble putting food on the table, and urges any former Qantas staff facing hardship to seek an early interview.

Where do I go for help?

Six Winz offices in the Auckland region have been set up to give urgent attention to people caught the receivership. Those offices are in Queen St, Manukau, Highland Park, Onehunga, Westgate and Takapuna.

Call 0800 559-009 for an urgent appointment and say you are an aviation worker.

Or call the engineering union on 09 303-9000.