Redundancy payments by regulation

Press, Volume CXVI, Issue 34129, 15 April 1976, Page 12

Redundancy payments by regulation

The Federation of Labour could not be expected to accept the new regulations restricting redundancy payments without an outcry on behalf of its members. That does not mean that the regulations, or the manner in which they were made, are wrong. The regulations must be seen as part of the Government’s economic measures to restrain inflation and maintain employment, rather than as an industrial or social matter which they might have been in more normal times. As such, the regulations were not a matter for negotiation. If the F.O.L. was not advised of what was being done—and this seems unlikely, in spite of the complaints of Sir Thomas Skinner—the F.O.L. was placed in a situation no different from that of importers when import restrictions are changed, or financial institutions when interest rates are adjusted If villains must be found, they are among those larger employers, especially in the North Island, who have conceded inflated redundancy payments as a means of buying industrial peace in the last few months. A situation was reached where unions were “ leap-frogging ” one another in their attempts to secure better and better redundancy payments for their members. Had the Government waited until suitable comprehensive legislation had been drafted, the situation would have been out of control.

Employers now have the support of the Government in resisting excessive claims: employees still have access to the Industrial Commission and other tribunals in exceptional circumstances. The regulations are not harsh. Indeed, until the last few months many unions would probably have been satisfied if they had secured for their members assurances of one week’s pay for each year of service in a redundancy agreement. Their latest claim was for three weeks’ pay for redundancy after one year.

Much of the success of the regulations will turn on the interpretation of redundancy. The Severance and Re-employment Bill brought before Parliament last year by the previous Government was much too loose in its definition of redundancy. Agreements since have included a variety of more precise definitions. Redundancy payments should not be allowed to become a form of penal payment forced on struggling employers, regardless of the circumstances.

The Government has acknowledged that the regulations are no more than a temporary measure to restrain excessive payments until legislation can be enacted. That will take some time if there is to be adequate consultation and some measure of agreement among all those affected. The questions of retraining, and of the proportion of the costs of redundancy which should be borne by employers and by the rest of the community, have still to be worked out. In the meantime, workers have a clear indication of the compensation they can expect if they lose their jobs because of the decline in economic activity. The maximum figure will almost certainly become the minimum figure as well, so that many workers not covered by existing redundancy agreements are likely to be better off as a result of the Government’s decision.