EMPLOYMENT LAW: Nine-Day Working Fortnight – The New Alternative To Redundancy

The nine-day fortnight was one of the headline suggestions to come out of the Government’s recent Jobs Summit. The scheme is designed to give businesses extra help to ride out tough economic conditions, hopefully saving few jobs in the process. However, there are many other alternatives to redundancy that are often forgotten by employers when making the decision to cut costs.
It is important to remember that redundancy is still dismissal. It can actually be difficult to carry out redundancy in way that complies with the law; there are detailed selection and consultation requirements, and all other alternatives (see below) must be fully explored.
Because of these complex obligations, many employees who are made redundant sue their former employer, claiming that the redundancy was not genuine (for example, they claim it was really about performance). Alternatively, they say the process was unfair – or both. In some redundancy cases, the Employment Relations Authority has made significant awards.
For all these reasons, it makes sense to keep redundancy as last resort, rather than rushing to lay people off at the first sign of reduction in business.

The nine-day working fortnight
The nine-day working fortnight will be aimed at companies with over 100 full-time employees, and applies between 27 March 2009 and 31 December 2010.
Any reduction in hours of work to nine-day working fortnight is to be voluntary. At this stage, it is not clear whether this means an agreement must be signed by each employee, or whether the Government expects that in the case of collective agreements, scheme voluntarily negotiated between an employer and union would apply to all employees covered by the collective. Technically, an employee covered by collective would not be bound to accept the nine-day fortnight unless the requirements to amend the collective itself were met.
A number of additional features apply to the scheme:
• Any nine-day fortnight arrangement is subject to maximum period of six months.
• Employees need at least two months’ full-time service with their employer.
• The subsidy will be available for up to 10 employees, for each averted redundancy (although it is not clear how employers must show the need for redundancies in order to receive the subsidy).
• While workers are involved in an employer’s nine-day fortnight scheme, they cannot be made redundant, unless the employer comes off the scheme.

How do employers actually manage nine-day fortnight?
After nine-day fortnight is agreed upon, employers will then be paid $12.50 an hour per worker (equivalent to the adult minimum wage), for up to five hours per fortnight. The Government’s expectation is that its contribution, while paid direct to employers, will be passed on to the workers who agree to reduce their working hours. Employers can also choose to make additional contributions.

Alternatives that employers can consider
Although nine-day fortnight could be good alternative to redundancies for employers needing to cut costs, it is only one of the many options available. Many of these options may seem obvious, but they are frequently forgotten. They include:
• redeployment
• retraining
• flexible working arrangements
• restricting overtime
• relocating staff
• offering early retirement
• agreeing reductions in pay
• bringing outsourced work back in-house
• not replacing departing staff
• hiring freezes
• voluntary redundancy.
If employers are open and honest with employees about the need to cut costs, most employees will be eager to think creatively in order to avoid redundancy. Job sharing, working from home, compressed hours (doing the same number of hours in fewer days), and reduced hours could all be attractive possibilities.
It is important to remember, however, that regardless of how dire an employer’s financial situation is, simply cutting or not paying wages is unlawful, unless the employee’s agreement is obtained first. Even then, the employer must still pay the minimum wage.
Employers who breach these obligations may have to throw themselves on the tender mercies of labour inspector, who, if the employer will not pay up, can take case on the employee’s behalf to the Employment Relations Authority. In that way, the employee avoids having to pay lawyer or an advocate. The Authority can hear wage-deduction claims, or minimum-wage claims, for up to six years after the money became due (rather than the 90 days that applies to personal grievances, apart from cases involving exceptional circumstances).

The key to the nine-day fortnight scheme’s success is that it is short-term and appropriately targeted. If it can reduce the number of redundancies, and thereby curb rising unemployment figures, it can only be good thing. It is, however, only one of the options available for employers having to cut costs. It is important that all alternatives to redundancy are considered. That way, employers can retain the benefit of experienced employees, and stay out of the Employment Relations Authority.

Greg Cain is partner with law firm Minter Ellison Rudd Watts. Amy Cunningham is solicitor with the firm.

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