Redundancy cover

What redundancy cover pays, and when

Redundancy cover pays a monthly benefit if you are made involuntarily redundant from permanent employment. It begins after a stand-down period, continues for a limited number of months, and stops when you start work again.

It is a narrow product with firm conditions, and it is worth understanding those conditions before rather than after. Within them it does something no other cover does.

Why this sits differently in New Zealand

There is no statutory redundancy compensation in New Zealand. Employment New Zealand puts it plainly: whether an employee receives a redundancy payment depends on their employment agreement and any negotiation with their employer, and if the agreement does not mention redundancy pay, there would be no compensation.

Notice, unused holiday pay and other accrued entitlements are still owed. Beyond that, a New Zealander whose agreement is silent leaves with a final pay and nothing else.

People who have worked in Britain or Australia often assume otherwise, because in both of those countries a statutory entitlement exists. It is worth reading your own agreement before deciding whether this cover is relevant to you.

Source: Employment New Zealand, Redundancy, employment.govt.nz, last modified 26 November 2025.

The conditions that apply

Where it fits in a plan

We will say this plainly, because it is the sort of thing an adviser paid by commission is not always quick to say: redundancy cover is not the first cover most households should buy.

A serious illness lasting two years costs a household far more than six months between jobs, and it is more likely. Where a budget will not stretch to everything, income protection and trauma cover come first.

Redundancy cover earns its place in specific situations. A narrow specialism in a small market. A single-income household with a large mortgage and thin reserves. An industry going through visible consolidation, addressed well before that consolidation reaches your employer. In those cases it is a sensible addition, usually as an option attached to mortgage repayment cover.

What shapes the premium

The monthly benefit, the stand-down and payment periods, and in most cases your occupation and industry. It is generally arranged as an option on an existing monthly benefit rather than as a policy of its own, and it is not offered by every insurer.

Availability moves with economic conditions. Insurers have withdrawn and reintroduced this cover before, and terms tighten when the labour market does. If it matters to you, the time to arrange it is when it feels least necessary.

At claim time

A redundancy claim is a documentary one: the letter, the employment agreement, and evidence that the role was disestablished and that the decision was your employer's.

It also runs on a clock. There is a stand-down before the first payment and a firm limit on how long payments continue, so the claim needs to be lodged immediately rather than once the dust settles.

We lodge it, and we keep the record of your job search in the form the insurer requires. You should be looking for work. You should not also be maintaining a file about looking for work.

How a claim works, step by step

Common questions

Am I entitled to redundancy pay in New Zealand?

Only if your employment agreement says so. Employment New Zealand states that whether an employee receives a redundancy payment depends on their employment agreement and any negotiation with the employer, and that if the agreement does not mention redundancy pay, there would be no compensation. You remain entitled to notice, unused holiday pay and other accrued entitlements. Many New Zealanders assume a statutory entitlement exists because it does in Australia and the United Kingdom.

When do I have to arrange it by?

While your employment is entirely secure. Every policy carries a qualifying period after it starts, commonly six months, during which no claim can be made, and every policy excludes redundancy you knew about or had reason to expect when you applied. Cover taken out after a restructure has been announced will not respond.

How long does it pay for?

A limited period, typically up to six months, and it stops when you start new employment. It is designed to cover a search, not a career change or a sabbatical.

Can I get it if I am self-employed or on a fixed-term contract?

Generally not. Cover is written for permanent employees and usually requires a minimum number of hours. The end of a fixed-term contract, the end of a project, a resignation, dismissal for cause and the failure of your own business all sit outside it. For the self-employed the honest answer is that this cover is not the right tool, and cash reserves are.

Is it worth having?

It depends on how replaceable your role is and how long the household could carry the mortgage without your income. For a specialist in a thin market it can be genuinely valuable. For someone in a role with steady demand and six months of reserves behind them, the same premium is usually better spent on income protection, because illness is both more likely and far more expensive than redundancy.

Cover that often sits alongside this

• Mortgage protection the cover redundancy protection is usually attached to.
• Income protection answers the more likely and more expensive cause of a stopped income.
• Trauma and critical illness cover a lump sum on diagnosis, which is the other event that empties a household budget without warning.
• How we advise the order in which cover is arranged matters more than any single policy in it.

This page is general information about how this type of cover works. It is not financial advice for your circumstances. Advice is given after we understand your position. See our disclosure statement.