What to Know About Redundancy and Termination Pay for Nannies

When it comes to ending a nanny’s employment, either through redundancy or termination, it’s important for families to understand their obligations under New Zealand law. Whether you're facing changes in your childcare needs or restructuring your household, knowing the rules surrounding redundancy and termination pay is key to ensuring a smooth, legally compliant transition. 

In this guide, we'll explain how redundancy and termination payments work for nannies, including notice periods, final pay calculations, and entitlements like redundancy compensation. Redundancies are never easy, so following the right process is always important. 

The advice in the blog article below is intended to be for general purposes always and the team at Pay The Nanny aren’t employer lawyers so we’d always recommend seeking legal advice before undertaking a redundancy process 

Redundancy: When it Applies and What it Means

Redundancy occurs when a nanny’s job is no longer needed due to a change in circumstances, rather than through any fault of the nanny. For example, if your children are now attending school full-time or you’re moving to a different city, you may no longer require a nanny’s services. 

It’s important to remember that redundancy is a form of termination, but it is typically treated more sensitively since the nanny’s role is being removed, not their performance. 

Notice of Redundancy 

Under New Zealand employment law, you are required to give your nanny reasonable notice of redundancy. The length of the notice period will usually depend on what is stated in the employment agreement. If no specific period is mentioned, a "reasonable" period is generally considered to be four weeks. 

The purpose of the notice period is to give your nanny time to find alternative employment and to provide time for a smooth handover if needed. During this time, the nanny continues to work and is paid as usual. 

Redundancy Compensation 

New Zealand law does not mandate redundancy compensation unless it is specified in the nanny’s employment agreement. However, many families choose to offer redundancy compensation as a gesture of goodwill to help the nanny transition to new employment. This could be a lump-sum payment, often calculated as a certain number of weeks’ pay based on the length of service. 

If your nanny’s employment agreement includes a redundancy clause, it’s crucial to follow the terms laid out, including any specific compensation requirements. 

Final Pay for Redundant Nannies 

When a nanny is made redundant, their final pay must include: 

• Payment for all hours worked up to the termination date. 

• Payment for any unused annual leave, calculated based on their ordinary weekly earnings or average weekly earnings, whichever is higher. 

• Payment for any public holidays they would normally work if their employment ends on or before a public holiday. 

• Any redundancy compensation, if applicable. 

Termination: Performance or Misconduct

Termination, unlike redundancy, is the result of performance issues or misconduct. Termination can occur when a nanny is not meeting the agreed-upon expectations of their role, or when there is a breach of the employment agreement. 

Notice of Termination 

In most cases, if you are terminating your nanny’s employment due to performance issues, you are required to provide notice. The length of the notice period should be stated in the employment agreement. If no period is specified, reasonable notice, usually two to four weeks, is standard. 

It’s important to note that if the termination is due to serious misconduct (e.g., theft, violence, or other serious breaches of trust), you may be able to terminate the nanny’s employment without notice. However, even in cases of serious misconduct, it’s critical to follow a fair process, including investigating the issue and giving the nanny an opportunity to explain their actions. 

Final Pay for Terminated Nannies 

When terminating a nanny’s employment, the final pay must include: 

• Payment for all hours worked up to the termination date. 

• Payment for any unused annual leave, calculated based on their ordinary weekly earnings or average weekly earnings, whichever is higher. 

• Payment for any public holidays that fall during the notice period or at the time of termination, if applicable. 

Calculating Final Pay 

When it’s time to calculate the final pay for a nanny being made redundant or terminated, there are several components to consider. These include: 

1. Outstanding Wages: The nanny must be paid for all hours worked up to the termination date. This includes any overtime, allowances, or bonuses that may apply. 

1. Unused Annual Leave: Nannies are entitled to be paid for any unused annual leave accrued during their employment. This is calculated based on either their ordinary weekly earnings or average weekly earnings over the previous 12 months, whichever is higher. If your nanny has taken more leave than they have accrued, you may be able to deduct this from their final pay, but only if your employment agreement allows it. 

1. Public Holidays: If a public holiday falls within the nanny’s notice period or on a day they would normally work, they are entitled to be paid for that holiday. If they work on the holiday, they are entitled to time and a half, plus a day in lieu. 

1. Redundancy Compensation: If redundancy compensation is required under the employment agreement or offered as a goodwill gesture, it should be included in the final pay. 

Handling the Termination Process Fairly

Terminating a nanny’s employment is a delicate process, whether through redundancy or for other reasons. To avoid potential disputes and to maintain a positive relationship, it’s important to handle the situation professionally and fairly. 

Here are some best practices: 

• Follow the Employment Agreement: Always refer to your nanny’s employment agreement to ensure you are following the correct procedures regarding notice periods, redundancy compensation, and termination requirements. If you haven’t got one, read why it’s important here. 

• Communicate Clearly: When discussing redundancy or termination with your nanny, be clear and respectful. Explain the reasons for the decision and outline what their final pay will include. 

• Document the Process: Keep records of all conversations, notices, and payments related to the termination or redundancy. This will help protect both you and your nanny in case of future disputes. 

• Seek Legal Advice: Engage with an employment lawyer before beginning the process to make sure you are meeting all your requirements. Employment Law in New Zealand is complex so seeking advice is always recommended. 

How Pay The Nanny Simplifies Redundancy and Termination Pay

Managing redundancy or termination pay can be complicated, but Pay The Nanny can simplify the final payment process for families, ensuring compliance with New Zealand’s employment laws and avoiding costly mistakes. Here’s how we can help: 

1. Accurate Final Pay Calculations Pay The Nanny automatically calculates the nanny’s final pay, including any unused annual leave, public holiday entitlements, and redundancy compensation (if applicable). You won’t have to worry about manually calculating these amounts, we handle it all for you. 

1. Customised Notice Periods You’ll be able to notify us of the amount of the notice period that needs to be processed/paid and we’ll process accordingly. There isn’t a set amount and we’ll work in with whatever is required per your Employment Contract.  

1. Compliant and Transparent Payslips We generate clear and compliant payslips that show the breakdown of all final payments, including redundancy compensation (if applicable), public holidays, and accrued leave. This transparency helps avoid misunderstandings and ensures a smooth transition. 

1. Leave Tracking Our automated leave tracking ensures that you always know how much annual leave your nanny has accrued, making it easy to manage payouts during redundancy or termination. 

Get in Touch for Support

Redundancy and termination are never easy, but understanding your obligations as an employer is essential to ensuring a fair and compliant process. Whether you’re making a nanny redundant due to changing needs or terminating their employment for performance reasons, knowing how to handle notice periods, final pay, and compensation will help you navigate this sensitive situation with professionalism. 

With Pay The Nanny, the process of managing redundancy and termination pay is simplified. From calculating final payments to generating payslips, we ensure that you remain compliant with New Zealand law, providing peace of mind for both you and your nanny. 

If you’re facing a redundancy or termination situation and want help managing the payroll side of things, get in touch with us today. We’re here to make the process easier for everyone involved and, if we don’t know the answer, we’ll point you in the right direction.