Work and Income unlawfully withholding redundant worker payments “for decades”

According to RNZ Work and Income have been illegally delaying paying redundant workers until they have used up all their redundancy funds.

On Friday: Work and Income acts ‘unlawfully’ over benefits and redundancy payments

Work and Income has been acting “unlawfully” and ignoring its own legislation by telling people paid redundancies that they are not eligible for a benefit till that money runs out.

It came to light after RNZ detailed the story of Mary*, a hotel worker made redundant when the Covid-19 lockdown began.

She applied for a job seeker’s benefit but was told she would not receive anything till her redundancy runs out in September.

Work and Income’s Kay Read, group general manager client service delivery, said on Wednesday that payments received when a person stopped work, such as holiday pay and some severance payments, would delay the time when income support payments started.

However, section 422 of the Social Security Act makes clear when calculating a person’s income and benefit level, Work and Income is to “take no account of a redundancy or retirement payment”.

The legislation states:

Regulations made under subsection (1) may (without limitation) authorise MSD,..

(c) in calculating the income of a person for the purpose of determining the rate of benefit, to take no account of a redundancy or retirement payment.

It should have been easy to question and rectify.

Mary’s case was reviewed this week after RNZ asked questions. She has been told a mistake was made and she can receive the benefit.

Mary said it was great to have better news but she was very worried and angry about how many other people had been wrongly advised and simply given up.

The Work and Income employee she dealt with had many years’ experience. She told her she had always applied the rules in this way.

Today:  Work and Income wrong on benefits and redundancies for decades

Work and Income appears to have spent decades wrongly advising some benefit applicants that they cannot get support until their redundancy has run out.

Work and Income admitted on Friday it had made an error after it rejected the benefit claim of Mary, an Auckland hotel worker, due to her Covid-19 redundancy payout.

The reversal came after RNZ pointed out that the Social Security Act said redundancy should not be a factor when calculating an entitlement to a benefit. A community law expert said that the law relating to redundancy and benefits had not changed substantially since 1994.

RNZ asked those in a similar situation to Mary to get in touch and has been inundated with scores of emails that highlight cases not only from the past few months, but dating back to the 1990s.

Among them were:

  • In 2018 a 63-year-old man was told he had to wait 16 months till his redundancy ran out before he could get the benefit. By that time he was only three months off his pension.
  • A woman who was made redundant twice, in different parts of the country, and denied the benefit both times. Eventually she was declared bankrupt after losing her house.
  • In 2012 a man who spent six months “burning through all our savings” before he found work.
  • In 2011 a former defence force worker says he was told he should return when the money had run out.
  • In the early 2000s a sole parent who lost his hospital job and then had to live on his $20,000 redundancy.
  • A new dad who was made redundant in the early 1990s and told he couldn’t get anything for six months. He got sick and the family’s debt spiralled.
  • A number of people decided not to apply after reading on the Work and Income website they couldn’t because of their redundancy.

Up until Friday, Work and Income’s site continued to say that if a person received a redundancy “your payments from us will start once [it’s] finished”.

RNZ has asked Work and Income and Social Development Minister Carmel Sepuloni a number of further questions about how long the practice had been in place; the number of people affected and whether back payments may need to be made.

A spokeswoman for the minister said Sepuloni had not been aware of the issue but had asked officials for a briefing on Monday. They had advised it was an “operational issue”.

I wonder if this comes under the Prime Ministerial gagging directive.

I’m shocked that it has taken this long to become an issue. Surely people will have complained in the past.

Work and Income earlier said staff had been reminded redundancy payments should not form part of calculations made as to when a person’s benefit payments should start.

It was encouraging anyone who has concerns about how it had calculated their benefit start date to get in contact.

This will affect many people who have been paid less than they are entitled to, but backdating correct payments for decades would be a mammoth correction.

Leave a comment


  1. I thought that redundancy was instead of pay, and it wouldn’t have occurred to me to expect to keep it as a bonus instead of using it to keep myself and expect to go on the UB when I had thousands in redundancy pay.

    • Blazer

       /  10th May 2020

      You get paid when you have a job.
      Being made redundant means you do not have a job…then you do not get paid.

  2. Duker

     /  10th May 2020

    “I wonder if this comes under the Prime Ministerial gagging directive.”

    Is this exactly what was mentioned in previous post
    “That’s another attempt to deflect via personal discrediting.” [of the PM ]

    Nothing to do with the Document dump , its a MSD failure of epic proportions and the Minister has asked MSD to give a detailed briefing so she has the facts at hand

    • My comment wasn’t personal, it was referring to a general directive given to all ministers.

      The Government provided a detailed briefing of facts related to Covid decisions in Friday but instructed ministers to not answer questions about them.

      If Sepuloni makes a statement on what she finds out I hope she is available to answer questions on it and that she isn’t directed to fob off any holding to account.

      • Duker

         /  10th May 2020

        Not in any way connected to the PM directive, not part of the document dump on Friday ( first surfaced a few days before that)
        Sepuloni would know no more than what you or I do from reading in the media. Clearly NOT part of previous cabinet papers or decisions made before. Its clearly an internal MSD issue – and heads should bloody well roll at the top of the ministry where blame seems to lie
        You are doing exactly what you didnt like – deflecting by personal discrediting, nothing in the story which you have excerpted even goes near to what you claim.
        Dont you think that its time to own it

        • “Not in any way connected to the PM directive”

          The problem the Government now have is that a perception that’s been around for some time has been reinforced by the leaked email, that some Ministers are being shielded from media and public scrutiny.

          David Clark was obviously shielding and/or shielded from media from when his bike ride went public to when he says he fronted up to the PM with “full disclosure” (that we later found out wasn’t full disclosure, at least not to the public).

          It’s been obvious since they took over power that they are given phony phrases to repeat, like ‘nine years of neglect’.

          So it’s not unreasonable to suspect that that may not have been a one off directive to Ministers, and to consider whether other Ministers may be given directives on what issues not to answer questions about.

          • Duker

             /  10th May 2020

            Another diversion… Clark was not available at first but did the full media after his second breach . Didnt stop every one quite rightly having a go at him

            MPs or Ministers who have issues always hide away since year dot, and its normal to say thats what they are doing
            Sepuloni actually gave a statement which you mention and Im sure this story will have more coverage next week…I hope she calls for heads to roll in MSD

            Again this is Nothing to do with the Covid dump either or the “PMs directive” … by any stretch of the imagination . Its your blog so you can say what ever you like or what you dont like to see. Its clear cut that this was an instance of your dislike of ““That’s another attempt to deflect via personal discrediting.”

            It seems a bizzare thing to try and police anyway, other than things that are baseless or covering appearance or ‘lifestyle’

            • “Clark was not available at first”

              He made himself not available, unless the PM’s office made him not available. Robertson covered for him. Then Ardern said he was available for interviews, but he wasn’t until two days later and after he had talked to Ardern.

            • Duker

               /  10th May 2020

              “Health Minister David Clark has rejected claims he and other Government ministers have been “gagged”, as he fronted today to announce a $160 million boost to Pharmac health spending.
              “Clark rejected today an assertion he had been gagged – or that the memo was a sign of arrogance, as several political commentators have written. “Obviously I am here.”

              He said he had not personally received the memo, but saw it after it became a story. He did not believe the Government was arrogant.
              “I am here, happy to answer questions that journalists might have. This is the advice we have received. We have looked at that advice and then made decisions.”

              Asked about the advice to not defend but “dismiss” media questions, Clark said that was just advice from officials.

              so a massive media beatup falls in a heap catching all who lavished care on it-
              how dare politicians not bother to work to the deadlines of and ignore the special people who demand that they are the only ones for government info

  3. Gezza

     /  10th May 2020

    Beggars belief that this has gone on for decades and nobody – not even journos, who’d have done stories on redundant workers – checked it until now.

    • Hard to believe that no one would have complained and bought it to their attention before now. The law looks quite clear.

      • Gezza

         /  10th May 2020

        Citizens Advice Bureaux. Lawyers. Nobody checked?

        • Duker

           /  10th May 2020

          Redundancy …who really gets that these days…ah the middle class are losing their jobs

          • Blazer

             /  10th May 2020

            Very perceptive.
            The senior management class often have quite nice ‘golden parachutes’.

    • Corky

       /  10th May 2020

      It also applies to savings. Orchard workers made sure they never had a cent in their accounts before applying for the dole. I believe the same applies to inheritances.

      This was happening even in the late 80’s.

      • Duker

         /  10th May 2020

        Doesnt apply to savings ! The deemed interest only on savings is counted as income , not the amount you have.
        It will affect the accommodation part of the benefit if there are savings

  4. Blazer

     /  10th May 2020

    ‘Regulations made under subsection (1) may (without limitation) authorise MSD,..
    (c) in calculating the income of a person for the purpose of determining the rate of benefit, to take no account of a redundancy or retirement payment.’

    I wonder how the law would treat an applicant having significant savings ?

    • Duker

       /  10th May 2020

      Savings are counted only as the income they produce each year…. I dont know the details but they use their ‘own interest rate’ as a minimum rather than the actual interest rate to make a level playing field


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