New Zealand Defence Force ordered to pay full $116,400 redundancy after contract error

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An error in a New Zealand Defence Force finance director’s employment contract has led to him getting $73,000 more than he should in his redundancy payout.

Michael Beauchamp was employed as NZDF financial controller and later as finance director for eight and a half years, but was made redundant in April 2012 after the finance section was restructured.

He was paid $42,778 in redundancy but complained to the Employment Relations Authority because it was significantly less than his individual employment agreement specified.

In the authority’s decision released last Friday, it revealed the Defence Force’s chief admitted there was an error in Beauchamp’s 2008 employment agreement, which was repeated in a subsequent contract in 2011.

His redundancy entitlement was recorded as $116,400 – the amount of his annual salary – when it should have been at most $42,000.

NZDF human resources manager Michelle Thompson said a former manager had prepared the redundancy calculations but found it “hard to accept” that Beauchamp had not noticed the mistake.

“In her view, he had not acted in good faith in not bringing the error to his employer’s attention.”

However, Beauchamp told the authority he was unaware his redundancy compensation was incorrect in his 2008 and 2011 employment contracts, instead thinking it was higher than expected but “plausible”.

“He had not calculated the amount himself and had not asked his employer to provide him with a calculation. He accepted that if he had done the calculation at the time, he would have realised when he received the 2008 letter of offer that the redundancy compensation amount was incorrect,” authority member Trish MacKinnon said in her decision.

“I have also accepted that he was reassured, after mentioning it to an HR advisor, that he had no reason to query the sum.”

 

When Beauchamp first started working for the Defence Force in 2003, his contract’s redundancy clause stated he would get six weeks pay for the first year of service, two weeks pay for the second and subsequent years’ service up to 19 years, and the total amount should not exceed $42,000.

In 2006, his new individual contract stated that redundancy clause would be frozen at the existing rate and any payout would be the greater of that or three months’ salary at the rate when his position was disestablished.

However, his new job contract in 2008 mistakenly stated his redundancy payout would be the greater of $116,400 instead of the value of his frozen redundancy compensation rate from 2003, or three months’ salary at the rate when he was made redundant.

When he was made redundant nearly two years ago, he was only paid the lower amount because the Defence Force realised his contract contained the wrong figure.

MacKinnon said she accepted the Defence Force intended the redundancy clause from his 2003 employment contract to continue to apply but ordered it to pay the difference between the amount it paid him and $116,400.

– The Dominion Post

 

Source : Stuff logo

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