(Image: Jihee Junn)
(Image: Jihee Junn)

MoneyJune 7, 2020

The giant Work and Income benefits bungle, explained

(Image: Jihee Junn)
(Image: Jihee Junn)

For years, Work and Income has been telling New Zealanders they couldn’t get the benefit until their redundancy payments ran out. Turns out, it was wrong.

What’s all this then?

Work and Income has long told New Zealanders receiving redundancy payments that they weren’t eligible for the benefit until their redundancy money ran out. However, it was revealed last month that Work and Income was wrong, and that for decades, the organisation has been in breach of its own rules.

The revelation came after RNZ reported the story of a cleaner at an Auckland hotel who’d been made redundant at the start of the Covid-19 lockdown. She applied for the job seeker’s benefit but was told she wouldn’t be eligible until her redundancy payment ran out in September, which Work and Income insisted was correct. But a few days later, Work and Income admitted it had made a mistake after RNZ pointed out that the Social Security Act said redundancy shouldn’t be a factor when calculating an entitlement to a benefit.

That doesn’t sound good. So is this an isolated case or a widespread issue?

All evidence seems to point at this being a widespread issue that’s been going on as far back as the 1990s. Many stories from those claiming to have also been wrongly denied benefits have since emerged with some experiencing bankruptcy and debt while others report losing their savings and homes. 

Work and Income, however, has said these were “isolated practice issues” and that its policy guidance, training and IT system contained no errors. Furthermore, a review by the Ministry of Social Development (MSD) said it found there were “no systemic issues”.

Do we know how many people have been affected?

According to the MSD review, it found that close to 9% of applicants had been wrongly denied the benefit based on redundancy payments. However, that number comes from a sample of just 185 cases where redundancy was mentioned on applications from 7 February to 15 May this year which means its prevalence over time is still unknown. Legal experts suggest the practice has been unlawful since 1991 which means thousands of people could have been affected. 

It’s also important to note that a number of people have since said they decided not to apply for the benefit in the first place after reading on the Work and Income website that their redundancy payment would make them ineligible, which makes calculating the true cost of Work and Income’s error extremely difficult.  

Minister for Social Development Carmel Sepuloni (Photo: Getty Images)

So has Work and Income done anything about this? 

Late last month, Work and Income reported that 244 people had been in touch with concerns over how their redundancy payments had been handled. Several of these people have since had their cases successfully reviewed and have started receiving back payments. Those with older cases that date back many years, however, are set to take much longer to assess.

What’s been the response from the government?

When the news first broke in May, social development minister Carmel Sepuloni said she’d not been aware of the issue and subsequently ordered MSD to investigate, which led to its review that found there was room for improvement but “no systemic issues”. Sepuloni has since reprimanded MSD while saying that mistakes had been made but also that she remained confident in her ministry’s approach.

Can those affected take legal action?

Potentially. One lawyer told RNZ that “on the information presented to date, there is a high prospect of a class action being formed provided people are sufficiently interested”. But others point out that with little case law relating to the issue of redundancy and benefit payments, it’s unclear exactly how a legal proceeding would pan out.

And lastly, what can I do if I’m one of those affected?

Work and Income has recommended people call 0800 559 009 if they have concerns over how their benefit start date was calculated, or fill out an enquiry form on its website.

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