As your enterprise grows, you are likely to automate systems and processes. From technological developments to company restructuring, you may no longer require some of your employees’ roles. It is then critical that you identify whether you are removing the position or dismissing an employee. This article explains genuine redundancy and how you can protect your enterprise from an unfair dismissal claim.
What is a Genuine Redundancy?
A genuine redundancy is a legitimate reason for terminating employment. A genuine redundancy is where you:
- no longer need an employee to perform a specific role in your business due to changes in your operational requirements;
- have complied with the consultation obligations in the modern award or enterprise agreement that covers your employee; and
- have considered redeploying your employees within your business.
Although terminating an employee can make you susceptible to a claim for unfair dismissal, you will be in an excellent position to defend such a claim if you have satisfied the conditions of genuine redundancy. For this reason, let us explore these three conditions in greater detail below.
1. You No Longer Need The Role
Whatever the reason, you should ensure you have a real reason for making the position redundant. That means you are not making the position redundant merely because you dislike the employee who performs that role.
You should note that where employees continue to perform work but you distribute the work differently, this can still be considered a redundancy. For example, if you had five warehouse workers but re-distributed the work to two workers by making three positions redundant, this would still be a redundancy.
2. Consultation Obligations
You must comply with the consultation obligations specified under the relevant award or agreement that covers your employees. These consultation obligations will generally include:
- speaking or meeting with the affected employee;
- asking for the affected employee’s input on ways to minimise the effect of the redundancy; and
- if applicable, notifying your employees that their employment will be terminated.
You should keep records of your conversations to ensure you have evidence that you followed the relevant consultation process.
3. Redeployment
Redeployment is where you ‘transfer’ an employee affected by redundancy to another role within your business. For example, if you are closing your retail store in Sydney CBD but your store in Paddington will continue to operate, you could offer your employee a role in the Paddington store if it is reasonable.
When deciding if redeployment is an option, you should consider the qualifications required to perform the role and whether your employee can fulfil them. Although redeployment will not always be a widely available option, it is essential that you nevertheless consider it.
How Can I Protect my Enterprise From an Unfair Dismissal Claim?
Firstly, are you simply trying to rid your business of a poor-performing or troublesome employee under the false pretence of redundancy? Unfortunately, this is relatively common. The Fair Work Commission does not look favourably on employers trying to skirt around by changing the job title or making minor alterations to the job description. You will also need to confirm that there are no other suitable positions or teams at your company that your employee can move into.
If you hire staff subject to an Award, for example, administrative staff, you need to discuss the planned redundancy with them. You should explain the decision, the consequences and what you are doing to minimise the harm they will suffer due to the redundancy. Again, you will also need to consider whether you can move these staff into a new position or team. If you are unable to do, you must pay out the employee in compliance with the terms of the highest paying agreement they are subject to. This could be their Award Rate, your internal policy, an Enterprise Bargaining Agreement, or their Employment Agreement.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
How Much Will I Need to Pay?
As you employ 15 or more people, you will likely be required to pay your employee redundancy pay if their role is made redundant. Under the National Employment Standards (NES), most employees are entitled to redundancy pay if they have performed more than one year of continuous service for your business.
To calculate your employee’s redundancy payment, you generally multiply their base pay rate by their redundancy period.
Whilst redundancy pay periods can be higher under an award or enterprise agreement, the NES sets out the following pay periods.
|
Period of Continuous Services |
Redundancy Pay Period |
|
At least one year but less than two years | 4 weeks |
|
At least two years but less than three years | 6 weeks |
|
At least three years but less than four years | 7 weeks |
|
At least four years but less than five years | 8 weeks |
|
At least five years but less than six years | 10 weeks |
|
At least six years but less than seven years | 11 weeks |
|
At least seven years but less than eight years | 13 weeks |
|
At least eight years but less than nine years | 14 weeks |
|
At least nine years but less than ten years | 16 weeks |
|
At least 10 years |
12 weeks. In this instance, the redundancy pay period declines to 12 weeks after ten years of service because these employees are also entitled to long service leave. |
Failure to pay your redundant employee their correct entitlements can lead to serious consequences. For this reason, you should clarify your obligations with an employment lawyer to ensure you pay your employee correctly.
Key Takeaways
If your business needs have changed and you no longer require a staff member to fulfil a particular role, you can make the position redundant. A genuine redundancy is where you:
- no longer need an employee to perform a specific role in your business;
- have complied with the consultation obligations in the modern award or enterprise agreement that covers your employee; and
- have considered redeploying your employees within your business.
By satisfying the above conditions, you can limit the likelihood of a claim for unfair dismissal from arising. In addition, you should ensure that you pay your employee their correct redundancy pay.
If you are making positions redundant, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
If you fire an employee harshly, unjustly or unreasonably, this could be considered unfair dismissal.
If an employee lodges a claim for unfair dismissal with the Fair Work Commission, this can proceed to a hearing. If the Commission finds the dismissal was unfair, you may be liable to compensate the employee.
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