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Coronavirus (Covid-19) is causing a significant downturn in business for many Australian businesses. As an employer, you may reluctantly be considering cutting costs by reducing the size or structure of your workforce. One way you can do this is by making employee roles redundant. 

It is important to undertake the redundancy process carefully and correctly. Otherwise, your employee could bring an unfair dismissal claim against your business.

What Is a Genuine Redundancy?

A redundancy is a dismissal brought about because an employee’s role is no longer required to be performed by anyone. Permanent employees can be made redundant, but not true casuals.

When considering dismissing employees because their roles are redundant, it is important to ensure it is a ‘genuine redundancy’. In particular, if the employee is eligible to bring an unfair dismissal claim. 

A genuine redundancy requires the following three criteria:

  1. you no longer require the person’s job to be performed by anyone because of the changes in your business’ operational requirements;
  2. you have complied with consultation obligations (see below) under any applicable award or agreement; and
  3. you have considered reasonable redeployment opportunities with your business or associated entities. This includes overseas entities and providing retraining so the employee can move into another available role.

What Is a Consultation Obligation?

Modern awards and enterprise agreements contain obligations for employers to consult with employees where there are significant changes to their employment, including redundancy. 

You should always check the terms of an award or agreement to ensure you comply with these consultation obligations (which often require consultation in writing).

Redundancy Payment

If you make an employee’s role redundant, you must pay the employee the same payments you would make to any employee whose employment is terminated. 

In addition, you may be required to make a redundancy payment as set out by the Fair Work Ombudsman.

Key Takeaways

When terminating an employee’s role due it becoming redundant, it is important to get the process right in order to limit your risk to an unfair dismissal claim.

Redundancy is not the only option when responding to a business downturn caused by Covid-19. It is worth carefully considering the pros and cons before proceeding. 

If you need help with how to conduct a redundancy, or with how to restructure your workforce in response to Covid-19, LegalVision’s employment team can help. Fill out the form on this page or call us on 1300 544 755.

 

 

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