Redundancy is never an easy situation for employers. However, redundancy happens often, particularly in small businesses that may have frequent organisational changes for their employees or that need to operate flexibly according to client projects. For this reason, employers like you must understand redundancy and your obligations to employees whose job position is affected by it. To help clarify your obligations, this article explains your obligations as an employer towards employees affected by redundancy.
1. What is Redundancy?
Redundancy occurs if an employee’s role within an organisation is no longer required to be performed by anyone due to changes in the business requirements. This can be for several reasons. For example, business restructuring or operational changes might mean that some positions are no longer necessary.
Where the redundancy is genuine, this could give you grounds to terminate employment. You may be obligated to make a redundancy payment to the employee affected by the redundancy in accordance with either the:
- relevant award;
- enterprise agreement;
- employment contract; or
- the National Employment Standards.
2. Was the Redundancy Genuine?
The law requires the redundancy to be genuine to prevent employers from using redundancy to terminate an employee. A genuine redundancy is where you:
- no longer need a role in your business to be performed by anyone;
- have complied with your consultation obligations in the modern award or enterprise agreement that covers your employee; and
- have considered redeploying your employees within your business or associated entities.
Under the Fair Work Act 2009 (Cth) (‘Act’), a redundancy is not genuine if “it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer”. This means that although your business may be undertaking restructuring or organisational changes, you will need to consider other possibilities of redeploying staff affected by the redundancy.
Continue reading this article below the form3. Standard in Seeking Redeployment
The Act prescribes that an employer must comply with any employment agreements, award or enterprise agreement when consulting an employee about redundancy. Every employer should first consult with their employee and discuss the issue of redeployment.
In general, redeployment is where you ‘transfer’ an employee affected by redundancy to another role within your business. For example, if you are closing your Sydney CBD store but your shop in Surry Hills will continue to operate, you could offer redeployment to the Surry Hills store if roles are available. Although redeployment may not always be a widely available option, you must consider the:
- nature of the position available;
- qualifications required to perform the role; and
- your employee’s ability to fulfil the role.
In any event, you should engage in an open dialogue with the affected employees to see how redeployment might suit your staff and your business
4. Consequences of a Non-Genuine Redundancy
If a redundancy is not genuine or an employee is under the impression that the redundancy is not genuine, they can make an unfair dismissal claim. Therefore, you should seek to make genuine redundancies by redeploying an employee within the organisation or an associated entity of the organisation if it is reasonable.
There are many steps an employer can take to minimise the risks of an employee making a successful unfair dismissal claim, including:
- taking the obligation to redeploy seriously; and
- consulting with the employee about their prospects of gaining employment within the organisation or an associate of the organisation.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
5. Redundancy Pay
Your employee’s entitlement to redundancy payment will depend on:
- the length of their continuous service;
- their base rate of pay; and
- the provisions in the NES, award, agreement or contract.
To calculate your employee’s redundancy payment, you must multiply their base rate of pay by their redundancy period. In other words: Base Rate of Pay x Redundancy Pay Period = Redundancy Pay.
While a modern award, enterprise agreement or employment contract might set a higher redundancy pay than the National Employment Standards (NES), the redundancy pay periods in the NES are as follows.
|
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 10 years of service because these employees are also entitled to long service leave. |
Note: Employers in a business with fewer than 15 employees are generally exempt from the requirement to pay redundancy. However, this can be affected by a relevant award, employment contract or company policy. Therefore, you should seek specific advice.
Key Takeaways
Regarding your obligations as an employer relating to redundancy, you should ensure that the redundancy is genuine. This means you no longer need the role, have fulfilled your consultation obligations, and have reasonably considered redeployment. You should also ensure that you pay your affected employee a redundancy payment following the relevant agreement.
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
An unfair dismissal claim can arise if you do not have a good reason to terminate your employee’s employment and you have not treated them fairly in the process of dismissal. In terms of redundancy, it can arise if the redundancy is not genuine.
The National Employment Standards (NES) set out 11 minimum entitlements for all workers covered by the national workplace system. While an award, enterprise agreement and employment contract can vary the standards in the NES, these legal instruments cannot diminish NES entitlements.
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