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You can make an employee redundant if you decide that you no longer require the work carried out by the employee. This means that you cannot then go on to hire someone else to complete the same job. Furthermore, you must not be able to redeploy the employee elsewhere within your business. 

For example, this may occur if you: 

  • introduce new technology into your business; 
  • restructure your business; or
  • become insolvent or bankrupt.

Care should be taken by an employer when making an employee redundant as the employer should ensure that any redundancy is non-discriminatory, fair and justified. Notably, you may be at risk of receiving a claim for unfair dismissal or unlawful termination if your termination of an employee’s employment: 

  • by way of redundancy is not a genuine redundancy; or 
  • does not otherwise comply with the relevant legal requirements. 

Make sure to give your employee a letter of termination of employment if they are still in their probation period.

Relevant Legislation

You must take care when making an employee redundant. This is because federal workplace laws provide protections to employees in certain circumstances where their employer terminates their employment. The aforementioned federal workplace laws allow an employee to commence proceedings against their former employer following the termination of their employment. Making an employee redundant is not always the end of the process.

For example, an employee may commence proceedings for unlawful termination if you terminate their employment for a discriminatory reason, or any other reason that is against the law.

Further, if you do not take care when terminating or dismissing an employee, then the Fair Work Commission may consider the dismissal to be: 

  • harsh;
  • unjust; or
  • unreasonable.

Generally, a dismissal will not be harsh, unjust or unreasonable where: 

  • there is a valid reason for the dismissal relating to the employee’s conduct; 
  • you notify the employee of the reason for dismissal and give the employee an opportunity to respond; 
  • the employee receives one or more warnings about unsatisfactory performance before being dismissed; and 
  • the employee’s dismissal relates to unsatisfactory performance.

Legal Process

If you are making an employee redundant due to poor performance or misconduct, then you must have sufficient grounds for termination. In the case of poor performance, you must also have: 

  • previously warned the employee about their poor performance; 
  • provided training (where appropriate); and 
  • given the employee an opportunity to improve their performance.

Amongst other things, when making an employee redundant, you should take into account:

  • notice; and
  • entitlements.

Notice

Generally, you must notify employees of termination of their employment, or provide payment in lieu of notice. You can determine the length of the notice period either by the terms of an employee’s employment contract or their length of service as an employee. 

For example, under the National Employment Standards (NES), most employees are entitled to between one and four weeks notice of termination. You must give an additional week’s notice if an employee is over forty-five years of age and has two years of continuous service.

However, you are not required to provide notice of termination for casual employees and employees terminated due to serious misconduct.

Entitlements 

An employee is entitled to payment of their outstanding employee entitlements on termination of their employment, including: 

  • wages;
  • payment in lieu of notice (if any);
  • accrued annual leave and long service leave entitlements; and
  • severance pay entitlements (e.g. for redundancy). 

The final payment should be made on the employee’s last day of work, wherever possible.

Letter of Redundancy

You should also give an employee whose employment is to be terminated by way of redundancy a letter setting out: 

  • the date of redundancy;
  • calculations of all monetary entitlements;
  • other entitlements; and 
  • procedural issues (e.g. confidentiality and return of company property).

Key Takeaways

Before making an employee redundant, you should understand its obligations under the employee’s employment contract, award and at law. Care must be taken by an employer when making an employee redundant to minimise the risk of an employee commencing proceedings against their former employer following the termination of their employment.

You should carefully consider how you make an employee redundant, to: 

  • ensure that you comply with your legal obligations; and 
  • minimise the risk of an aggrieved employee commencing legal action. 

If you would like legal advice about how to properly terminate an employee by way of redundancy, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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