Making an employee redundant can pose a significant risk to employers. Redundancy is another means of terminating employment. You might pursue this option if your business no longer requires a certain role to be filled. This might be because of the advent of technology, i.e. robots and machines replacing human labour, or when the duties of an existing role are shared amongst other employees by way of restructure. If you are considering this option, there are legal considerations to note. This article will explore the risks of redundancy to employers.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Requirements to Protect Against ‘Unfair Dismissal’
Several important prerequisites are necessary for an employer to avoid facing claims of unfair dismissal. First, the redundancy has to be legitimate. This means the role is no longer required to be performed by anyone.
Second, you must personally consult employees under a modern award or enterprise agreement. You should do so in writing and as soon as you decide to impose redundancy. When reaching out to the relevant employee, be sure to:
- explain the details of the decision, consequences, and protocols in place;
- listen carefully to the questions, enquiries and requests of employees; and
- look into the currently available positions in the business to determine whether or not these employees can move into new roles (not necessarily more senior or higher paid).
General Protections Risk
Another risk for the business to be aware of when considering redundancy is a general protection claim. Under the General Protections Provisions, an employer cannot take adverse action against an employee because of a protected attribute, like age, race, family or responsibilities. Likewise, employers cannot punish staff for exercising a workplace right, such as taking leave or making a workplace complaint. Keep this in mind when pursuing redundancy, or you risk receiving a general protection claim.
Continue reading this article below the formAlternatives to Redundancy
Sometimes, through consultation, it is possible to find alternatives to making a role redundant. Some options include:
- reducing wages;
- reducing or eliminating bonuses; or
- taking annual leave.
You and your employee must agree to these arrangements in writing. Likewise, consider the requirements of the various award and enterprise agreements where applicable. Importantly, you risk opening your business for claims against breaching your employment obligations if you fail to comply with employment law.
The Notice Period
Suppose that, after considering redeployment, your business still needs to proceed with the redundancy. In this circumstance, you must still pay the employee their notice period. Importantly, redundancy is still a form of termination, meaning you must comply with providing the notice as stated in their employment agreement. Alternatively, you can pay in lieu of them working out the notice period.
Redundancy Pay
Employees that have been with your business for at least 12 months are entitled to redundancy pay. Small businesses (those with fewer than 15 employees across all related entities) are not required to pay redundancies. You should also check if there are any additional requirements under a relevant modern award or enterprise agreement.
Key Takeaways
As with any termination, redundancy carries potential risks, such as receiving an unfair dismissal or general protection claim. Accordingly, ensure that you understand the legalities of redundancy before you commence this process. Initially, it is best to look into options for alternative arrangements. Likewise, remember to consult with the relevant employee. Finally, double-check your obligations toward redundancy pay.
For more information on the risks of redundancy, 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
Redundancy is another means of terminating employment. It happens when an employer no longer requires a role to be performed. This might be because of the advent of technology, i.e. robots and machines replacing human labour, but might also arise when the duties of an existing role are shared amongst other employees by way of restructure.
The biggest risk is an unfair dismissal claim against the business if the employee feels like the redundancy was not genuine. Keep in mind, only certain employees have access to make an unfair dismissal claim. If not, you want to ensure that you satisfy the criteria that the job is no longer required to be performed by anyone, and that you have met your consultation obligations. However, even if the employee cannot bring an unfair dismissal claim, they might try to bring a general protection claim.
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