If you no longer require a person for a role in your company or your company is wound up, restructured or relocating, you may consider making the employee redundant. Redundancy is a situation where an employee’s role is no longer required due to changes in your business operations. However, the redundancy must be genuine. Otherwise, you risk facing an unfair dismissal claim from your affected employees. Hence, this article explains what you can do if you want to make a role within your business redundant.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
What is a Genuine Redundancy?
As an employer, you must know your obligations when you make a position redundant. Most importantly, the redundancy must be a genuine redundancy and not an unfair dismissal or unlawful termination. To determine whether your redundancy is genuine, you need to consider a few different factors.
As an employer, you must also comply with any relevant award, enterprise agreement or registered agreement that may apply. If a modern award applies, you will likely have to engage in a consultation process. A modern award covers most employers and employees unless the employee is senior or managerial. It is best practice to proceed with consultation even where a modern award does not apply.
How Can I Make a Position Redundant?
When making someone redundant, there are a few different steps you need to undertake as an employer. These steps include:
- confirming it is a genuine redundancy as discussed above;
- before making a position redundant, confirming the notice period you are required to give;
- reviewing the entitlements for the employee, including final pay and redundancy pay;
- depending on the nature of the redundancy, notifying Services Australia about the redundancy where more than 15 employees are being made redundant for economic reasons or other reasons outside of your control;
- discussing the redundancy with the employee and allowing them to respond, taking into account any feedback they may have; and
- providing your employee with the letter of termination or outcome letter.
What Should I Include in the Redundant Person’s Letter of Termination?
Your letter of termination or outcome letter should include:
- reasons for the redundancy, such as changes to the business structure or areas of work and that their position will not be required;
- a statement that you have attempted to find a new role for the employee within the organisation but that this is not possible;
- the notice that you will be providing to the employee as well as the payments the employee will be receiving up to their termination; and
- any other entitlements, such as redundancy pay, superannuation, and sick pay.
Once you have made the position redundant, you must be aware that the employee may still be able to apply for unfair dismissal if they believe the redundancy is not genuine. The employee has 21 days from the termination date to file this claim. They may also file outside of this timeframe in exceptional circumstances.
Key Takeaways
When it comes to making an employee’s position redundant, you should keep a few legal considerations in mind. As an employer, you should:
- consider whether the redundancy is a genuine redundancy;
- follow a fair and legal redundancy process;
- provide your employee with their appropriate entitlements, such as redundancy pay.
If you need help making a redundancy, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A redundancy is genuine if you no longer require an employee’s role to be performed by anyone due to your business’ operational requirements. Additionally, you should comply with the consultation obligations in any modern award or enterprise agreement that covers your employee (if any) and consider redeploying the employees within your business or other related entities.
Under the National Employment Standards, employees (other than casual employees) with more than one year of continuous service are entitled to redundancy pay. Their payment will depend on the length of their continuous service and base pay rate. A modern award, enterprise agreement, employment contract or workplace policy may entitle the employee to a higher redundancy pay than the National Employment Standards.
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