If you no longer require a person for a role in your company or your company is wound up, restructured or relocating then you may like to look at making the position redundant rather than terminating the employees’ employment agreement. If your business has gone into liquidation or becomes bankrupt, then there are also requirements you must meet including the Fair Entitlements Guarantee (FEG).
What is a Genuine Redundancy?
It is important as an employer you understand what your obligations are concerning making a position redundant and ensuring that it is a genuine redundancy and not an unfair dismissal or unlawful termination. As an employer, you also need to comply with any relevant award, enterprise agreement or registered agreement that is in play.
As an employee, to determine whether your redundancy is genuine or not, you need to consider a few different factors. If you still require someone to do the job, then it is likely that you need to terminate the agreement rather than make the position redundant. You also need to confirm there is no option to move the person to a different role or department within your business.
Steps in the Redundancy Process
When making someone redundant, there are few different steps you need to undertake as an employer:
- confirm it is a genuine redundancy as discussed above;
- before making a position redundant, you need to confirm the notice period you are required to give;
- you need to review the entitlements for the employee, including final pay;
- depending upon the nature of the redundancy you may be required to contact Centrelink and let them know about the redundancy (where more than 15 employees are being made redundant for economic reasons or other reasons outside of your control);
- discuss the redundancy with the employee and give them the opportunity to respond; and
- provide your employee with the letter of termination.
Letter of Termination Due to Redundancy
Your letter of termination should include and address the following issues:
- reasons for the redundancy e.g. changes to the business structure, areas of work and that their position will not be required;
- address that you have made attempts to find a new role for the employee within the organisation but that this is not possible;
- set out 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 for example superannuation, sick pay, etc.
Once you have made the position redundant, you need to be aware that the employee may still be able to make an application for unfair dismissal for example if they believe that the redundancy is not genuine.
Therefore as set out above it is very important to comply with the processes in the Fair Work Act to properly make an employee redundant. If you have any questions about making an employee redundant and the process you need to follow, you should speak to an employment lawyer, and they will be able to guide you through the process. Undertaking this process correctly is an important risk management step to reduce the risk of an unfair dismissal claim.