Business requirements can change quickly and drastically, sometimes requiring the creation of new roles and the end of others. When a role is no longer required to be performed, employers ought to take great care in making such a role redundant. Failing to do so may open an employer up for an unfair dismissal claim if the redundancy is not, or does not appear to be, genuine.
What is redundancy?
Under the National Employment Standards, redundancy happens when an employer either:
- decides they no longer want an employee’s job to be done by anyone and terminates their employment (or in cases of ordinary and customary turnover of labour – which depends on the relevant circumstances); or
- becomes insolvent or bankrupt.
When it comes to redundancy, it is important to remember that it is the role, not the employee, which becomes redundant.
When may redundancy happen?
Redundancy may happen in a number of scenarios, including when:
- the job someone has been doing is replaced due to the employer introducing new technology (i.e. it can be done by a machine);
- business slows down due to lower sales or production;
- the business relocates;
- a merger or takeover happens; or
- the business restructures or reorganises.
Is the redundancy genuine?
A dismissal is not a genuine redundancy if the employer:
- still needs the employee’s job to be done by someone else;
- has not consulted with the employees about the redundancy under an award or registered agreement; or
- could have reasonably given the employee another job within the business.
If the redundancy is not genuine, the employee may make an unfair dismissal application to the Fair Work Commission, which can be a costly exercise for employers.
What notice am I required to give my employee of the redundancy of their role?
The amount of notice that is required to be given in relation to a redundancy depends on the employee’s period of continuous service. A detailed table setting out the notice period required to be given for redundancies, based on an employee’s period of continuous service with the employer, can be found on the Fair Work Commission’s website at https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/notice-of-termination-and-redundancy-pay
Standard redundancy pay entitlements
Employers are generally required to make a redundancy payment (in addition to payment of other legal entitlements) to an employee who loses their job due to a role becoming redundant. The Fair Work Commission website has an informative table which sets out the number of weeks of pay that an employee is entitled to receive where the employer is required to make a redundancy payment (see https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/notice-of-termination-and-redundancy-pay).
It is also possible for employees and employers to negotiate an appropriate redundancy payment should they choose to do so.
In addition, redundancy pay will not be payable in any of the following circumstances:
- an employee whose period of continuous service with the employer is less than 12 months
- an employee employed for a specified period of time, for a specified task, or for the duration of a specified season
- an employee whose employment is terminated because of serious misconduct
- a casual employee
- an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement
- an apprentice
- an employee to whom an industry-specific redundancy scheme in a modern award applies
- an employee to whom a redundancy scheme in an enterprise agreement applies if:
- the scheme is an industry-specific redundancy scheme that is incorporated by reference (and as in force from time to time) into the enterprise agreement from a modern award that is in operation
- the employee is covered by the industry-specific redundancy scheme in the modern award.
- An award that is in operation may include a term specifying other situations in which redundancy pay does not apply to the termination of an employee’s employment.
I run a small business. Am I required to make a redundancy payment to my employee?
An employer who is a small business employer is not required to provide redundancy pay on the termination of an employee’s employment. A small business employer for the purpose of determining redundancy pay is an employer who, at a particular time, employs fewer than 15 employees.
When calculating the number of employees employed at a particular time, the following factors are to be taken into account:
- all employees employed by the employer at that time are to be counted
- a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis
- associated entities are taken to be part of the one entity
- the employee being terminated and any other employees being terminated at that time are counted.
Please contact us if your business requires advice in relation to managing the redundancy of a role. We can be reached on (03) 9642 0435 or at admin@phsolicitor.com.au. Nothing in this article should be relied on as legal advice. The contents of this article should be regarded as general information only, and for specific legal matters, independent advice should always be sought
