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Five alternatives to redundancy

With COVID-19 causing so much uncertainty in Australia, many of our clients have been looking to us for advice. We've answered the most common COVID-19 questions we've received here in this blog.
Published 24 Mar 2020
3 min read
Five alternatives to redundancy

With COVID-19 causing so much uncertainty in Australia and updates changing multiple times throughout the day, many of our clients have been looking to us for advice. We’ve answered the most common COVID-19 questions we’ve received here in this blog.

What is redundancy?

Redundancy is where an employer no longer requires an employee’s job to be performed by anyone. In the case of COVID-19, this may be due to a significant downturn in business.

There are redundancy alternatives available.

When we’ve recovered from the impact of COVID-19 and we’re back to business as usual, businesses will scramble to hire employees if mass redundancies are made. In such an uncertain economic environment, here are five redundancy alternatives you can choose for your team.

1. Allow employees to take their paid leave

No one knows the true timeframe of the impact COVID-19 will have on Australians. With this in mind, if employees have annual leave or long service leave, you should allow them to take it before you opt straight to redundancy. However, this is dependent on the terms of the modern award or enterprise agreement that applies to the business. In regards to long service leave, this also depends on the terms of the applicable state or territory legislation.

With annual leave, award-free employees can be directed to take their annual leave when it is considered ‘reasonable’.

Given the current COVID-19 pandemic, it is likely many employers will direct employees to take annual leave. For those employed under a modern award, some awards allow an employer to direct employees to take annual leave during a temporary shut down (but usually only where the employee is given a set period of notice). Where the award is silent, the employee cannot be forced to take leave.

From 25 March 2020, NSW has made amendments to the Long Service Leave Act 1955 to assist with the impact of COVID-19. This will allow employees to take their long service leave (LSL) in shorter blocks, such as one day per week. Additionally, employees don’t need to provide the traditional one-month notice period. This legislation will be in effect for six months, with the possibility of extension to one year if required. This will help ease pressure on employees and employers during these difficult times.

2. Switch the business to a 3 or 4 day week

If your business is experiencing a reduction in business and the workload is decreasing, introducing a shorter working week can help ease the pressure. While hopefully temporary, this will provide your employees with structure to their days and weeks, allowing them to complete required work and also help support them financially in these unprecedented times.

Expect some pushback on the reduced income. One way to navigate this conversation is to stress the importance of an ‘all for one, one for all’ mindset. In order to preserve colleagues’ jobs, everyone has to pitch in. Download agreement for reduced pay letter template here.

3. Switch to job sharing

Job sharing is the process whereby two employees share the equivalent of one full-time role. This reduces the cost of one full-time employee, whilst allowing two employees to work reduced hours. This allows employees to retain some work and income.

4. Switch to one week on, one week off

If you are experiencing a period of reduced business, switching to one week on, one week off for your employees can help ease financial pressure caused by COVID-19. Similar to job sharing, it allows for employees to maintain their role and income while everyone navigates through uncharted waters. If you decide to go down this path, ensure that these new arrangements are formally recorded.

5. Stand downs

Commonly, it’s not possible for employers to force employees to take periods of unpaid leave. This remains true even in the event the downturn is caused by external factors outside the employer’s control. However, with stoppage of work caused by the impact of COVID-19, it is possible for employers to direct employees to take a period of unpaid leave under the “stand down” provisions of the Fair Work Act 2009.

Factors that can cause this to occur in a business, include a direction from the Australian government, such as instruction not to operate for a period of time. If the employee agrees to take leave without pay, agreement needs to be formally recorded. We’ve uploaded a stand down letter template here.

Looking for more information?

If you found the redundancy alternatives helpful, we’ve put together a COVID-19 Resource Hub with a depth of information, templates and webinars to help you navigate these challenging times.

Disclaimer: The information provided in this knowledge-based article is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information about redundancy alternatives applies to your specific situation, we recommend you contact Employment Innovations for further advice.

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