How does redundancy work?
Redundancy occurs when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt, and terminates their employment. The job itself, not the employee, becomes redundant. Redundancy can happen when the business:
- introduces new technology (eg. the job can be done by a machine)
- slows down due to lower sales or production
- closes down
- relocates interstate or overseas
- restructures or reorganises because a merger or takeover happens.
Other Options Beside Redundancy
Before dismissing the employee, to avoid a successful claim for unfair dismissal, employers should consider whether it is reasonable in all the circumstance to re-deploy the employee in the organisation. This would extend to any businesses of “associated entities” of the employer, including “related bodies corporate” (as defined in the Corporation Act 2001).
Matters to consider would include the nature of any available position, the qualifications required to perform the job, the employee’s skills, qualifications and experience, the location of the job and the remuneration which it offered. You should notify the employee whether you have considered any re-deployment options.
We have a great article on 5 options you should consider before redundancies. Please take the time to have a read.
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. We suggest heading over to our legal partners, Employment Innovations, to learn more.
Notice of termination and redundancy pay forms part of the National Employment Standards (NES). The NES apply to all employees covered by the national workplace relations system, regardless of any award, agreement or contract. The NES establish the minimum entitlement to the notice period, or payment in lieu of notice, that an employer must give an employee to end their employment. This applies to all employees (other than casuals), not just those covered by the national workplace relations system.
To help you determine how much redundancy payout your employee might be owed, please use the Fair Work Redundancy Calculator.
Notice of Termination.
An employer must provide an employee with written notice of the day of termination when ending their employment.
An employer may give notice to the employee by either:
- delivering it personally
- leaving it at the employee’s last known address
- sending it by pre-paid post to the employee’s last known address.
- via a certified digital delivery system like Employment Hero
An employee may also need to give their employee notice of termination if their award of agreement specifies it.
Redundancies at Scale
If a business is considering redundancy of 15 or more staff, employers must give written notification to the Department of Human Services of the proposed dismissals. More information, and a notification template, can be found on the Department of Human Services website.
What amount of notice needs to given?
An employer must not terminate an employee unless they have either:
- given the minimum period of notice
- paid the employee instead of giving notice. This is paid at the employee’s full pay rate as if they had worked the minimum notice period.
Does redundancy pay apply to all employees?
Some employees don’t get redundancy pay when their job is made redundant.
The following employees don’t get redundancy pay:
- employees whose period of continuous service with the employer is less than 12 months
- employees employed for: – a stated period of time – an identified task or project – a particular season
- employees fire because of serious misconduct
- casual employees
- trainees engaged only for the length of the training agreement
- employees of a small business.
What is a small business?
A small business employer, for the purpose of determining redundancy pay, is an employer who employs fewer than 15 employees at the time when notice is given. To determine whether the employer has fewer than 15 employees, the following factors need to be considered:
- 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, they have been employed on a regular and systematic basis
- associated entities are taken to be one entity
- the employee being terminated and any other employees being terminated at that time are counted.
An award or agreement may have different redundancy provisions which could apply instead of those listed above. These provisions, such as industry-specific redundancy schemes, can override the listed exceptions. For example, the industry-specific redundancy scheme in the Building and Construction General On-site Award means that small business employers may need to provide redundancy payment.