Lucy Cobb
Thursday, June 4, 2020
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Redundancy is a daunting process and many employers struggle with its complexities.
In Australia, you need to consider the many employment laws as well as establish a strong business case, while maintaining a fair approach throughout.
In this guide, we’ll cover what redundancy is, the main steps within the process, and how our round-the-clock HR support can help you.
What is redundancy?
Redundancy occurs when an employer decides that a job is no longer needed and terminates the employment of the employee holding that position, typically due to factors unrelated to the employee's performance or conduct.
However, the process is a little more complicated than just ending an employees’ contract of employment. Let’s take a closer look.
Redundancy law in Australia
The Fair Work Act 2009 is the primary Commonwealth legislation governing employment and workplace relations in Australia, establishing a framework that sets minimum standards and conditions for employees and outlines the rights and responsibilities of employers, employees, and employee organisations.
It is also the legislation that gives employers the right to dismiss employees with redundancies. However, as it is intended to be used as a last resort, employers must provide a strong business case as to their reasoning.
Common reasons for redundancy are:
If your business must close down
For cost-cutting measures after serious economic issues, such as a recession or pandemic
If a role is no longer a requirement due to technology
If your business moves location
When one business purchases another
But your employees also have redundancy rights. Some of these include:
A fair and objective redundancy process.
Consideration for alternative options in your business. Including: other roles, a reduction in working hours and a reduction in pay.
Consultations during the process
Time off to find a replacement job
The right notice period
The right redundancy pay in most circumstances
It’s essential to respect your employees’ rights or it could result in a grievance complaint or an unfair dismissal. For example, if you directly discriminate at work by making an employee redundant due to pregnancy, their religious beliefs, or due to their gender.
This could lead to a costly and damaging employment tribunal. Be sure to follow a fair process to limit any risks.
The types of redundancy
There are two. And these are:
Genuine redundancy
A genuine redundancy is when:
the employee’s job doesn’t need to be done by anyone, and
the employer followed the consultation requirements in the relevant award or enterprise agreement.
This means you have made the decision that their job no longer exists, and their employment is to be terminated. Redundancy payments are a type of employment termination payment (ETP).
Non-genuine redundancy
A non-genuine redundancy occurs when a role is not truly eliminated from the business. For example, when the position or its main duties continue to be required, and will most likely be performed by another worker, or their dismissal is for disciplinary or inefficient reasons.
Redundancy of 15 or more employees
If your business is considering redundancy of 15 or more staff, you must give written notification to Services Australia of the proposed dismissals as soon as possible and before the employee is made redundant.
The notice must set out the:
Reason for the dismissals
Number and categories of the employees likely to be affected
Timing of the dismissals
The redundancy process — a quick overview
Consider these redundancy rules to help you avoid legal issues or unnecessary complications:
Make sure there’s a clear business case for your plans
Analyse your business and see if there are alternative options to redundancies
Create selection criteria to identify staff to dismiss
Hold consultations with the employees you chose
Confirm the dismissals with a redundancy notice letter (include the notice period, the employee’s final day and the redundancy pay they will receive).
Under the National Employment Standards (NES) the minimum redundancy entitlements are as follows:
1 – 2 years: 4 weeks’ pay
2 – 3 years: 6 weeks’ pay
3 – 4 years: 7 weeks’ pay
4 – 5 years: 8 weeks’ pay
5 – 6 years: 10 weeks’ pay
6 – 7 years: 11 weeks’ pay
7 – 8 years: 13 weeks’ pay
8 – 9 years: 14 weeks’ pay
9 – 10 years: 16 weeks’ pay
Over 10 years: Redundancy pay entitlement drops to a maximum of 12 weeks’ pay, as long as service leave entitlements are also paid out at this point.
Navigate redundancies in a smart and efficient way with BrightHR
BrightHR understands how difficult redundancies are for both employers and employees. Our expert team has helped thousands of companies handle these sensitive processes by using our redundancy navigator tool.
BrightAdvice is also on hand to help you with 24/7 employment relations advice relating to redundancy and any other HR queries you may have.
Book a demo today, or call our team on 1 300 029 198.