Guide To Redundancy Entitlements in Australia

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The corporate and business world is no stranger to change. Organisations get restructured, new technological innovations are adopted, and mergers and acquisitions are frequent. These structural and operational changes may result in employees being reassigned roles within the company, while some may be made redundant.

As an employer, it is essential for you to know the legal requirements to consider when making employees redundant. This article will detail the various aspects of redundancy and the legal obligations you hold as an employer when exercising these rights.

What is redundancy?

A redundancy occurs when the business no longer requires the services of an employee. There are multiple reasons why a redundancy may occur. The most common scenarios are when a business is restructuring or relocating or is insolvent and closing down.

Technological innovation is also a common cause for redundancies because automated processes and machines are beginning to replace people. Accordingly, when the employee no longer has work to do due to the above reasons, their employment contract may be terminated by way of redundancy.

When is a redundancy genuine?

When looking to make employees redundant, employers need to ensure it is a genuine redundancy and not an unfair dismissal.

A genuine redundancy is defined by the Fair Work Act 2009, which states that:

  • The employer does not require anyone to do the person’s job due to a change in structure or operations; and
  • The employer has complied with the obligations detailed by modern awards or the enterprise agreement.

Following the Act, redundancy is not deemed genuine if:

  • the employee could have been reasonably reassigned into the employer’s enterprise, or any other associated entity;
  • the employer has not explored options other than redundancy;
  • the employer has hired another person to do the same job; and
  • the employer has not consulted with the employee or followed the due process that is detailed by modern awards.

Dismissals can be complicated, and it is advisable to seek expert consultation before dismissal. This will ensure that a redundancy is in accordance with the obligations detailed by the law and avoid having to face charges of unfair dismissal from disgruntled redundant employees.

Redundancy Pay

When employees are made redundant, they may be entitled to a payment. The National Employment Standards (NES) has set the minimum amount employees must be paid based on their years of service. There are also some awards and agreements which set Industry Specific Redundancy Schemes that set different entitlements. The redundancy payments do not include bonuses, allowances or any other incentive-based payments. Employees who are entitled to a redundancy payment are ones who have been working with the enterprise for the minimum of a year.

Another condition of redundancy is that the business must consist of at least 15 employees at the time, inclusive of the employees who are being dismissed. However, these conditions may vary under some awards. Hence it is recommended that all employers consult the relevant award or agreement for the appropriate causes of action.

Who is not eligible for the redundancy payment?

The following employees are ineligible for the redundancy payments:

  1. An employee that has served for less than a year;
  2. Casual employees;
  3. Apprentices or trainees; and
  4. Employees who have been hired for a season/specific task or a project.

Terms of Notice

The National Employment Standards (NES) has set a minimum notice period which an employer is mandated to give to the employee when ending the employment contract. An employer is required to provide an employee with written notice of the day of termination when ending their employment. Payment in lieu of notice can be given in place of notice.

The payment in lieu of notice is the amount that the employee would have earned had they served the notice period. No permanent employee can be dismissed without the notice period, or payment in lieu of notice. The notice period is based on the duration of which the employee has served at the company.

As noted above, notice is often served as a written document. It is advisable to mention the last day the employee will be working and the specified dates of the notice period.

However, similar to the redundancy payment exemptions, businesses are exempted from offering notices to certain employees. These include:

  1. Casual employees;
  2. Employees hired for a certain time, season, project or task;
  3. Employees hired for a certain training period only;
  4. Daily or weekly hired employees; and
  5. Employees fired for serious misconduct.

Do Small Businesses get an Exemption?

Some small businesses may not have to make redundancy payments and offer notices. These include businesses that consist of less than 15 people, inclusive of the ones being laid off. While this is an exemption under the NES, some awards may require small businesses to carry out some of the abovementioned obligations towards their dismissed employees. Therefore, as a small business owner, it is important to be aware of the relevant industry award and follow the obligations detailed in them.

Redundancy Consultation Requirement

According to industry Modern Awards and enterprise agreements, businesses undergoing structural and organisational changes are to follow certain processes. These processes become imperative when redundancies come as a result of the structural changes made.

The consultation processes need to be carried out as soon as the changes are made. Employees who may be affected by the changes need to be notified. Additionally, all employees need to be informed of the changes and what implications they may have on their employment. Employers must communicate with employees and identify how they can contribute to minimising the negative consequences of job loss which may eventuate.

Key Takeaways

  • Structural and operational changes may lead to employees being dismissed. This is called redundancy.
  • Genuine redundancies are ones where the employer no longer needs the employee to get the work done. Redundancies must be in accordance with the Fair Work Act, modern awards and enterprise agreements.
  • Permanent employees made redundant are entitled to redundancy payments and notice periods. These are set by the NES and are based on years of continuous service.
  • Small businesses (employing less than 15 people) may be exempt from serving notice periods and making redundancy payments.
  • Redundancy consultation must be undertaken when employees are being dismissed to comply with the industry Modern Awards.

Hire an Expert

Redundancies can be tricky, and it is important to follow the legal obligations you have as an employer. To ensure that you stay out of any legal trouble, hire an expert business lawyer to help you through the restructuring and redundancy process.

At Lazarus Legal, we have business lawyers who understand the complexities of the employment law and are ready to help you navigate the intricacies of employment contracts and dismissals. Get in touch and we will be glad to help you with your legal requirements.

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Mark Lazarus

Mark Lazarus

Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.

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Guide To Redundancy Entitlements in Australia