Redundancy Considerations for Employers
Redundancy occurs where the position filled by an employee is no longer required to be performed by anyone.
Due to economic fallout of COVID-19, employers are currently faced with difficult decisions regarding staffing numbers with many considering the prospect of redundancies.
Genuine Redundancy Considerations
For a redundancy to be genuine, section 389 of the Fair Work Act 2009 requires the following conditions must be met:
- The employee’s job is no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
- The employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy; and
- It would not have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity of the employer.
Termination of employment for purported redundancy may amount to an unfair dismissal in breach of the Fair Work Act where all of the above requirements are not met.
An employee who is of the view that their termination for reason of redundancy was not a genuine case of redundancy may be able to apply to the Fair Work Commission for reinstatement to their position or compensation for unfair dismissal.
Consultations about Redundancy
Under section 389(1)(b) of the Fair Work Act, employers are required to consult with their employees about redundancy when:
“…a modern award or enterprise applies to an employee and that modern award or enterprise contains requirements to consult about redundancy.”
It is important to note that almost all modern awards contain consultation obligations which require an employee to be notified as soon as any definite decision has been made regarding making their job redundant.
These consultations must be genuine and are ordinarily required to be undertaken in as soon as practicable after a decision affecting the employee’s position has been made.
Where an employer is obliged to consult under an award and does not, the redundancy will not be considered genuine for the purpose of unfair dismissal law, even where the position is no longer required.
Redundancy Pay and Entitlements
Employees who have been made redundant may also be eligible for redundancy pay. This is paid in addition to other employee entitlements such as accrued annual leave.
It is important to note that employers will not be required to pay redundandy pay in the following circumstances:
- The employer is a small business employer with fewer than 15 employees;
- The employee is a casual;
- The employee has been employed for less than 12 months continued service;
- The employee is terminated because of serious misconduct;
- The employee is an apprentice;
- The employee was employed for a specific task or a finite period; and
- The Fair Work Commission orders no redundancy pay.
The amount of redundancy pay which is payable to employees is based on the length of time they are employed by the business not inclusive of unpaid leave.
Generally, redundancy payment will be calculated by multiplying the employee’s base rate of pay by the redundancy pay period, however, if the employee has been hired under a registered employment agreement this may differ.