Making an employee redundant

Redundancy occurs when an employer no longer requires an employee’s job to be performed by anyone. Making someone redundant invariably involves terminating their employment and so carries the risk of legal claims (such as unfair dismissal). In order to reduce the risk of such claims it is advisable to follow a redundancy process.

Redundancy process

A redundancy process usually involves giving employees written notice about the possibilities of redundancies, consulting with them about how they will be affected, developing a fair selection criteria for selecting staff for redundancy and offering any suitable redeployment opportunities. Modern awards – those industry or occupation specific rules that apply to the majority of Australian employees – contain specific rules about the redundancy consultation process to be followed.

Redundancy entitlements

Most employees are entitled to redundancy pay if their role is made redundant (calculated on their length of service). However there are exceptions to this rule, for example where the employer has offered the employee suitable redeployment opportunities, where the employee has less than a years’ service, where the redundancy is due to the “ordinary and customary turnover of labour” or where the employer is a “small business employer” (see below). Our lawyers can help guide you through this process and make sure you understand whether an obligation to make redundancy payments arises in your particular situation.

Calculating redundancy pay

The Fair Work Act 2009 (Cth) sets out a sliding scale of redundancy pay entitlements for employees. Whilst calculating redundancy entitlements may seem straight-forward, it is important for businesses to check whether a modern award applies to their business and whether this sets out alternative rules about redundancy pay, as many awards do. We advise on these matters regularly and will be quickly able to help you understand your obligations and how to calculate redundancy payments.

Small business redundancy

The same redundancy rules generally apply to small businesses as they do to other employers, the one exception is that under the Fair Work Act 2009 (Cth) there is an exemption from paying redundancy pay for a “small business employer” (defined as one which has less than 15 employees, including employees of any associated entities). However, employers need to be aware that the small business exemption does not operate in all industries. A number of modern awards have different rules regarding obligations on small businesses and redundancy pay. It’s therefore essential for small businesses to understand which award applies to their business and what is says about redundancy pay..

If you need redundancy advice, please contact us for a free initial consultation.