Redundancy under the National Employment Standards happens when an employer either:
- decides they no longer want an employee’s job to be done by anyone and terminates their employment (except in cases of ordinary and customary turnover of labour – which depends on the relevant circumstances), or
- becomes insolvent or bankrupt.
Redundancy may happen when:
- the job someone has been doing is replaced due to the employer introducing new technology (i.e. it can be done by a machine)
- business slows down due to lower sales or production
- the business relocates
- a merger or takeover happens
- the business restructures or reorganises.
A dismissal is not a genuine redundancy if the employer:
- still needs the employee’s job to be done by someone else
- has not consulted with the employees about the redundancy under an award or registered agreement or
- could have reasonably given the employee another job within the business.
NOTICE OF THE REDUNDANCY
A notice period is the length of time that an employee or employer has to give to end employment. This is also required in the redundancy context.
|Employee’s period of continuous service with the employer at the end of the day the notice is given||Period|
|Not more than 1 year||1 week|
|More than 1 year but less than 3 years||2 weeks|
|More than 3 years but less than 5 years||3 weeks|
|More than 5 years||4 weeks|
*If the employee is over 45 years old, and has completed at least two years of service at the end of the day notice is given, the employee receives an additional one week’s notice.
To end an employee’s employment, an employer must give written notice of their last day of employment which must be delivered personally, by leaving it at the employee’s last known address or by sending it by pre-paid post to the employee’s last known address.
Notice can be paid out instead of worked should the employer choose to do so. This payment must equal the wages for the period you would have worked whilst on notice.
STANDARD REDUNDANCY PAY ENTITLEMENTS
|Employee’s period of continuous service with the employer on termination||Redundancy pay period|
|At least 1 year but less than 2 years||4 weeks|
|At least 2 years but less than 3 years||6 weeks|
|At least 3 years but less than 4 years||7 weeks|
|At least 4 years but less than 5 years||8 weeks|
|At least 5 years but less than 6 years||10 weeks|
|At least 6 years but less than 7 years||11 weeks|
|At least 7 years but less than 8 years||13 weeks|
|At least 8 years but less than 9 years||14 weeks|
|At least 9 years but less than 10 years||16 weeks|
|At least 10 years||12 weeks*|
* There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least 10 years continuous service. This is consistent with the 2004 Redundancy Case decision made by the Australian Industrial Relations Commission.
It is possible for an employer to apply to the Fair Work Commission for a determination reducing the liability to pay redundancy pay to a specified amount (that may be nil) if the Fair Work Commission considers it appropriate. The employer may apply for the determination if an employee is entitled to redundancy pay, and the employer finds other acceptable alternative employment or cannot pay the amount.
At the same time, it is possible for employees and employers to negotiate an appropriate redundancy payment should they choose to do so.
DOES REDUNDANCY PAY APPLY TO ALL EMPLOYEES?
An employer who is a small business employer is not required to provide redundancy pay on the termination of an employee’s employment. A small business employer for the purpose of determining redundancy pay is an employer who, at a particular time, employs fewer than 15 employees.
When calculating the number of employees employed at a particular time, the following factors are to be taken into account:
- 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, he or she has been employed by the employer 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.
In addition, redundancy pay will not be payable to any of the following:
- an employee whose period of continuous service with the employer is less than 12 months
- an employee employed for a specified period of time, for a specified task, or for the duration of a specified season
- an employee whose employment is terminated because of serious misconduct
- a casual employee
- an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement
- an apprentice
- an employee to whom a industry-specific redundancy scheme in a modern award applies
- an employee to whom a redundancy scheme in an enterprise agreement applies if:
- the scheme is an industry-specific redundancy scheme that is incorporated by reference (and as in force from time to time) into the enterprise agreement from a modern award that is in operation
- the employee is covered by the industry-specific redundancy scheme in the modern award.
An award that is in operation may include a term specifying other situations in which redundancy pay does not apply to the termination of an employee’s employment.
CHECKLIST: A REDUNDANCY PACKAGE
Below is a checklist of all the things you should give to an employee if you are making them redundant:
- Entitlements calculated to the last day, clearly explained, listing which agreement or award you based the calculations on, when and how you will make final payments
- An Employment Separation Certificate stating that employment has ended and for what reason (if needed for Centrelink)
- A written, accurate, statement of service (if requested)
- The offer of time off for counseling, training and job search services.
- The offer to end their employment immediately by taking pay in lieu of notice (if mutually convenient)
- A farewell event.
PH Solicitor is here to assist and provide advice in this area of redundancy law. Call today on (03) 9642 0435 to speak about your individual situation.