Redundancies come with a unique set of rules that must be followed carefully. Failing to do so puts employers at risk of facing an unfair dismissal claim from their employees. Get informed and protect your business by following these steps. Click here to learn more about genuine redundancy in general.
Step 1: Who must follow these steps?
You may need to follow these steps if you are a ‘national system employer’ under the Fair Work Act 2009 (Cth). Most businesses registered in Australia fall under this category.
However, some businesses may not be required to pay ‘redundancy pay’. Exceptions to redundancy pay, include:
- Businesses with less than 15 employees (including the employee you want to make redundant and any regular casual employees);
- Employees employed for less than 12 months of continuous service; or
- Employees employed for a specified period of time, for a specified task, or for the duration of a specified season.
You should ensure that you seek advice on whether you are required to pay redundancy entitlements on the termination of an employee’s employment.
Step 2: Does a modern award or enterprise agreement apply?
Modern awards and enterprise agreements often have different procedural requirements and redundancy pay provisions than what is set out under the Fair Work Act. Make sure you know which award or agreement (if any) applies to the employee.
Step 3: Ensure you can prove the ‘change in operational requirements’
Under the Fair Work Act, a ‘genuine redundancy’ is when an employee’s job is no longer required to be performed by anyone because of ‘changes in the operational requirements’ of the employer’s business.
Some recognised examples of ‘changes in operational requirements’ are:
- New technology;
- The job is being outsourced;
- Your business is experiencing a downturn and needs to downsize; and
- You are restructuring the business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the relevant employee’s job no longer exists.
When informing the employee about the redundancy, you are not required to provide evidence of the change in operational requirements. Such evidence would usually be considered the employer’s privileged information and not something the employee is inherently entitled to. However, if the employee makes an unfair dismissal claim, the obligation is then on the employer to prove this was a genuine redundancy. In such circumstances, you would need to provide documentary evidence of the change in operational requirements. So, it is important to record notes, reports or correspondence to prove that change in your operations.
Step 4: Considered redeployment?
Proving a change in operational requirements is not enough. You should have also properly considered if there are any other roles within your company or related entities that the employee could fill.
To ensure you’ve done your due diligence, follow these steps and keep a record of each one:
- Search for available jobs in your company and related entities;
- Would any of the available jobs suit the employee?
Factors to consider are:
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- The nature of available positions;
- The qualifications required of the alternative positions;
- The employee’s skills, qualifications and experience; and
- The location and level of remuneration in the alternative position.
Some examples of a record for this step would be:
- Offering an alternative position to the employee;
- Keeping a record of the available positions and their requirements; and
- Inviting the employee to inform you if they are interested in any other roles.
If you would like to avoid paying redundancy pay and keep the employee within the business, you will need to show that you have considered the above factors and that the new role offered is ‘reasonably suitable’ for the employee and ‘directly comparable’ to their existing role.
If you would prefer to make the employee redundant, you need to prove that it was ‘not reasonable in consideration of all the circumstances to redeploy the employee’.
Most disputes over redundancy occur at this step.
If you are unsure about your redeployment options, get in touch with us. Call us on 1300 654 590 or email us.
Step 5: Consult, even if you don’t have to
If you are required to consult with the employee under an award or enterprise agreement, you should consult with them before making any decisions to make them redundant. It is important to show that consultation occurred before any decisions were made.
We often find that it helps ease the process if you consult with the employee, even if you are not required to. When consulting with the employee, you should:
- Invite them to a meeting in writing;
- Take notes during the meeting;
- During the meeting – explain the process, give reasons for the potential redundancy and answer any questions the employee might have. Be prepared to give them options of what redeployment or redundancy pay might look like; and
- After the meeting, give them a letter clearly outlining the conclusion of the meeting and next steps.
At all times, offer support to the employee. This can include providing information on their entitlements, offering outplacement support, and assisting with job search efforts.
Step 6A: Announce the redundancy and pay redundancy pay
You’ve now reached the final step and can announce the redundancy. You can read about calculating redundancy pay here.
Send a final letter announcing the redundancy and clearly outlining the employee’s entitlements.
What you do next (and whether you apply step 6B or 6C) will depend on what has ultimately determined regarding the employee’s future employment with you.
Step 6B: Redeploy
If you have offered a new role to the employee and they accept the role, it is important to clearly outline how the transition into the new role will occur and whether their service will continue with the same employer.
At this stage, you should also have a a new employment contract prepared for the redeployed employee, clearly setting out the terms of their new role. We can assist you with preparing the new employment contract.
Step 6C: Enter into a Deed of Release
If:
- the employee has not been offered or accepted a new role; or
- you think the redundancy will be challenging for the employee; or
- the employee is likely to bring a claim against you,
then it may be appropriate to enter into a Deed of Release with the employee. We can advise you on this, and help you negotiate the terms of the Deed of Release.
A Deed of Release is a binding agreement in which an employee agrees to waive their right to make a claim against their employer in exchange for a certain ex-gratia payment in addition to their redundancy pay.
Get in touch with us to know more about this option. Call us on 1300 654 590 or email us.
As you can see, there are several steps to consider if you need to effect a redundancy. Don’t risk missing a critical step. Let us help take the stress out of the process, advise you on the next steps and ensure the redundancy is handled appropriately. Call us on 1300 654 590 or email us.
The information contained in this post is current at the date of editing – 16 February 2023
