Redundancy occurs when the work performed by an employee is no longer required to be performed by them or any other employee. This might be because of an economic downturn affecting the business, technological change, company merger, restructuring or changes to operational methods. Redundancy does not result from any factors arising from the employee’s conduct or performance.
Selecting Employees for Redundancy
Deciding which employee to make redundant can sometimes be a difficult process. The recommended approach to adopt, is for you to select who is to be made redundant by referring to the skills, experience, training and performance of individuals compared to the current and future needs of your organisation. You should not take into account discriminatory factors such as age, health or whether they have exercised workplace rights (e.g. taken sick leave or made a workers’ compensation claim).
Unfair Dismissal Risks
Making an employee redundant involves terminating their employment and so can carry a risk of a finding of unfair dismissal if a proper process is not followed.
Generally a successful unfair dismissal claim can be avoided if the employer follows a process whereby:
- The employee is met with and consulted with before any final decision is made, and they are given an opportunity to suggest any ways to avoid the redundancy
- Any redeployment opportunities within the organisation or any of its associated entities are explored with the employee
We have detailed guidance of the process we recommend employers follow in this free downloadable guide.
Where a permanent employee is made redundant they will often be entitled to a redundancy payment if they have at least one year’s service and the employer has at least 15 employees (including employees in any associated entity).
Where the employer has less than 15 employees or the employee has less than a year’s service they will generally not be entitled to a redundancy payment, although some modern awards and enterprise agreements provide for different rules and will apply to all employers regardless of how many employees they have.
Where an employee is entitled to redundancy pay the general entitlement is as follows (subject to different rules in some awards or agreements):
|Redundancy pay period|
|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|
It should be remembered that if an employee’s employment is ending due to redundancy, they will be entitled to a notice period as well as a redundancy payment.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.
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