A redundancy can happen when an employer either doesn’t need anyone to do the employee’s job or the employer becomes insolvent or bankrupt.
Common situations where a redundancy may occur are when the employer organisation or business:
- Introduces new technology that makes the employee’s job obsolete.
- Decreases in size due to lower sales or production.
- Relocates to another state or overseas.
- Restructures due to a merger or takeover .
What is a genuine redundancy?
An employee can’t make an unfair dismissal claim if there has been a genuine redundancy.
A genuine redundancy is when:
- The employee’s job does not need to be done by anyone; and
- The employer has followed the required consultation procedures in the relevant award, enterprise agreement or other registered agreement.
What is not a genuine redundancy?
There is not a genuine redundancy if the employer does one or more of the following:
- Still needs the employee’s job to be done by someone.
- Has not followed the required redundancy consultation procedures laid out in the award, enterprise agreement or registered agreement.
- Could reasonably have given the employee another job within the organisation or business.
Consultation when making a redundancy
Each award, enterprise agreement and registered agreement sets out the consultation requirements that an employer must meet when making major changes to the workplace that might or will result in redundancies.
These consultation procedures include details on:
- Notifying affected employees about proposed changes.
- Providing information about the changes and their potential effects.
- Discussing the changes with employees and steps that can be taken to minimise the negative impact on employees.
- Considering employee’s suggestions about the changes.
Notice of redundancy
The amount of notice that employers have to give their employee of a redundancy depends on how long the employee has been working for the employer. This period of work is called ‘continuous service’.
Some authorised unpaid leave such as unpaid parental leave is included in the calculation of continuous service.
If an employee’s continuous service is:
- Less than 1 year: 1 week’s notice must be given.
- More than 1 year and less than 3 years: 2 weeks’ notice must be given.
- More than 3 years and less than 5 years: 3 weeks’ notice must be given.
- More than 5 years: 4 weeks’ notice must be given.
If an employee is over 45 years of age and has been employed for more than 2 years, then an extra 1 week’ notice must be given.
Awards, enterprise agreements and registered agreements may specify a longer minimum notice period of redundancy than what is given above.
Employers may give more notice than is required and the employee only has to work for the minimum length of the notice period. For example, if the employer gives 3 weeks’ notice but only needs to give 2 weeks’ notice, the employee can choose to work for 2 or 3 weeks.
Redundancy payment amounts
The redundancy payment amount depends on the length of service and is set out in your award, enterprise agreement or registered agreement.
Employers can apply to the Fair Work Commission reduce the amount of redundancy pay if they:
- Find other suitable employment for the employee, or
- Can’t afford to pay the full redundancy payment.
Who is not entitled to redundancy pay?
Those who are not entitled to redundancy pay include:
- Employees whose continuous service is less than 12 months.
- Casual employees.
- Employees who were employed for a particular project, seasonally or for a specified length of time.
- Trainees who are employed only for the length of the traineeship.
- Employees who are dismissed due to serious misconduct.
- Employees who work for some small businesses (small businesses employ 15 people or less).
- Employees whose employment is transferred when their workplace organisation or business is sold (see below).
Redundancy on transfer of business
Special arrangements apply to employees whose employment is transferred when their workplace organisation or business is sold. This is called a ‘transfer of business’.
To be a transfer of business, the following must occur:
- The employee begins working for the new employer within 3 months of finishing their job with the previous employer.
- The employee’s new role is the same or very similar to their role under the previous employer.
- There is a ‘connection’ between the new employer and the previous employer.
A connection between employers can be found when:
- Some or all of the previous employer’s business assets have been sold to the new employer.
- The previous and new employers are associated entities (for example, they are related companies).
- The previous employer outsources the employee’s work to the new employer.
- The new employer stops outsourcing the employee’s work to the previous employer.
Transferring employees are not entitled to redundancy payments.