What is redundancy?
If an employer no longer needs a role to be performed or doesn’t need the same number of employees to perform certain tasks, then an employee’s position can be made “redundant”.
Reasons for redundancy can include:
- the job the employee is doing is being replaced by new technology/machinery
- outsourcing tasks to contractors
- an slow down affecting the business
- a restructure or reorganization of the business or a merger or takeover taking place
- the business stopping trading
Redundancy may or may not however, result in an obligation on the employer to pay the affected employee ‘redundancy pay’ (sometimes called ‘severance pay’). This, and the amount, depends on:
- the length of employment
- the employer’s size
- whether the employee can be redeployed
- the terms of the:
- employee’s employment contract
- any applicable Award or Enterprise Agreement; and
- the Fair Work Act / National Employment Standards (NES).
An employee must have been employed for 12 months or more for redundancy pay to even be considered.
If the employer employs less than 15 (full time or full time equivalent, not casual) employees at the time of dismissal, then there is no entitlement for redundancy pay, unless your Award, Contract or Enterprise Agreement provides for it.
If there is no other position the employee could be redeployed into or if an offer to do so is not accepted, the amount of redundancy pay can be reduced, or even removed.
Redundancy pay is based on ordinary rates of pay (so it doesn’t include bonuses, commission, overtime, loadings, allowances etc).
If redundancy pay is payable, then the table in the NES applies.
Often there is a requirement for employee consultation regarding major workplace changes that could result in dismissal.
If a redundancy is not “genuine”, then issues of potential unfair dismissal can arise. If an employee is made redundant but, for example, someone else is hired at the time or soon thereafter to perform their duties, then the redundancy is not genuine.
Even if no redundancy pay is payable, notice (or payment in lieu thereof) is still required as the employment is being terminated (in addition to payment for all accrued employee entitlements).
FURTHER INFORMATION
For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au
This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.
