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Redundancy Redundancy

In some circumstances, there are times when a job becomes redundant. It might be because you are relocating, introducing a new technology, or your business has closed down. In these circumstances, you need to follow a fair redundancy procedure, with plenty of consultation and communication.

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Understanding Redundancy

A redundancy occurs where an employee’s job is no longer required for the business. In some circumstances, this is because a new technology fulfils the job obligations, the business is relocating or closing down, or the employee’s job may be divided up and then transferred to various other employees. The result is that the employee, who no longer has any work to do, may have their employment terminated.

A genuine redundancy should not occur because of an employee’s performance or conduct. Employers need to follow a fair procedure with plenty of consultation and communication.

Redundancy Payment

The National Employment Standards (NES) set out the minimum redundancy or severance payment for employees based on length of their employment (continuous service). The employee must have served at least one year of service, however, it is important to check for exceptions in the relevant Award or agreement.

The payment is calculated in accordance with the Fair Work Act 2009. The employee’s base rate of pay for ordinary hours of work are to be paid in accordance with the period of employment as detailed below.

Period of employment. Weeks of pay.
At least one year but under two years Four
At least two years but under three years Six
At least three years but under four years Seven
At least four years but under five years Eight
At least five years but under six years 10
At least six years but under seven years 11
At least seven years but under eight years 13
At least eight years but under nine years 14
At least nine years but under 10 years 16
At least 10 years 12                      

If an employee was employed before the NES began on 1 January 2010, their period of service starts from that date.

 

Redundancy Notice.

When ending employment because of redundancy, you must provide adequate notice or make payment in lieu, included in their full redundancy payment.

The minimum notice period in the NES is based on how many years your employee has worked for you (continuous service).

Period of employment. Minimum notice period.
Less than one year One week
One – three years Two weeks
Three – five years Three weeks
Over five years Four weeks

If an agreement or contract stipulates a longer notice period, then that one applies. If you give notice to an employee over 45 years old, who has worked at least two years, they are entitled to an extra week’s notice.

Who does not receive redundancy pay?

Some employees do not qualify for redundancy payment. They include:

  • employees whose period of continuous service with the employer is less than 12 months
  • employees terminated because of serious misconduct
  • employees employed for a stated period of time or project
  • trainees engaged only for the length of the training agreement
  • a particular season
  • casual employees
  • apprentices

Small businesses with less than 15 employees may also be exempt, however, it is best to seek professional advice. Employsure can advise and assist with correct redundancy payments in accordance with Fair Work legislation in Australia.

For more information, visit the redundancy complaints guide.

For peace of mind, please call our 24-hour Advice Line now on 1300 651 415