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