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RedundancyFebruary 9, 2016
Unfortunately, there may come a time when a role in your business becomes redundant. When this happens you need to follow a fair procedure which includes consultation and communication.
The redundancy must also be genuine, meaning the employee’s role does not need to be done by anyone, or the business becomes insolvent or bankrupt. Dressing up a termination as redundancy in order to get rid of an employee is not a genuine redundancy and may land you in hot water.
Below is Employsure’s Managing Director, Edward Mallet’s top tips on managing redundancies.
Redundancy can be justified when:
– new technology is introduced
– the sales / workload is reduced
– the company ceases to operate
– there is a relocation interstate or overseas
– restructures or reorganisation occurs due to a merger or company takeover.
A redundancy is not genuine if:
– another person takes over the role
– the business could have reasonably provided the employee with alternative employment
– you have has not followed the correct procedure to consult with the employee regarding the redundancy
It may be possible to find alternative employment for an employee within the business. Whether the alternative role is suitable for them, depends on the pay and benefits, location, working environment or hours of work. If there is a suitable alternative position and you do not offer this role to the employee, they can make an unfair dismissal claim.
The National Employment Standards set out the minimum redundancy payment for employees based on length of continuous employment.
Period of employment Weeks of pay
At least 1 year but under 2 years 4
At least 2 years but under 3 years 6
At least 3 years but under 4 years 7
At least 4 years but under 5 years 8
At least 5 years but under 6 years 10
At least 6 years but under 7 years 11
At least 7 years but under 8 years 13
At least 8 years but under 9 years 14
At least 9 years but under 10 years 16
At least 10 years 12
A different level of redundancy pay or notice may be set by the modern award which applies to your business and the employee, or in their contract of employment.
If you have less than 15 employees or are selling your business, you may not have to pay redundancy. Again, it is important to seek advice on your obligation.
In addition to redundancy pay, you also need to provide the employee with notice (or pay them in lieu of their working their notice).
The amount of notice is again based on the continuous length of the employee’s employment:
– 1 year or less: 1 weeks’ notice
– 1-3 years: 2 weeks’ notice
– 3-5 years: 3 weeks’ notice
– 5 + years: 4 weeks’ notice
If an employee is over 45 years of age and has worked for the business for more than two years, they are entitled to an extra week of notice.
If you have any questions regarding redundancy or dismissing an employee, contact one of our knowledgeable staff at Employsure today on 1300 651 415.