Redundancy is when an employer does not require a certain job to be done by anyone anymore due to operational changes to the business.
Employers should have a valid reason for making the decision to make an employee redundant and may be required to follow various procedural steps to ensure the redundancy is genuine.
BrightHR has a Redundancy Tool to help you navigate this process. It helps you formulate a plan and ensures you have a basic understanding of the necessary steps. It provides resources and template letters and even has a handy glossary to clarify relevant terminology.
What Is a Letter of Redundancy?
A Letter of Redundancy or Redundancy Letter usually refers to the process outcome letter confirming the employee is being made redundant and terminating their employment.
In the case of redundancy, you may be required to consult with the employee before ending their employment as per the terms of the applicable award or registered agreement. If your employee is not covered by an award or registered agreement, there is no requirement to consult unless there is a contractual term requiring you to do so.
Consultation usually involves notifying the employees of the proposed change to their employment, inviting them to a meeting to further discuss the matter, and taking any suggestions the employee might offer to keep their job into consideration and considering any alternative options before making a final decision. If, after a fair process has been conducted, it is decided that the outcome will be redundancy, a final meeting should be convened.
At that final consultation meeting, an employer may be able to make an employee redundant. A formal outcome letter confirming the redundancy, also known as a letter of redundancy, should be issued to the employee.
What To Include in a Letter Of Redundancy?
Generally, employers must not terminate an employee’s employment unless the employer has given the employee written notice of the day of the termination of the employment (which cannot be earlier than the day the notice is given). When you make an employee redundant, you may also have to pay redundancy entitlements.
It is generally considered best practice for a redundancy letter to outline the process in coming to the decision to make the employee redundant, and the reasoning behind it, and any further considerations such as redeployment options. It should also include notice of the last day of employment and details as to final pay and any entitlements owing.
The information contained in a letter of notification of redundancy should:
provide an overview of the situation generally (e.g. the reason why the redundancy is being considered)
provide an outline of the process that has been followed (steps of consultation)
confirm that the employer has reviewed other areas in the business and that there are no suitable vacancies or opportunities for redeployment.
confirm that there is no suitable alternative to avoid the redundancy.
clearly state that the position is being made redundant and explain the reasoning behind the decision.
specify the last date of the employee’s employment with the company.
break down the monetary entitlements the employee will receive and specify when they can expect to receive them (i.e. annual leave, overtime, long service leave).
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How Do I Write a Redundancy Letter?
Step 1: Start with the date and then add ‘Private and Confidential’ before the Employee’s name and address. Then put in the subject matter e.g. ‘Termination of Employment (Redundancy)’ or ‘Confirmation of Redundancy’. Address the employee e.g. ‘Dear John’.
Step 2: Confirm the purpose of the letter and briefly reiterate that the business operational requirements have changed. Summarise the reasons for operational changes to the business and why the position is being considered for redundancy.
Step 3: Refer to the consultation meeting and confirm what was said in it – that you provided an overview and summary of the current business position and sought feedback from the employee – then summarise the employee’s comments and proposals (if any).
Step 4: Explain that upon review there were no viable alternative or redeployment options available.
Step 5: Confirm that the position is being made redundant and list the employee’s last day of work and the employee’s entitlement to notice, and whether notice will be worked or if the employer is paying it in lieu.
Step 6: List the details of the employee’s other entitlements that will be paid as part of the employee’s final pay where applicable e.g. redundancy pay, and payment for untaken annual leave or long service leave.
Step 7: Consider finishing with a personal touch – for example express how much you have appreciated the employee’s contribution to the business over the years and offer to provide a reference.
Step 8: Make sure the letter is printed on company letterhead and give it to the employee personally or send it by pre-paid post to their last known residential address, rather than delivering it to their email address.
You can manage and keep track of employee rosters, timesheets, leave and absenteeism to enable you to pay the employee their final pay with BrightHR. You can generate and print reports, and then store wage and time records and related documents securely in the cloud to comply with your record-keeping requirements.
Employsure can help you understand redundancy and guide you through the process, as well as providing clients with template redundancy letters and documents, and helping you calculate final pay. Call us for free initial advice on 1300 651 415
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Frequently Asked Questions
When do I issue a termination letter?
Ideally, after the consultation process has been carried out following the final outcome meeting in which you have advised the employee of your decision to make them redundant.
An employer must provide an employee with written notice of the day of termination when ending their employment and must give the minimum period of notice required under the NES, or the contract or applicable industrial instrument, or pay the employee instead of giving notice.
What’s the difference between a termination letter and deed of release?
A Termination Letter confirms that the employee’s employment is being terminated, gives a reason for the termination, stipulates the day the employment will end, and sets out any entitlements owing.
A Deed of Release is a legal document often used to resolve a dispute between an employer and employee or ex-employee.
Do I have to give a reason to terminate an employee?
Yes. The Fair Work Act provides that you should have a valid reason for dismissal, (which may include redundancy) and that the employee should be given notice of that reason explicitly in clear terms before the dismissal, and also that the dismissal process itself should be fair.
How much notice are employers required to provide before terminating an employee?
The National Employment Standards in the Fair Work Act 2009 generally provide the minimum entitlements in respect of notice of termination for employees covered by the national workplace relations system, which will usually depend on how long the employee has been employed within the business.
If an agreement or employment contract, modern award or enterprise agreement stipulates a longer notice period, this will prevail.
Some modern awards and enterprise agreements may provide employees with more or less beneficial entitlements in respect to both notice and redundancy pay, particularly in circumstances where there is an industry specific redundancy scheme.
How do I tell my employees about redundancy?
You should follow any consultation requirements in the in the applicable industrial instrument to ensure a fair process. A fair redundancy process will usually consist of three stages:
- Notification or warning that the employee’s job is at risk of being made redundant;
- Consultation with the employee including discussion regarding the selection process and any alternative employment options;
- Confirmation of outcome (and follow-up redundancy letter including written notification of the employment end date and entitlements owed)