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Making Redundancies: 3 Things Every Employer Should Know

Published June 01, 2020 (last updated March 9, 2021) Author: Employsure
employers reading on redundancy

Employers have been forced to make a number of difficult decisions over the past several months due to the pandemic.  

Quite often small businesses believe they don’t have to make redundancy payments, due to their size, though this is not always the case. This is compounded by the assumption that they don’t have to go through a fair redundancy process. In the event they need to make staff redundant Businesses should plan ahead and be aware of the following key points.

1. Is it A Genuine Redundancy?

The first question that needs to be answered when considering whether any employee can be made redundant is whether there is a genuine redundancy situation. The Fair Work Act (the Act) states that a genuine redundancy arises where the employer no longer requires the person’s job to be performed by anyone due to operational changes to the business, and where the employer has consulted with the employee where applicable, and has  investigated any viable alternative employment options within the business and or an associated entity to no avail.

Redundancy can happen when an employer either doesn’t need an employee’s job to be done by anyone anymore, or if the business becomes insolvent or bankrupt.

It can also occur when the business introduces new technology, restructures, relocates or closes down.

Business owners considering making redundancies should be looking at whether there are certain jobs and functions in their business that might no longer be necessary. Employers need to go into the redundancy process with an open mind, ready to consider any viable suggestions an employee may make that will allow them to keep their job. Employers need to be transparent with the affected staff members, and let them know the circumstances the business is facing that has led to their role no longer being required.

Generally, a redundancy would not be genuine if it would have been reasonable in all the circumstances for the staff member to be redeployed elsewhere within the employers’ enterprise, or the enterprise of an associated entity of the employer.

A redundancy dismissal is also not genuine if the employer still needs the affected staff members’ job to be done by someone else, has not followed relevant requirements to consult with staff where prescribed by the applicable award or registered agreement, or has not reasonably looked at other roles that could be given to the employee whose position is being made redundant.

2. Have You Completed A Consultation Process?

When going through a redundancy process, consultation with affected staff is best before you take any action and it is likely to be a requirement of the applicable award or registered agreement.

A genuine consultation process should occur where an employer should arrange individual meetings to have with those employees whose roles are affected. Employees should be asked to provide any questions they have, and an open discussion should take place.

Fundamentally an employee shouldn’t be let go unfairly or on a discriminatory basis. If there is more than one person in the role and not all those roles are being made redundant, then employees should ideally be assessed based on their performance in the role, and an employer should share the criteria that will fairly select which staff member to keep on.

The employer needs to tell staff what the circumstances are, look at whether there is alternative employment for them in the business, and if so offer that alternative employment to the employee’s whose roles are to be made redundant, if it is a job they can reasonably do without too much retraining, even if it is role that pays less or is more junior. If there are no alternative positions available, employers should still seek any final feedback from the affected employees before moving forward with a redundancy as employees may be willing to consider other options, such as reducing their hours, for example.

3. Are You Exempt From Redundancy Payments?

Employers in a business which has fewer than 15 employees are generally exempt from having to pay redundancy, however this can be affected by a relevant award, contract of employment or registered agreement and specific advice should be sought.

Those who are generally exempt are employees with less than 12 months continuous service, those in fixed term contracts that have come to an end, casual employees, apprentices, trainees engaged only for the length of the training agreement and those engaged by a small business.

Business owners should exercise caution as there are a number of aspects which may impact the above.

The redundancy process can be tricky and confronting for employers not familiar with the complexities. For advice, support and information about genuine and fair redundancies in your business or if you would like information on our BrightHR software which can help you track employee entitlements, contact us for a free initial conversation.

About Employsure.

Employsure is Australia’s largest workplace relations specialists.

We take the complexity out of workplace laws to help small business employers protect their business and their people.

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