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Making Redundancies: 5 Things Every Employer Should Know

Published June 01, 2020 (last updated June 25, 2020) Author: Employsure
employers reading on redundancy

As businesses try to navigate, survive and recover from the COVID-19 crisis, the sad reality is that many will need to consider changing and restructuring the way they operate. For many, redundancies may be required.

Employers have been forced to make a number of difficult decisions over the past several months due to the pandemic. Workplaces have operated at a limited capacity or have shut down altogether. Some staff have been stood down and are “still on the books” due to JobKeeper.

“I’ve seen a number of business owners consider redundancy as an option, but I think there is confusion there in how it works,” said Employsure Managing Director Ed Mallett.

“Quite often small businesses believe they don’t have to make redundancy payments, due to their size. They confuse that with the concept that they don’t have to go through a fair redundancy process,” Mallett added.

“I’ve had questions from clients who have taken their heads out of the JobKeeper sand and are planning ahead (when JobKeeper ceases) in the event they need to make staff redundant. What we advocate at Employsure is a relatively cautious approach, but it also needs to be approached with respect when talking to employees as well.”

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 changes in the operational requirements of the enterprise.’

Redundancy can happen when an employer either doesn’t need an employee’s job to be done by anyone, or if they become 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,” said Mr Mallett.

“They need to go into that redundancy process with an open mind. They need to be transparent with the affected staff members, and let them know the circumstances the business is facing that has led to a reduction in the need for their role.”

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

A dismissal is 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, or has not reasonably looked at other roles that could be given to the employee.

2. Have You Completed A Consultation Process?

When going through a redundancy process, consultation with affected staff is essential before you take any action.

“A genuine consultation process should occur where an employer should arrange individual meetings to have with those employees,” said Mr Mallett.

“Staff 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. They should ideally be assessed based on their performance, and an employer can go through 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 not, they should still seek any final feedback from them before moving forward with a redundancy.”

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 company policy, 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 those listed such as awards, service and associated entities.

4. Does Jobkeeper Give You A Different Option?

If a business owner is in consultation with their employee about a potential redundancy, and they are receiving (or are eligible to receive) the JobKeeper payment for that employee, the new JobKeeper enabling directions under the Act can potentially be used to help avoid a redundancy.

In particular, if they comply with all of the conditions regarding JobKeeper enabling stand down directions, they are able to reduce an employees’ hours, including to zero. Utilising this provision may allow them to keep the employee in employment in the short term, before making a final decision in the future on whether a redundancy is required once business conditions are more stable.

Business owners should note that any ‘time on’ in a stand down is taken into account when determining how much notice and redundancy pay is required. Therefore, delaying a redundancy through a stand down may result in higher costs if you do decide to proceed with a redundancy in the future.

“There are a lot of hurdles in the redundancy process. It takes time, and time equals cost, and that might not even take into account the cost of the redundancy payment on top of that,” said Mr Mallett.

“What you don’t want to be doing is making someone redundant right at the end of the JobKeeper program, where you already know the work is likely not to be there. You don’t want to end up with all the time and expense of going through that process when you are paying for it rather than JobKeeper. You’d be better off looking at how the wage subsidy can help you make good decisions now to help minimise the cost.”

“Business owners shouldn’t now rush out and make people redundant. They should make rational business decisions based off what they are seeing and what they are projecting. The worst thing they can do is bury their heads in the JobKeeper sand.”

5. Do You Understand Your Options Under A Jobkeeper Enabling Direction?

The Act has been temporarily amended as a result of the JobKeeper scheme. As part of this, employers who are covered by the Act and entitled to JobKeeper payments can give eligible employees a JobKeeper enabling direction to vary certain terms of the employee’s employment.

Broadly speaking, the amendments to the Act allow eligible employers to issue a JobKeeper enabling direction in relation to:

  • the duties to be performed by the employee, and/or
  • the location of the employee’s work, and/or
  • the total number of hours to be performed by an employee.

Related: Need to know more about JobKeeper Enabling Directions? Find out more with our Step-by-Step Guide

Support is available

The redundancy process is tricky, confronting and fraught with danger for employers not familiar with the complexities. For advice, support and information about genuine and fair redundancies in your business, 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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