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What Is A Genuine Redundancy, And Why Is It So Important To Get It Right?

Published June 12, 2020 (last updated March 9, 2021) Author: Employsure
Employer figuring out what genuine redundacy is

If you are an employer and are considering making positions redundant perhaps because of a downturn in business, an important aspect you must consider is if the redundancy is genuine. When an employee’s dismissal is a genuine redundancy the employee isn’t able to succeed in the event that they pursue an unfair dismissal claim.

This blog will explain what a genuine redundancy is, give some initial tips on redundancy, and answer some extra questions about redundancy.

What is a Genuine Redundancy?

A genuine redundancy means the employee is being dismissed because the employer doesn’t require that position to be filled anymore. 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 or the business becomes insolvent or bankrupt.

For a redundancy to be genuine, the employer must consult with the employee as per the terms of the applicable award or registered agreement, and there must be no other role available within the business or an associated business that the employee could reasonably perform.

A redundancy is not genuine if the employer:

  • still needs the employee’s job to be done by someone
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business (or associated entity)
  • has not followed consultation requirements as provided by the relevant Modern Award or enterprise or other registered agreement (if applicable)

Below are common scenarios in which a redundancy may occur:

  • The business is restructuring and doesn’t need that job doing anymore
  • New technology can perform the requirements of the role e.g. automation 
  • The business is relocating or closing down
  • There is a prolonged and significant downturn in business that requires operational efficiencies to be introduced e.g. downsizing

Why is it so Important that the Redundancy is “Genuine”?

If a redundancy is genuine, an employee cannot succeed in the event that they pursue an unfair dismissal claim.

An employer should take any reasonable steps to keep the employee within the business where possible. Redundancy can pose a risk for employers if there is doubt the redundancy is genuine, and it can be expensive to make an employee who has been with the business a long time redundant, as an employer may have to pay notice, redundancy pay, any untaken annual leave and possibly long service leave, depending on the circumstances.

If you’d like to know more about what to expect if you receive an unfair dismissal claims, why not download our guide on What To Expect When Facing An Unfair Dismissal Claim.

How Do I Avoid Making a Redundancy that is Not Genuine?

As above, you should understand what a genuine redundancy is, and consider options to keep employees employed such as consultation and redeployment before terminating their employment where required. If terminating an employee because of the redundancy of their position, ensure you are carrying out a genuine redundancy and complying with any extra provisions in the applicable award, or enterprise or other registered agreement.

You are generally required to consult with the employee before ending their employment. This means that you must notify the employees of the proposed change to their employment, invite them to a meeting to further discuss the matter and take any suggestions the employee might offer to keep their job into consideration before making a final decision. As part of the consultation process you must offer the employee any vacant job within the business or an associated entity that the employee can reasonably do. You should also consider jobs that pay less or that are not as senior, as the employee may want to take them for a number of reasons. 

Note: A redundancy is not genuine if the employer:

  • still needs the employee’s job to be done by someone
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business (or associated entity)
  • has not followed consultation requirements as provided by the relevant award, or enterprise or other registered agreement (if applicable)

Is There Anything Else I Need to Know About Redundancies?

There are several things that need to be considered when embarking on a redundancy besides the ones we have already addressed which are:

  • Awards and registered agreements have a consultation process for when there are major changes to the workplace, which may include situations such as redundancies; and
  • Employers are obliged to consider suitable alternative employment before making the role redundant (if applicable).

Minimum Notice Periods

When ending an employment because of redundancy, you need to give the employee written notification of the day of termination, and if the employee is engaged on a permanent basis you need to provide adequate notice or make payment in lieu depending on how long the employee has been employed in the business.

The minimum notice period in the National Employment Standards (NES) is based on how many years your employee has worked for the business (continuous service).

Minimum notice periods for redundancy according to the NES:

The applicable award or enterprise or other registered agreement may stipulate a longer notice period than the below. If so, then that notice period which needs to be applied.

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

An employee will generally be entitled to an additional week of notice if they are over the age of 45 and have been engaged for at least 2 years, depending on the applicable award or registered agreement.

Minimum Redundancy Payments

The NES also provides for a minimum payment to an employee made redundant.

Minimum payment for redundancy according to the NES

The applicable award or enterprise or other registered agreement agreement may set out different entitlements and may stipulate longer or shorter periods of continuous service and/or more or less weeks of pay than the below. If so, then the specific redundancy provisions in the award or agreement need to be applied

Period of continuous service.
Weeks of pay.
At least one year but under two years
4
At least two years but under three years
6
At least three years but under four years
7
At least four years but under five years
8
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

Just remember, not all employees are entitled to redundancy pay. The following employees generally don’t get redundancy pay:

  • employees whose period of continuous service with the business is less than 12 months
  • employees employed for:
    • a stated period of time
    • an identified task or project
    • a particular season
  • employees dismissed because of serious misconduct
  • casual employees
  • trainees engaged only for the length of the training arrangement
  • apprentices
  • employees of a small business (depending on the circumstances)

Are There Are Any Alternatives To Redundancy?

There are a few alternatives available to employers. 

An employer should take any reasonable steps to keep the employee within the business where possible. Redundancy can pose a risk for employers if there is doubt the redundancy is genuine, and it can be expensive to make an employee who has been with the business a long time redundant, as an employer may have to pay notice, redundancy pay, any untaken annual leave and possibly long service leave, depending on the circumstances.

We have put together a FREE guide explaining some of these alternatives, which you can download here.

If you’d like to know more about redundancy, or would like information on our BrightHR software which can help you track employee entitlements, then call us for free initial advice on 1300 207 182.

Frequently Asked Questions

  • Do Casuals Get Paid Redundancy?

    As a general rule, casuals do not have access to redundancy payments.. Modern Awards and enterprise and other registered agreements may have different provisions for redundancy, so make sure you consult the applicable modern award or registered agreement first.

  • What Is Suitable Alternative Employment In Redundancy?

    The employee should have the skills and competence required to perform any alternative role to the required standard either immediately or within a reasonable period of retraining. The location and the level of remuneration of the alternative position also need to be reasonable, but the employer should still offer any lower-paid roles with less responsibility or positions located elsewhere to the employee for their consideration. Suitable alternative employment in redundancy can include job sharing as well as moving the employee to a role that the employee can reasonably do. For example, a recruitment agent may be able to fill a role in telesales.  It is important to note that the alternative position should be of similar pay and status, but employers should not assume that an available role of lesser pay or seniority would be undesirable to the employee facing redundancy.

    Note: A redundancy will not be ‘genuine’ if it would have been ‘reasonable in all the circumstances’ to redeploy the employee to another role within the organisation (including any associated entities).

  • How Long After Redundancy Can I Employ Again?

    The premise of redundancy is that the role performed is no longer required. Accordingly, an employer should not rehire anyone in that position.

  • What Is Voluntary Redundancy?

    Voluntary redundancy occurs when an employee volunteers or agrees to be made redundant.

    In most cases of voluntary redundancy, the employer offers a financial incentive to an employee to voluntarily resign subject to a formal Deed of Release (which may prevent the employee from bringing a successful claim).

  • How Do You Work Out Voluntary Redundancy Pay?

    Voluntary redundancy pay is agreed between the parties. However, it should not fall beneath the entitlements to which the employee would otherwise be entitled under the national minimum wage, or as per the applicable award or registered agreement for employees covered by the national workplace relations system.

About Employsure.

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