Redundancies on the Rise as Businesses Feel the Pinch

Published July 04, 2022 (last updated August 22, 2022) Molly Chandran

As the 21-22 financial year ends, businesses across the nation are under increased pressure to balance their budgets and prepare for an increasingly uncertain year ahead. No sector has been immune to financial pressures with several high-profile construction companies, as well as technology start-ups going bust or drastically restructuring to avoid closure.

As a result of increased financial pressures from record inflation, interest rate rises, and increased operational costs, many employers are turning to redundancies to reduce headcount and overheads.

Employment relations firm, Employsure representing over 30,000 businesses experienced a 64% increase of calls to their advice line between May and June 2022 from concerned employers unsure of what their redundancy obligations are under the Fair Work Act.

“The process around redundancies can be complex as it requires employers to demonstrate that the role being made redundant is no longer required by the business.” Said Employsure Head of Operations, Stephen Roebuck.

“It is not a tool to dismiss an employee for performance or conduct. In cases where this does happen, the redundancy will not be considered genuine and may expose the business to an unfair dismissal or adverse action claim.”

Employers looking at making redundancies must follow a consultation process and consider the amount they must pay to affected employees based on the size of business, modern award coverage, and employee’s length of service[1].

Mr. Roebuck continued, “Where many employers get into trouble is they fail to follow fair process which includes discussing how the affected employee(s) might be retained within the business.”

“This can be made more complicated the longer an employee has been with the business.”

“It’s a two-way process and shouldn’t be rushed, especially since shortcuts taken could cost your business. Employers unsure of their obligations should seek help from qualified experts who can ensure that complete and compliant procedure takes place.”

[1] Generally small businesses with less than 15 Employees are exempt from redundancy payments unless the modern award has a redundancy specific scheme such as the Building and Construction Award.

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