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 relevantmodern 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.
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).
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 year but under three years | 6 |
| At least three year but under four years | 7 |
| At least four year but under five years | 8 |
| At least five year but under six years | 10 |
| At least six year but under seven years | 11 |
| At least seven year but under eight years | 13 |
| At least eight year but under nine years | 14 |
| At least nine year but under ten years | 16 |
| At least ten 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 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.