Redundancy is when an employer does not require a certain job to be done by anyone anymore due to operational changes to the business.
Employers should have a valid reason for the decision to make an employee redundant and may be required to follow various procedural steps to ensure the redundancy is genuine.
BrightHR has a Redundancy Tool to help you navigate this process. It helps you formulate a plan and ensures you have a basic understanding of the necessary steps. It offers resources and template letters and a handy glossary to clarify relevant terminology.
What is a letter of redundancy?
A Letter of Redundancy or Redundancy Letter usually refers to the process outcome letter confirming the employee is being made redundant and terminating their employment.
In the case of making an employee redundant, you may be required to consult with them before ending their employment as per the terms of any applicable modern award or registered agreement. If your employee is not covered by an award or registered agreement, there is no requirement to consult unless there is a contractual term requiring you to do so.
Consultation usually involves notifying the employees of the proposed change to their employment. Inviting them to a meeting to discuss the matter, and taking any suggestions the employee might offer to keep their job into consideration and considering any alternative options before making a final decision. If, after a fair process has been conducted, it is decided the outcome will be redundancy, a final meeting should be arranged.
At that final consultation meeting, an employer may be able to make an employee redundant. A formal outcome letter confirming the redundancy, also known as a letter of redundancy, should be issued to the employee.
What to include in a letter of redundancy?
Generally, employers must not terminate an employee unless they have given the employee written notice of the day of the termination of the employment (which cannot be earlier than the day the notice is given). When you make an employee redundant, you may also have to pay redundancy entitlements.
It is considered best practice for a redundancy letter to outline the process in coming to the decision to make the employee redundant, the reasoning behind it, and any further considerations such as redeployment options. It should also include notice of the last day of employment and details as to final pay and any entitlements owing.
The information contained in a letter of notification of redundancy should:
- provide an overview of the situation (e.g. the reason for the redundancy)
- outline the process that has been followed (steps of consultation)
- confirm the employer has reviewed other areas in the business and there are no suitable vacancies or opportunities for redeployment
- confirm there is no suitable alternative to avoid the redundancy
- clearly state the position is being made redundant and explain the reasoning behind the decision
- specify the last date of the employee’s employment with the company
- break down the monetary entitlements the employee will receive and specify when they can expect to receive them (i.e. annual leave, overtime, long service leave).
How do I write a redundancy letter?
Step 1: Start with the date and then add ‘Private and Confidential’ before the Employee’s name and address. Then put in the subject matter e.g. ‘Termination of Employment (Redundancy)’ or ‘Confirmation of Redundancy’. Address the employee e.g. ‘Dear First Name’.
Step 2: Confirm the purpose of the letter and briefly reiterate the business operational requirements have changed. Summarise the reasons for operational changes to the business and why the position is being considered for redundancy.
Step 3: Refer to the consultation meeting and confirm what was said – that you provided an overview and summary of the current business position and sought feedback from the employee – then summarise the employee’s comments and proposals (if any).
Step 4: Explain that upon review there were no viable alternative or redeployment options available.
Step 5: Confirm the position is being made redundant and list the employee’s last day of work and the employee’s entitlement to notice, and whether notice will be worked or if the employer is providing pay in lieu of notice.
Step 6: List the details of the employee’s other entitlements that will be paid as part of their final pay where applicable e.g. redundancy pay, and payment for untaken annual leave or long service leave.
Step 7: Consider finishing with a personal touch – for example express how much you have appreciated the employee’s contribution to the business over the years and offer to provide a reference.
Step 8: Make sure the letter is printed on company letterhead and give it to the employee personally or send it by pre-paid post to their last known residential address, rather than delivering it to their email address.
You can manage and keep track of employee rosters, timesheets, leave and absenteeism to enable you to pay the employee their final pay with BrightHR. You can generate and print reports, and then store wage and time records and related documents securely in the cloud to comply with your record-keeping requirements.
Peninsula can help you understand redundancy and guide you through the process, as well as providing clients with template redundancy letters and documents. Call us for free initial advice.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.