Sometimes an employer will no longer require an employee’s job to be done by anyone due to changes to the operational requirements of the business. This is known as a redundancy. Employers should have a valid reason for making the decision to make an employee redundant and may be required to follow a redundancy process to implement the redundancy.
The reasons for redundancy can be the result of introduction of new technology, changes to the market (i.e. lower sales or production), changing operational demands such as automated processes, as well as the general need to increase efficiency and reduce costs of doing business.
A redundancy is only exempt from unfair dismissal when the redundancy is genuine.
Consulting with employees
You are required to consult with the employee before ending their employment as per the terms of the applicable award or registered agreement. If your employee is not covered by an award or registered agreement, there may be no requirement to consult. Consultation usually involves notifying the employees of the proposed change to their employment, invite them to a meeting to further discuss the matter, and taking any suggestions the employee might offer to keep their job into consideration before making a final decision. As part of the consultation process, an employer is usually required to offer the employee that the employee can reasonably do any vacant job within the business or an associated entity.
Consultation (Warning)
Typically, consultation commences with an informal discussion with an employee outlining that the business is considering making that person’s position redundant and that their job is ‘at risk’. Following this discussion, the employer should give the employee an invitation in writing to a formal meeting to discuss the possibility of redundancy in more depth. The invitation should notify the affected employees of the proposed changes, provide them with details and outline the possible effects.
The second consultation meeting should be scheduled at least 24 hours after the invitation is given to allow the employee to consider their position and come up with suggestions that will allow them to keep their job. They may also need that time to seek professional advice or organise a representative or support person to attend the meeting with them.
It is a good idea to keep a record of any invitations to redundancy meetings and follow each meeting up with a written summary.
Consultation (Subsequent)
At the second meeting, the employer would provide the employee with more information about the proposed redundancy. The employer and the employee should explore any options to avoid or minimise the impact on the employee, including any possibility of re-deployment to another position within the business or an associated business, and any alternatives which may save the employee’s job.
What amounts to a reasonable deployment depends on the facts of the case and advice should always be taken on specific circumstances.
In many cases, to properly satisfy its obligations, a business may be required to meet with the affected employee to consult on more than one occasion.
Confirmation
The employer should be seen to seriously consider any suggestions that the employee or their representative may raise in the formal consultation meeting before making a final decision. If, after a fair process has been conducted, it is determined that the outcome will be redundancy, a final meeting should be convened. Again, a formal invitation should be issued to allow the employee time to organise representation or a support person to attend with them. At that final consultation meeting, the employer should deliver a preliminary outcome.
Following confirmation of redundancy, a formal outcome letter confirming the redundancy, also known as a letter of redundancy, should be issued to the employee.
Preparing redundancy outcome documentation
The outcome letter should confirm the employee is being made redundant. It should outline the process in coming to that decision, and 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.
Redeployment
As part of the consultation process, you should consider is whether you can redeploy any workers to another role within the business or an associated business. This can mean moving a staff member to another workplace or moving an employee from one role to another. Doing so means the employee may be able to fulfil a needed role elsewhere and retain their employment. The employer may need to provide evidence of the steps they have taken to identify other positions that the employee could reasonably do if there is doubt the redundancy is genuine.
When considering redeployment, the job must be suitable, in the sense that the employee should have the skills and competence required to perform it to the required standard in order to hit the ground running or else with reasonable 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.
Final pay and notice
The National Employment Standards in the Fair Work Act 2009 generally provide the minimum entitlements in respect of notice of termination and redundancy pay for employees covered by the national workplace relations system, however some modern awards and enterprise agreements may provide employees with more or less beneficial entitlements in respect to both notice and redundancy pay, particularly in circumstances whereby if there is an industry specific redundancy scheme.
When ending employment because of redundancy, you need to give the employee written notification of the day of termination, and you need to provide adequate notice or make payment in lieu usually 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 in the business (continuous service). Notice is paid at the employee’s full pay rate as if they had worked the minimum notice period, so the notice can include incentive-based payments and bonuses, loadings, allowances and overtime or penalty rates.
If an agreement or employment contract, modern award or enterprise agreement stipulates a longer notice period, this will prevail. On top of this, it is important to know that if an employee becoming redundant is over 45 years old and has worked within your business for at least two years, they may be entitled to an extra week’s notice, depending on the applicable award or registered agreement.
The employee’s final pay will include the payment of any outstanding wages, accrued entitlements that such as annual leave and annual leave loading if applicable, and possibly other payments such as long service leave, payment in lieu of notice, and redundancy pay.
Most awards require you to give a departing employee their final pay within 7 days of their employment ending. Some awards and registered agreements may provide a longer or shorter timeframe.
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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.