In the last 10 years employers have been restructuring their operations more than ever before. As a result, employers change what they need from employees. Redundancy can happen when an employer no longer needs an employee to carry out a particular job, or to perform work at the same location and cannot redeploy the employee a suitable alternative role within the employer’s place or work or any other places of work the employer is associated with. Although it affects the employee it is about the job the employee does and not the employee per se.
Redundancy exists in Legislation, in an Enterprise Agreement or in some cases an Employment contract. Termination is not necessarily the consequence every time. Redundancy cannot be used by an employer to replace an employee with a different employee doing the same job. There must be legitimate operational reasons for the redundancy such as:
- a machine/device is able do the job;
- tasks done by an employee are distributed between several other employees;
- the employer’s business is suffering a downturn; and/or
- a worksite or business shuts down;
It is important to note that the onus is on the employer to prove that, on the balance of probabilities, the redundancy was due to changes in operational requirements. Not all employees are entitled to a financial settlement with redundancy. A redundancy is not required to be paid out if, immediately before the time of the termination due to redundancy, or at the time when the person was given notice of termination:
- the employer is a small business employer (employs fewer than 15 employees);
- an employee has less than 12 months continuous service with the employer;
- the person is a casual employee;
- the employee is terminated because of serious misconduct;
- the employee is employed for a specified task, or a finite period; and/or
- the employee is an apprentice.
The National Employment Standards (NES) scale of redundancy payments based on an eligible employee’s years of continuous service with the employer. Many Enterprise Agreements however have superior arrangements than these, so it is important to know what your Agreement states if you are covered by one. Your employer cannot provide you with a Redundancy payment which, is less than the following entitlements per the NES:
|Less than one year’s service||Nil|
|At least one year but less than 2 years continuous service||4 weeks’ pay|
|At least 2 years but less than 3 years continuous service||6 weeks’ pay|
|At least 3 years but less than 4 years continuous service||7 weeks’ pay|
|At least 4 years but less than 5 years continuous service||8 weeks’ pay|
|At least 5 years but less than 6 years continuous service||10 weeks’ pay|
|At least 6 years but less than 7 years continuous service||11 weeks’ pay|
|At least 7 years but less than 8 years continuous service||13 weeks’ pay|
|At least 8 years but less than 9 years continuous service||14 weeks’ pay|
|At least 9 years but less than 10 years continuous service||16 weeks’ pay|
|At least 10 years continuous service||12 weeks’ pay|
The amount of redundancy pay equals the employee’s ‘base rate of pay’ for ordinary weekly hours of work. The base rate of pay is the employee’s ordinary weekly rate of pay for their ordinary hours of work, excluding incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates, and any other separately identifiable amounts.
It is very important to note that an employee is unable to decide if they are redundant or not. The Fair Work Commission will not entertain a situation where an employee faced with redundancy and is offered comparable alternative employment but refuses it because they would rather accept a redundancy payment.
An employee who refuses suitable alternative employment in this circumstance will not be entitled to receive any redundancy pay. The test about what is suitable should consider each individual employee’s circumstance. This test should be applied when an employer is either trying to organise alternate employment with another employer or trying to arrange other employment within the organisation. The considerations can include:
- If the pay for the alternate job is similar or the same as the redundant position, this could be considered as suitable.
- Type of work
- If the new job is part-time or casual employment and the old job is full-time then this is likely to be unsuitable.
- If the new job involves a change of starting and finishing times, a change from shift work to day work, or work on different days of the week, this may be deemed unsuitable.
- Identifiable status
- The offer of a non-managerial job to a manager will see the loss of the status associated with the current position. This could be a demotion.
- Qualifications and experience
- The new job may be unsuitable if it is not a good use of the employee’s capabilities and/or qualifications.
- If the job in a different location, we need to review any additional unreasonable travel time.
Many employers have a policy that provides for ‘voluntary redundancy’ in certain circumstances. It is to assist the employer to coordinate the redundancy process. There are those who think it is a way for an employer to manage out those employees who are less productive, this is not the case. All eligible employees apply for voluntary redundancy.
There is no formal formula or percentage as to what a voluntary redundancy offers over and above the entitlement and so it is going to be relative to what the employers restructure plan looks like.
Redundancy does not replace other entitlements such as any unused annual or long service leave. It is a separate entitlement if you are eligible.
We suggest that you seek advice on your own personal circumstances. If you have any questions please contact our Workplace Advice and Support team at Professionals Australia.