A genuine redundancy is when there is no longer a need for a job to be performed. Unlike termination, redundancy is not about the performance of an employee but a change in the requirements of the business. Redundancy can happen when a business introduces new technology, slows down due to lower sales, relocates interstates or overseas, or if the business restructures.
As an employer, it is important to distinguish the job that has become redundant from the person performing the role. It is important to follow the Fair Work Act (2009) and any Award or enterprise agreement you employees may be covered by when considering redundancy to avoid an unfair dismissal claim.
If an employee’s job becomes redundant, they may be entitled to a redundancy payment. The National Employment Standards (NES) set out the minimum redundancy payment for employees based on their length of service, however, be sure to check the Award your employee is covered by which may set out different entitlements. To be considered for a redundancy payment an employee has to have been working at the business for at least a year and the business must have 15 or more full-time employees.
Redundancy entitlements are paid at the employee’s base rate of pay for the ordinary hours they would have worked if they continued to be employed over the period. This period can range from 4 weeks for employees with under 2 years continuous service or 12 weeks pay for employees with 10 years continuous service.
An employee is not entitled to redundancy if they are a casual employee, are terminated for serious misconduct or if they were employed for a specified task, period or season. Similarly, employers with less than 15 full-time employees are not required to make redundancy payments.
Be aware that making an employee redundant requires a consultation process – not consulting with an employee can put employers at risk of an unfair dismissal claim. Doubt that the redundancy is genuine can also increase your risk of an unfair dismissal claim. An employee should be consulted, and the employer should take reasonable measures to keep the employee in the business. There needs to be evidence that an employer has attempted to find another suitable position for the employee.
Redundancies should only be considered when there is a genuine need to reduce a role, as they can be expensive and open a business up to unfair dismissal claims.