The Legal side of Redundancy: What businesses need to know
Under the National Employment Standards (NES), an employer who is defined as a small business employer is not required to provide redundancy pay. However, an employer may have redundancy pay obligations under an industrial instrument or contract of employment.
A small business employer, for the purpose of determining redundancy pay under the NES, is an employer who employs fewer than 15 employees. This is based on a simple head count of employees immediately before the relevant person was terminated, or at the time when the person was given notice of termination (whichever happened first).
When calculating the number of employees employed at a particular time, all the following factors are to be taken into account:
• all employees employed by the employer at that time are to be counted
• a casual employee is not be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis
• associated entities are taken to be one entity
• the employee being terminated, and any other employees being terminated at that time are counted.
What is redundancy?
Redundancy under the NES occurs when an employer either:
• decides they no longer want an employee’s job to be done by anyone and terminates their employment (except in cases of ordinary and customary turnover of labour), or
• becomes insolvent or bankrupt.
Redundancy may happen when:
• the job someone has been doing is replaced due to the employer introducing new technology (i.e. it can be done by a machine)
• business slows down due to lower sales or production
• the business relocates
• a merger or takeover happens
• the business restructures or reorganises.
Genuine redundancy or unfair dismissal?
If a dismissal is a genuine redundancy it will not be an unfair dismissal.
Under Commonwealth workplace laws, a person’s dismissal is a ‘genuine redundancy‘ if:
• the employer no longer needs the person’s job to be done by anyone because of changes in the operational requirements of the business, and
• the employer followed any consultation requirements in the modern award, enterprise agreement or other industrial instrument that applies.
A dismissal is not a genuine redundancy if it would have been reasonable in the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity.
Payouts and Notice Periods
The following table highlights redundancy pay periods
|Employee’s period of continuous service with the employer on termination||Redundancy pay period due|
|At least 1 year but less than 2 years||4 weeks|
|At least 2 years but less than 3 years||6 weeks|
|At least 3 years but less than 4 years||7 weeks|
|At least 4 years but less than 5 years||8 weeks|
|At least 5 years but less than 6 years||10 weeks|
|At least 6 years but less than 7 years||11 weeks|
|At least 7 years but less than 8 years||13 weeks|
|At least 8 years but less than 9 years||14 weeks|
|At least 9 years but less than 10 years||16 weeks|
|At least 10 years||12 weeks|
The following table highlights notice periods
|Period of continuous service||Notice period|
|Not more than 1 year||1 week|
|More than 1 year, but not more than 3 years||2 weeks|
|More than 3 years, but not more than 5 years||3 weeks|
|More than 5 years||4 weeks|
If you have a query regarding an issue related to redundancy or another employment law matter, please call us on 1300 QUINNS (1300 784 667) or +61 2 9223 9166 or complete and submit the online enquiry form and we will contact you to discuss your enquiry.