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How your business should approach reducing headcount following the end of JobKeeper

As JobKeeper draws to a close at the end of March, many businesses may find they will need to reduce headcount to ensure their wage bill remains affordable. This can be a painful and challenging process, but often necessary for the business to remain viable. It’s also a process fraught with legal risks.

So, how can businesses approach a restructure legally and effectively?

Start early

Once you know you will need to reduce headcount, it’s important to start the planning process as soon as possible. If you leave it to the last minute, the process can become rushed and careless. This is how mistakes are made and potential risks are overlooked.

Review your overarching strategy

It’s important that a restructure aligns with your overarching strategy. Otherwise, you may find you are not adequately resourced to meet your goals. This will also ensure that any decisions are made based on what the business genuinely needs such as IP, skills, attitude, performance and contribution to team culture.

Follow the legal framework

Depending on the size of your business and how people are employed in the business, the process for ending employment may differ. It’s best to seek legal advice on how to approach the process with each staff member.

When making people redundant, make sure you are meeting the requirements for a genuine redundancy, otherwise you could be at risk of an unfair dismissal claim. A position can be found redundant if the employer no longer needs the particular job to be done by anyone or the employer becomes insolvent or bankrupt.

Give enough notice

You will need to notify your employees that their employment will be coming to an end with enough notice as required under their award or enterprise agreement. You must officially give notice in writing or provide payment in lieu of notice. Make sure you also honour any other requirements under their agreement, such as giving them time to look for work, if that’s required.

Pay out employee entitlements

Calculate what employee entitlements are outstanding, such as employee wages or accrued leave. You will need to pay out any owed entitlements. This may include annual leave, long-service leave and any redundancy pay. Make sure you review the enterprise agreement or award, employment contract, rules in your state and rules for a business of your size, to assess what you will owe.

Finalise employee tax payments

Review whether you still owe employee superannuation, PAYG withholding or fringe benefits tax for any exiting employees and finalise these payments.

Communicate the changes

Communicating effectively with the exiting staff members as well as the remaining staff members is extremely important. This can reduce the risks of retaliatory action by the exiting staff members and ensure that remaining staff members feel supported.

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Rolf Howard

Rolf Howard

Rolf Howard is Managing Partner of Owen Hodge Lawyers, in the legal practice since 1986 and a partner of Owen Hodge Lawyers since 1992. Rolf focuses on assisting clients to proactively manage legal responsibilities and opportunities to achieve competitive advantage, with a major interest in assisting business owners and their financial advisers to build and exit from successful businesses.

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