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5 things to remember when managing a redundancy

When terminating an employee by reason of redundancy, it is critical to ensure the redundancy is genuine, provide a fair consultative process and know your employee’s entitlements.

Arming yourself with knowledge and a fair approach will ensure smooth redundancy management.

1. Ensure genuine redundancy

A redundancy must be a genuine redundancy. That is, termination of employment must occur for the reason that an employee is no longer required for work because the position or job is no longer required to be performed by anyone.

If your reasons for redundancy termination are not ‘genuine’ in this sense, you leave yourself open to unfair dismissal claims.

2. Comply with terms of any standing agreement.

When selecting employees for retrenchment or termination, and in dealing with the termination, make sure you check the provisions of any applicable Award or Enterprise Agreement for specific requirements that might apply to selection for retrenchment, and consultation regarding retrenchment. Make sure you abide by the terms of any relevant agreement.

3. Fair and ethical practice: Consultation is key.

Even if there is no Award that expressly requires consultation with employees affected by redundancies in a particular form, best practice is to consult and adopt procedurally fair processes. Redundancies can have detrimental effects on productivity and morale. Engaging in a fair consultation process will assist to minimise disruption and disputes.

The standard Modern Award consultation clause requires employers to:

1. Notify employees and their union when they have made a definite decision to introduce major changes in the workplace that are likely to have significant effects on employees (and provide them with all relevant information, except any confidential information, in writing)

2. Discuss with the employees and their unions as early as practicable after a definitive decision has been made to introduce the changes, the likely effects of the changes on the employees as well as any measures to revert or mitigate these effect.

3. Give prompt consideration to the matters raised by the employees and/or their unions in relation to the changes.

Under Section 389(1)(b) of the Fair Work Act, a dismissal will only be regarded as a ‘genuine redundancy’ and so exempted from unfair dismissal protection if the employer had complied with any obligations set out in an applicable industrial instrument to consult about the redundancy.

4. Employee entitlements: Redundancy pay and notice period

Employees who are retrenched as a result of redundancy are entitled to redundancy pay under the National Employment Standards if:

1. The employer is not a small business (a business with less than 15 employees is considered a small business for the purposes of the Fair Work Act); and

2. The employee has served a period of continuous service of not less than 1 year.

In addition to redundancy pay, employees who are to be terminated by reason of redundancy must be given the period of notice required by the contract of employment or if no period is specified, by the National Employment Standards. An employer can make payment in lieu of giving notice.

5. Employee entitlements: Termination.

Employees whose employment is terminated are entitled to receive payment for all work done up to termination, accrued but untaken annual leave and annual leave loading.

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Rachel Cosentino

Rachel Cosentino

Rachel is the Partner leading the litigation team for Gibson and Gibson. She has more than 10 years’ experience in dispute resolution across areas including employee and workplace relations, property disputes, professional negligence, trade practices, inheritance, breaches of contract, sports and recreational club law.

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