An Employer’s Guide: Understanding Redundancy

by John F. Morrissey Employment Lawyers on July 29, 2013

  • SumoMe

(Employment Law in Australia & generally) All employees are covered by the redundancy provisions of the national employment standards, and this includes high income employees.

If a redundancy occurs, the employer needs to consider two matters:
•    are they abolishing the role or
•    are they dividing the work of the role amongst others at the workplace or elsewhere?

It is most important to note that the employee is not deemed to be redundant. It is the role that is abolished or the work divided amongst others.

Redundancy should not be looked at as a way of removing an employee. If this happens, an employee would have a right to an unfair dismissal claim.

There are a number of steps that the employer should follow when making a redundancy:

a.   Deciding if the role will be abolished or the work divided amongst others.

b.   Letting the employee know of the potential for the role to be abolished or the work to be divided.

c.    Giving the employee some timelines as to when the potential redundancy will be available.

d.    Letting the employee know that they can apply for vacant roles within the workplace or directing the employee to work in a vacant position.

e.   If there is no work available for the employee, then the employee will be advised that they will be made redundant.

f.    The employee will be advised that they will be provided the appropriate period of notice under their employment contract or the appropriate period under the Fair Work Act as follows.

 
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 no more than 5 years 3 weeks
More than 5 years 2 weeks

 

g.    If the employer has more than 12 employees, they have an obligation to make a severance payment. Severance payments are calculated on the employee’s guaranteed income and are calculated in accordance with the national employment standards, which are as follows:

 
Period of Continuous Service
Redundancy Pay Period (weeks)
1 year but less than 2 years 4
2 years but less than 3 years 6
3 years but less than 4 years 7
4 years but less than 5 years 8
5 years but less than 6 years 10
6 years but less than 7 years 11
7 years but less than 8 years 13
8 years but less than 9 years 14
9 years but less than 10 years 16
10 years or more 18

h.    When the employee leaves the workplace, they should receive their payment in lieu of notice. Their severance payment is also applicable. The notice should also be sent to them under the provisions of the Income Tax Assessment Act, which is a standard form showing the employee has been made redundant.

i.    Redundancy periods have a special tax arrangement. Employers should refer to the Australian Taxation Office for the current redundancy periods. The docoument is called Tax table for employment termination payments at the ATO Rates and Tax Tables site.

j.    Employers should provide the employee with a notification that they have been made redundant.

There is no obligation on employers to make a payment in lieu of notice. If required, the employer can direct the employee to work during the notice period.

On the last day of employment, the employer should provide the notification to the employee that they have been made redundant with the appropriate calculations as above.

 

John F. Morrissey Employment Lawyers
John Morrissey has been a practising Sydney solicitor for 30 years, and for the past 20 a sole practitioner and the principal at John F. Morrissey Employment Lawyers in Sydney, Potts Point. The main focus of John’s practice is employment law, advising small to medium-sized firms and their employees of their rights and obligation. For 15 years, John lectured at UTS, especially to graduate human resources managers in employment law subjects. John provides seminars to Not For Profit groups and professional associations such as BASIL (Brothers and Sisters in Law) and the Allied Health Professionals. Upcoming seminars are listed on our - See more at: http://www.johnfmorrissey.com.au/
John F. Morrissey Employment Lawyers
John F. Morrissey Employment Lawyers
John F. Morrissey Employment Lawyers

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