As the impact of the COVID-19 pandemic worsens, many employers are considering their options. The reality is, that some employers may need to make certain roles redundant and it’s imperative that businesses are aware of and adhere to their legal obligations.
When does redundancy occur?
Redundancy occurs when an employer does not require an employee’s job or role to be done by anyone, or upon the bankruptcy or insolvency of an employer. Redundancy can happen when a business closes down or ceases to operate, restructures or there is a takeover or relocation of a business.
During economic downturn or reduction in business – as many places are experiencing due to the impacts of COVID-19 – redundancy may also occur.
Redundancy does not occur because of poor performance of an employee.
What is a genuine redundancy?
For a redundancy to be “genuine” the individual’s job is no longer required to be done by anyone; and the employer has followed the requisite consultation requirements as prescribed in the award, enterprise agreement or other agreement.
It is important that employers follow the notice and consultation requirements to limit the exposure of liability for unfair dismissal.
What is not a genuine redundancy?
If the employer hires someone else to do the same job, fails to follow the consultation requirements or could have reasonably given the employee(s) another job or role within the business then it is not a genuine redundancy.
Obligations as an employer
Consultation requirements mean the employer is obliged to:
- Notify any employee(s) who may possibly be affected by proposed or actual changes to the business that make it likely for redundancies to occur;
- Provide information about the proposed business changes to employees and the expected outcomes of the changes, including providing employees an opportunity to ask questions;
- Discuss with the employees possible steps that could be taken to minimise or avoid any negative effects on the employee(s), such as redeployment or job sharing; and
- Allow an opportunity for employees to provide ideas or suggestions about the proposed changes and then consider those ideas or suggestions.
Other considerations for employers
If you make the employment of 15 or more employees redundant and the reason for the redundancy is related to economic downturn or structural changes, the employer will be required to notify Centrelink of the written notice of the redundancies.
There are obligations on employers regarding notice periods and redundancy entitlements:
- Minimum notice periods are determined by the period of continuous service given by the employee to the business;
- Some registered agreements, employment contracts, awards or enterprise agreements may entitle employees to longer notice periods;
- Notice can be paid out to an employee whose role has been made redundant rather than having the employee work out the notice period;
- Employees are entitled to final pay, which includes outstanding wages and any accumulated statutory entitlements such as annual leave; and
- Redundancy pay is ordinarily calculated by reference to an employee’s continuous period of service. Section 117 of the Fair Work Act 2009 sets out the minimum redundancy pay to which an employee is entitled however, certain awards, enterprise agreements, contract agreements or workplace policies may provide for more generous entitlements.
Alternatives to redundancies
Whilst it is inevitable that COVID-19 will result in many redundancies, employers should also consider options designed to help mitigate the impact of any downturn in business. This can include requesting employees take a period of unpaid leave or alternatively, agree to a temporary reduction in the number of days they have to work.
Know your options
If you have any questions or concerns about potential redundancies in your business, or would like general advice on redundancy, please call us on (02) 8072 1400 or send an enquiry.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your circumstances should be sought before taking any action based on this publication.
