When can I make an employee redundant?
You can only make an employee redundant in the following circumstances:
- if you don’t need an employee’s job to be done by anyone, or
- the business becomes insolvent or bankrupt.
Redundancy can happen when the business:
- introduces new technology (for example, the job can be done by a machine)
- slows down due to lower sales or production
- closes down
- relocates interstate or overseas
- restructures or reorganises because a merger or takeover happens
What is a genuine Redundancy?
A genuine redundancy is when:
- the person’s position is no longer required
- if the position is still required the employer must follow any consultation requirements in the award, enterprise agreement or other registered agreement.
When an employee’s dismissal is a genuine redundancy, the employee isn’t able to make an unfair dismissal claim.
However, a dismissal is not a genuine redundancy if the employer:
- still needs the employee’s job to be done by someone (for example, hires someone else to do the job)
- has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
- could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.
How much notice do I need to give before making an employee redundant and what do I need to pay them?
Employees receive redundancy pay based on their continuous period of service with their employer. This amount is paid at the employee’s base pay rate for ordinary hours worked.
An employee’s base rate of pay is the pay rate they receive for working their ordinary hours, but does not include the following:
- incentive-based payment and bonuses
- loadings
- monetary allowances
- overtime or penalty rates
- any other separately identifiable amounts.
|
Period of continuous service |
Redundancy pay |
|
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* |
* There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least 10 years continuous service. This is consistent with the 2004 Redundancy Case decision made by the Australian Industrial Relations Commission.
Reducing redundancy pay
An employer can apply for the reduced redundancy pay with Fair Work Commission if:
- the employer finds other acceptable employment for the employee, or
- the employer can’t afford the full redundancy amount.
Does redundancy pay apply to all employees?
Some employees don’t get redundancy pay when their job is made redundant.
The following employees don’t get redundancy pay:
- employees whose period of continuous service with the employer is less than 12 months
- employees who are employed for a set period of time, or a season
- employees who are dismissed because of serious misconduct
- most casual employees
- trainees engaged only for the length of the training agreement
- apprentices
- most employees of a small business.
Author
Natasa Briffa
