Employers should also ensure they comply with notification and consultation obligations outlined in an award, agreement or contract of employment (regardless of the number of employees being made redundant).
This letter will assist you to comply with the obligations under the Act. Prior to finalising the letter you should check it complies with the relevant obligations in an award, agreement or contract of employment.
The letter to the relevant union(s) should be given as soon as practicable after the employer has made the decision to terminate and, before the corresponding dismissal of an employee takes place.
The employer will need to give the union an opportunity to consult with the employer on:
- measures to avert or minimise the proposed terminations; and
- measures (such as finding alternative employment) to mitigate the adverse affects of the proposed terminations.
The opportunity should be given as soon as practicable after the employer has made the decision to terminate and, before the corresponding dismissal of an employee takes place.
The employer should not terminate an employee’s employment until this notification and opportunity to consult is provided. Failure to notify the relevant union could lead to the Fair Work Commission issuing an order, including:
- reinstatement of an employee;
- withdrawal of notice of termination if the notice period has not expired;
- monetary payment in lieu of reinstatement; and
- payment of severance pay.
What is a redundancy?
Termination of employment due to redundancy is a form of dismissal by the employer. It carries with it the concept of involuntary termination of the employee’s employment. However, rather than being a fault based dismissal, redundancy is usually caused by factors such as economic conditions, business efficiency, or technological development.
Generally speaking, termination of employment due to redundancy occurs where:
- an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone; and
- that decision leads to the termination of the employee’s employment.
Under the Act a dismissal will not be unfair where the person’s dismissal was a case of a genuine redundancy. Under the Act a redundancy will be genuine if:
- the job will no longer be required to be performed by anyone because of the changes in the operational requirements of the employer’s enterprise; and
- the employer has complied with any obligation to consult contained in an applicable modern award or enterprise agreement.
Possible redeployment
By ensuring that any redundancy is a genuine redundancy and exploring redeployment opportunities this will assist employers in defending an unfair dismissal claim brought by an employee on the basis that the redundancy was harsh, unjust or unreasonable.
Accordingly, employers should consider, prior to terminating an employee due to redundancy, whether it would be reasonable in all the circumstances for the person to be redeployed within:
- the employer’s enterprise; or
- the enterprise of an associated entity of the employer.
Record keeping
Employers should keep records of attempts made to re-deploy employee(s). Records of employer attempts to search for alternate jobs and the reasons why redundancy was necessary should also be retained (in the event a claim is made). Additionally records should be kept of the discussions with employees in connection with these matters. Employers should update the personnel file to note termination was for redundancy.
Legal advice
Before carrying out a redundancy, employers should consult their agreements and awards to ensure they comply with any relevant requirements relating to redundancy.
If you are unsure when terminating the employment of an employee whether the circumstances constitute a redundancy, you should seek legal advice about this matter. If the termination of an employee's employment is incorrectly classified as a redundancy and a redundancy payment made, there may be taxation consequences for both the employer and employee. You should obtain taxation and legal advice about these issues if you are unclear as to the true nature of the termination.
Mandatory severance pay
National system employers should be aware that the Act introduces mandatory severance pay for employees made redundant in workplaces that are not a 'small business employer' as defined by the Act.
An obligation to provide severance pay under the Act applies from 1 January 2010. Importantly, continuous service (relevant to the calculation of severance pay) under the Act will only start to accrue from 1 January 2010, where an employee previously had no entitlement to severance pay as at 31 December 2009. Advice should be sought in relation to severance payments if you are unsure of your obligations under the Act.
Advice should be sought in relation to severance payments if you are unsure of your obligations.
Further considerations
Where 15 or more employees will be terminated due to redundancy employers will need to notify Centrelink. A letter to Centrelink is available on this website.
Appropriate care also should be taken in selecting employees for redundancy in order to avoid discrimination claims.
Further information
Further information on how to use this document can be found at the 'How to use correspondence' link on the
Correspondence page of the
HR Advance website.
