As organisations grow, change, and face new challenges, there will be instances where someone’s role is no longer needed. If the person in this role cannot be moved elsewhere in the business, it may be time to let them go at which time a business case for redundancy is required.
This article provides employers who are facing this situation with a comprehensive overview and will cover the criteria that needs to be met when making someone redundant, how to help people who have been made redundant, and what happens when someone challenges their redundancy.
What is Redundancy?
A valid redundancy, when carried out properly, gives employers an exemption from claims of unfair dismissal. Redundancy happens when someone’s role within an organisation is no longer required, which can be because the business:
- has become bankrupt or insolvent, in which case all roles become redundant, OR
- no longer needs a role to be done by anyone
If neither of the above is true, then there is a risk that the redundancy will not be regarded as genuine. Redundancies must be genuine, otherwise your business will be at risk of facing legal action brought forward by the employee who has been made redundant.
A redundancy may be regarded as not genuine if the employer:
- still needs the employee’s role to be filled by someone
- did not follow the requirements to consult with the employees about the redundancy under an award or registered agreement
- could have given the employee another role within the employer’s business or an affiliated business
The Redundancy Checklist: Criteria that Needs to be Met
If you are planning redundancies, following the checklist below could help ensure you’re doing everything by the book:
Before Finalising Your Decision to Make a Position Redundant
- Assess whether your motivation for the redundancy meets the criteria of a genuine redundancy
- Consider alternatives to redundancy; making a position redundant should be a last resort. If you can transfer, redeploy, or retrain the affected employee/s, then you should – this includes offering the employee/s available positions in branches interstate or in affiliated businesses. Not doing this may leave your business open to an unfair dismissal claim.
Selecting Who is Redundant
- In some cases, there may be more than one person filling the same role. In these cases, before selecting who to make redundant, you will need to create a merit-based selection process. Doing this, and applying the criteria consistently to all employees, will help create a fair basis for the redundancy and ensure you are not letting go of your best talent. Some relevant factors you may want to include in your criteria are:
Consultation with Employees
- You will usually need to go through a consultation process with affected employees before you can confirm any redundancy. For instance employees covered by an award or if you have an enterprise agreement which requires consultation on major changes in the workplace.. You must ensure you follow this consultation process prior to making any positions redundant.
- Depending on your enterprise agreement if you have one, you may be obligated to offer voluntary redundancies prior to making anyone involuntarily redundant. If this is the case, then ensure you do so.
- Notify employees of impending redundancies. At this time, you should also inform any relevant unions of the redundancies. If 15 or more employees are made redundant, you must inform Services Australia via a written notice, information on how to do this can be found on their website.
- Discuss redeployment opportunities with employees who are both affected and eligible for other positions.
- Notify each employee who is being made redundant and give them a final date of employment. You should do this in person wherever possible but also ensure everything is in writing and given to the employee. The notice period in the employee’s contract must be observed. If you do not want to allow the employee to work through their notice period, then this period must be paid out.
Once you have gone through the above steps, everything else follows the usual process for terminating an employee’s contract – you need to be looking into the entitlements owed to the employee and begin the accountancy work associated with parting ways with an employee, taking into account the particular tax treatment associated with redundancies.
How to Assist Employees Who’ve Been Made Redundant
Being made redundant can be stressful for employees. You can make this transition easier on them by doing the following:
- Give as much notice as possible – the more notice you give your employees, the more time they will have to find a new job. There will be circumstances in which notice cannot be given, but if you can give notice beyond what is detailed in their contracts then this will be beneficial to them.
- Direct them to Services Australia – to set them up with a source of income between jobs, they will need to apply for Centrelink payments. Services Australia also has resources to assist people in finding new employment.
- Provide them with a reference – offer to provide your employees with references to assist them in their job search. If you are aware of other open positions at organisations not affiliated with your own, you can also consider directing your employees to them with your reference.
- Offer an Outplacement service through a professional provider – If you have the budget, engage an outplacement provider who will help the employee from the transition away from their role with you, to considering their options for the future and offering practical help and advice around for instance, securing a new role
What Happens if the Redundancy is Challenged?
If an employee who you’ve made redundant files an unfair dismissal claim with the Fair Work Commission, they will need to prove that their dismissal did not meet the criteria for a genuine redundancy before it goes further. If the Commission finds some merit in your former employee’s claim, a conference will be organised to help settle the claim between you and the former employee. If a settlement cannot be reached, then the dismissal will become a matter for the Commission to decide.
Redundancies can be stressful for both the employee(s) and employer involved. By taking into consideration the steps and ideas outlined in this article, you could help reduce both stress for the employee involved, and the likelihood of adverse repercussions for your organisation. If someone does make a claim against you and a conference is organised, it is recommended that you seek legal advice.
Employee Matters: Your Outsourced In-House HR Team
For over a decade, we have helped organisations with their HR needs, including redundancies. Partnering with Employee Matters gives you access to experienced HR and Recruitment Experts who can help you maximise employee productivity, satisfaction, and retention, which will lead to higher profitability for your business. Book a free call now to find out more about how we can help your business.
Being general information pertaining to the field of human resources management, the information in this article does not constitute specific legal advice and should not be relied upon as such. Employee Matters is not a legal firm and does not purport to give legal advice. We will happily provide you with general legal information on employment related topics and if we feel you need specific legal advice, we will inform you of this and can refer you to independent specialist employment law firms, as necessary.