As a CCIWA Member, you get unlimited access to our Employee Relations Helpline. We are here to help you manage your employee relations needs. This includes prompt advice on your circumstances, consulting, documents such as kits and guides and up-to-date industrial relations information.
Here are some of this month’s frequently asked questions that have come through the helpline about redundancies and restructures.
Q: What process should employers follow when implementing redundancies?
A: When an employer determines that redundancies are necessary, it is crucial to adhere to a structured process to ensure compliance with legislation and industrial instruments. The below practices provide an approach enacting compliance and provides procedural fairness. This process typically involves three key meetings:
- At-risk conversation: This initial, discussion serves to inform the employee about the potential redundancy of their position. The employer should explain the circumstances and indicate that a formal consultation meeting will be scheduled for further discussion.
Following this meeting, the employer should issue the employee with an official invitation to the consultation meeting, outlining the purpose of the meeting, and that this will be an opportunity for the employee to present their options to mitigate the risk of redundancy.
- Consultation meeting: This formal meeting enables both parties to engage in discussions regarding the redundancy. The employer must give the employee at least 24 hours' notice of the meeting and allow them with the option to bring a support person. Employees are encouraged to present any suggestions they believe could mitigate the impact of redundancy, which the employer must consider. The employer should also present any redeployment options to the employee during this meeting.
- Outcome meeting: In this final meeting, the employer will communicate the decision made regarding the individual’s employment. This may result in the confirmation of redundancy or alternative arrangements, such as redeployment, reduced hours, or job sharing. The outcome should be documented in a formal letter presented to the employee.
It is important to refer to the relevant industrial instrument before starting a redundancy process to ensure the correct process is followed as it may differ to the process outlined above.
Q: How do I calculate a redundancy payment?
A: Under the National Employment Standards, an employee’s final pay package in cases of redundancy consists of a few components; the redundancy payment (where applicable), payment in lieu of notice and payment of outstanding entitlements, such as wages, annual leave and if applicable, long service leave.
The amount of redundancy pay an employee is entitled to, is calculated on their period of continuous service. The table below outlines the redundancy pay period employees are entitled to, based on years of service.
Under the Fair Work Act 2009 (Cth) (“FWA”), employers are required to pay redundancy as per the below table:
| Employee’s period of continuous service on termination | Redundancy Pay Period (weeks) |
| Less than 1 year | Nil |
| 1 years and less than 2 years | 4 |
| 2 years and less than 3 years | 6 |
| 3 years and less than 4 years | 7 |
| 4 years and less than 5 years | 8 |
| 5 years and less than 6 years | 10 |
| 6 years and less than 7 years | 11 |
| 7 years and less than 8 years | 13 |
| 8 years and less than 9 years | 14 |
| 9 years and less than 10 years | 16 |
| 10 years and over | 12 |
Several exclusions apply to whether redundancy is payable, for example, where the business is considered a small business with 14 or less employees.
Enterprise agreements and awards may have different redundancy provisions which could apply, such as industry-specific redundancy schemes. These can override exceptions and provide different payment amounts than in the table above.
Q: If our business has gone through a restructure, and as a result we are needing to reduce the number of employees in a specific role, how do we determine which employees to make redundant?
A: When employers must make some employees in a specific role redundant while retaining others, it is essential to demonstrate that a fair and objective process was followed in selecting individuals for redundancy. This process is known as the selection process.
To maintain objectivity in the selection process, employers should identify the essential competencies that are required for the role are, and make the assessment based on the employee’s knowledge, skills, abilities and other qualifications. It is also crucial to document all criteria utilised in determining which employees will be made redundant to ensure accountability and that the employer can justify that any decision made had reasonable grounds. A skills matrix may be a useful tool in clearly assessing each employee against the essential competency criteria. The selection process is to be assessed by employers and employees should not be required to re-apply for their roles, as this may pose an unfair dismissal risk.
Employers should also be aware of discrimination risks when making the assessment and not including considerations such as an employee utilised personal/carers leave or other discriminatory grounds.
Other Resources
- More questions on redundancy answered:
- What are our obligations regarding redundancies?
- Do we need to consider redeployment opportunities?
- If we take steps to mitigate termination, do we still have to pay redundancy?
- Are there any exemptions to paying redundancy?
- Redundancy: what are employers’ obligations?
- Pulse Check: terminations, absent and underperforming employees
Q: If the business is requiring an employee to decrease their working hours, is this classified as a redundancy?
A: Redundancy in the Fair Work Act (FWA), defined in section 119, is when:
An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
If an employer decides to eliminate a full-time role while retaining the option for part-time work, this situation can still trigger redundancy, as the position of full-time employment at the employer’s initiative will no longer be required.
Modern awards and enterprise agreements include provisions regarding consultation about major workplace change. A reduction in an employee’s hours, for example from full-time to part-time can be constituting a significant workplace change. Therefore, employers must adhere to the consultation processes as outlined in their relevant industrial instrument.
During the consultation process, the option for part-time or reduced hours of work may be presented as a redeployment opportunity. If an employer offers a redeployment option, the employer may be able to apply to vary the amount of redundancy payable in accordance with the Fair Work Commission (FWC) for national system employers. Please note that redundancy pay under the FWA can only be varied by way of an order made by the FWC. We recommend seeking advice of how to do this before applying to the FWC because of the required steps involved.
Redundancy can be complex. Contact our Employee Relations Helpline on 9365 7660 or email [email protected] for tailored advice and assistance when considering redundancies.
Or, if you would like to speak to one of our employment lawyers, email [email protected].
