What employers need to know about redundancy

By Chloe Boike, Workplace Relations Advisor 

It’s important employers are aware of legislative requirements in case they need to make a position redundant.

Why would a business make employees redundant? 

There are many reasons why a business may consider making roles redundant. Occasionally, businesses may go through slump periods where they are not receiving as much income as normal. This can significantly impact the operational requirements of a business resulting in the need to reduce headcount. Businesses may also undergo restructuring, there they determine the duties of certain positions are either no longer required or can be completed with one or more other positions within the new structure. Redundancy can also be the outcome of business improvements, such as automation. 

What makes a redundancy genuine 

When considering redundancy, it is important to recognise it must be a genuine redundancy under the FW Act. Section 389 of the Fair Work Act 2009 (Cth) (‘FW Act’) provides the circumstances in which a genuine redundancy takes place. A genuine redundancy occurs when: 

• The employer no longer requires a person’s job to be performed by anyone because of changes in the operational requirements of the business; and 
• The employer has complied with any obligations in the relevant Modern Award or Enterprise Agreement to consult with the employee about the redundancy of the position they hold; and 
• It was not reasonable in all the circumstances for the person to be redeployed. 

Should all three criteria not be met, the redundancy may amount to being an unfair dismissal. 

Consequences for a redundancy not being genuine 

If an employee does not believe their employment was terminated due to a genuine redundancy, they can seek to lodge an unfair dismissal claim with the Fair Work Commission. This often occurs where an employee feels aggrieved that not all of the requirements of a genuine redundancy have been met.  

In response to an unfair dismissal claim being lodged, the employer can seek for the claim to be dismissed on the grounds that the redundancy was in fact a genuine redundancy. 

A redundancy that is not genuine will likely result in a finding it was an unfair dismissal, as other elements of an unfair dismissal will likely be present (e.g. a dismissal was unjust). In order to avoid an unfair dismissal claim, it is imperative employers follow the proper processes and ensure all the criteria of a genuine redundancy are met. 

Redundancy notice and severance payments 

The FW Act provides information on the notice period employers are required to give to employees losing their employment through redundancy, as well as the redundancy payments that are owed to employees. 

Notice Period 

*If an employee is 45 years old or older and has completed at least 2 years of continuous service, they are entitled to one additional week’s notice. 

Where employers have the requirement to provide greater notice, usually through an enterprise agreement or contract of employment, they are to provide the amount under that agreement or contract. Employers may choose to make a payment in lieu of requiring the employee to work out their notice.  

Redundancy pay 

Redundancy pay does not interact with payment in lieu of notice, if the employer chooses to make a payment in lieu of notice; both would be payable to the extent required under the notice requirements and redundancy pay table. 

Exclusions and reductions to redundancy payments 

Redundancy pay may be reduced, or not payable at all, under some circumstances 

Sections 121 and 123 of the FW Act provides exclusions that apply to employees where they will not be entitled to redundancy pay. These include: 

• An employee has less than 12 months of continuous service 
• The employer is a small business employer (less than 15 employees by headcount) 
• The employee is employed as a casual 
• The employee is employed for a specific period of time, for a specific task, or for the duration of a specified season (including for a training arrangement for a specified period of time, but excluding apprentices) 
• Where the employer no longer requires the job done by the employee, to be done by anyone due to the ordinary and customary turnover of labour (e.g. a decision not to recruit for a replacement is not a redundancy). 

Redundancy payments can also be reduced under certain circumstances, such as: 

• The employee was redeployed into another position, or 
• The employer cannot afford to pay the full redundancy amount (business goes into liquidation) 

If the employer redeploys the employee into another job, it should not be automatically assumed the redundancy pay can be reduced, even where the employee is redeployed into a role with the same pay. An employer may apply to the Fair Work Commission to reduce the amount of redundancy pay owed to an employee and they will take into consideration several matters, including pay and conditions, changes in travel time, seniority.  

If the redundancy pay is an entitlement under certain Modern Awards, such as the Building and Construction General On-Site Award 2020, or an Enterprise Agreement, the employer may not be able to seek a reduction in redundancy pay except as provided within that industrial instrument. 

Business Chamber Queensland resources 

A Redundancy Factsheet providing important information is free and available to members. 

A Redundancy Letter Template kit is also available for members and non-members to purchase. This kit includes: 

• Redundancy Consultation Meeting letter template 
• Letter detailing Potential Redundancy Information 
• Letter confirming termination by Redundancy 

The Redundancy Letter Template Kit is $253.00 for members* and $330.00 for non-members. 

*Business Evolve members have access to the kit for free as part of their membership. 

For a copy of the Factsheet or the Redundancy Letter Template Kit, please email [email protected].  

How can Business Chamber Queensland help?   

Business Chamber Queensland members with HR services as part of their membership are invited to contact the Workplace Advisory Services team:    

P: 1300 731 988  

E: [email protected]   

Businesses who do not have a HR membership may also seek assistance however a competitive consultancy fee will apply for any advice and assistance provided.    

For membership enquiries, please contact our membership team on 1300 731 988.