Redundancy refers to a job becoming redundant and not an employee becoming redundant.

An employee’s position is usually considered to be redundant if:

  • an employer has made a definite decision it no longer wishes the job the employee has done to be done by anyone
  • that decision is not due to the ordinary and customary turnover of labour
  • that decision led to the employee’s termination of employment
  • that termination is not on account of any personal act or default of the employee. 

Redundancy is usually caused by factors such as economic conditions, business efficiency or technological development.

Under the Fair Work Act 2009 (Cth) 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.

To avoid the risk of an unfair dismissal claim, employers must 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.

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.

Redundancy pay

Redundancy pay is mandatory eligible employees. There are however certain exemptions from that obligation.

Some of the common exemptions from the obligation to provide redundancy pay are detailed below:

  • the employer employs less than 15 employees
  • an employee has less than 12 months’ continuous service with an employer
  • the employee is a casual
  • the employee is terminated because of serious misconduct
  • the employee is employed for a specified task, or a specified period of time, or for the duration a specified season
  • a training arrangement applies to the employee (other than an apprentice) and their employment is for a specified period of time, or limited to the period of the training arrangement
  • the employee is an apprentice
  • an industry-specific redundancy scheme in a modern award applies to the employee, or the industry specific redundancy scheme from the modern award which covered the employee is incorporated into an enterprise agreement which applies to the employee.

Modern awards may also include exemptions from the obligation to provide redundancy pay.

What should be included in a redundancy letter

A letter notifying an employee their position is redundant should include:

  • a clear statement that the position has been made redundant
  • an offer to apply for voluntary redundancy (optional – only if this is being offered)
  • the time-frame over which the redundancy will take place
  • a schedule of entitlements setting out the monetary entitlements available to the employee as a result of the redundancy
  • an outline of meetings which will take place concerning the redundancy and the opportunity for the employee to respond to the decision, raise issues and propose alternatives
  • an expression of regret that the redundancy is necessary, and
  • an invitation to contact the HR department and/or relevant manager to discuss any further issues in a confidential manner.