Redundancy checklists for employers and employees

The redundancy process is difficult for employers and employees. This article contains two checklists:

• one for employers, to ensure that all steps of the process are completed properly
• one for employees, to ensure they receive all their correct entitlements, that their employer complies with the law, and that they can deal with other issues that arise post-redundancy (e.g. financial). 

Checklist for employers

Employers can approach the process of implementing redundancies by following these steps.

Making the decision 

• Redundancies should be a last resort. First, thoroughly evaluate other 'coping' strategies that may retain employees whose skills, knowledge and experience you will need when the business and economic climate recover. Options may include part-time work, reducing overtime, job redesign, transfers, retraining, encouraging employees to take all their accrued leave entitlements, temporary shutdowns, cost reductions in other areas, less use of casual staff and contractors, offering early retirement packages, etc.
• If redundancies are unavoidable, decide on the basis for making them. Options include seeking voluntary redundancies versus nominating the employees to be retrenched yourself.
• If you choose to make voluntary redundancies, prepare a redundancy package and an initial letter of offer that sets out all details of the offer, then send to all eligible employees. Ensure that the list of 'eligible employees' is not discriminatory in any way, e.g. does not exclude employees who might be interested.
• If making forced redundancies, calculate how many you need to make to achieve your target.
• Decide on a selection method that is fair, non-discriminatory and easily justified to other parties. Failure to do so could lead to claims of discrimination, unfair dismissal or dismissal for a prohibited reason.
• Whatever method you use, consider the future needs of the business. When recovery eventually occurs, you will need to have the right people to take advantage of opportunities that will arise. 

Preparing to implement the decision

• Where there are multiple redundancies (e.g. 15 or more), there are consultation requirements with affected employees and any unions that represent them that you must comply with. Note: this consultation must be genuine, not just window-dressing.
• Even where there are no legal consultation requirements, keeping employees informed of developments is recommended. They will know anyway when the business is in trouble, and 'official' information will reduce the potentially damaging effects of the rumour mill.
• Check all redundancy provisions that apply to each employee (notice period, severance pay, methods for selecting employees, other entitlements, etc) in the employee’s award, agreement or individual contract. These provisions will sometimes be more generous than the standard legislative entitlements.
• If your organisation also has a standard employee redundancy policy, check its provisions as well.
• Decide on timing of the redundancies. Cost and logistical issues will be two factors to consider, but note also that some employees to be retrenched may be 'missing in action' at any given time, e.g. due to being on leave, away on business trips, etc. If possible, it is much better that redundancies be implemented face-to-face, not by correspondence.
• Ensure that the line managers who will interview individual employees to be retrenched are adequately trained to handle what will sometimes be stressful experiences for both parties.

Redundancy payments

Contents of a redundancy package may include the following:

• compliance with minimum notice period and severance pay requirements
• pay in lieu of notice — may often suit either party better than working through a notice period, but consider the individual circumstances of each case
• extra notice period and/or severance pay
• outplacement counselling and job search services for retrenched employees
• written references or paperwork required by Centrelink
• counselling for employees who are NOT retrenched, but may be affected by the departure of work colleagues.

Counselling for both retrenched employees and 'survivors', as well as references/certificates and other assistance, are highly recommended practices, and in some cases award/agreement/contractual provisions will make them mandatory.

Implementing redundancies 

• Prepare individual letters for each retrenched employee. The letter should set out the date of redundancy, detailed calculation of all monetary entitlements, list of other entitlements to be provided (such as outplacement counselling, references) and other procedural issues (such as return of any company property, confidentiality requirements).
• Double-check that all calculations are correct and all legal requirements are complied with, before issuing the letters. Some employers use a third party to do this check, eg a lawyer or the outplacement assistance provider.
• Where multiple redundancies are to occur, consider holding an initial group meeting with all affected employees and their representatives to make the announcement.
• Also, hold a meeting with all other employees to explain the reasons for the decision, how it will be implemented, and how the business plans to move forward afterwards. Be open and honest about answering employees’ questions.
• Interview all redundant employees individually, handing over the letter as described above and answering all questions. If the employee is to be retrenched immediately with pay in lieu of notice, ensure that this payment is made promptly. If a notice period is involved, advise employee of the timetable of events from now on.
• During the notice period, ensure that someone remains available to handle all enquiries promptly and ensure that all parts of the process run smoothly.
• On their final day of work, interview all employees individually again, hand over a written statement of all their entitlements, ensure all payments have been made (eg into bank accounts); hand over other documents such as references, Employment Separation Certificate; collect any employer’s property held by the employee such as security passes, tools, uniforms, vehicles, etc (use a checklist of items for this step).
• Consider conducting an exit interview as well. Even though the reason why the employee is leaving is obvious, employees can still provide some constructive feedback on what it was like to work for your organisation, which the HR function may find valuable.
• Notify other affected parties such as superannuation funds, workers compensation and other insurers, important customers and suppliers, Centrelink (where required). For all except Centrelink, the only advice you need to provide is that the employee has left, no need to explain why.
• Update employment records to record the redundancies.
• Change passwords and other security precautions to ensure that ex-employees no longer have access to business information.
• Issue Group Certificates to employees within the required time period.

Afterwards

Be aware that surviving employees may be strongly affected by the departure of work colleagues and friends and may need time to adjust.

Review how the whole redundancy process operated. Was anything omitted? Could some things be handled better? What problems occurred? Use this feedback to improve the way any future redundancies are handled.

Checklist for employees

Employers could also consider providing a checklist such as the following one to retrenched employees, to assist them to cope with being made redundant. These issues will usually be addressed by outplacement counselling (if provided), but provide a useful list of logistical issues for employees to refer to.

• Know your legal entitlements, as per your award, agreement, contract or legislative minima. Check that the employer has complied with them.
• Check all calculations when you receive the statement, in particular to ensure you have been correctly taxed.
• Seek independent financial advice on your situation.
• Register with Centrelink and check whether you are entitled to unemployment benefits or other forms of social security assistance.
• Prepare a budget that takes into account your changed situation.
• Consider using part of your payout to repay or reduce current debts such as credit cards or mortgages. Also seek investment advice on what best to do with the payout funds.
• Review your superannuation and health insurance arrangements, as these may have been employer-provided. Arrange new coverage.
• Provide for any other major purchases, eg if employer provided a company car or mobile phone, you will probably need to buy replacements with your own funds.
• Inform your creditors of your altered circumstances. Consider renegotiating the payment terms if you are likely to have difficulty.
• Learn to use resources available to you, such as outplacement assistance, online job searches, networking/contacts, doing contract work, self-employment, etc.