Who can use this correspondence?

This document can be used by all employers throughout Australia.

However, the following employers:

• Non-constitutional corporation employers in Western Australia;
• State public sector employees (ie employees of a Minister, the Governor or the Crown); and 
• Local Government employers — except in Tasmania

should first obtain legal advice as the letter is based on legal regulation in Federal legislation, awards, enterprise agreements, employment contracts, and policies.

If any employer is not aware of its specific legal obligations, advice in relation to its circumstances should be sought when contemplating the use of this letter.

Commentary

What is a redundancy?

Termination of employment due to redundancy involves the involuntary termination of the employee’s employment by the employer.

However, rather than being a fault-based dismissal, redundancy is usually caused by factors such as economic conditions, business efficiency, or technological development.

Generally speaking, termination of employment due to redundancy occurs where:

• an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone; and
• that decision leads to the termination of the employee’s employment.

Under the Fair Work Act 2009 (Cth) (the 'Act') 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;
• the employer has complied with any obligation to consult contained in an applicable modern award or enterprise agreement; and
• there were no reasonable redeployment opportunities for affected employees, including within associate entities.

 

Record keeping

Employers should keep records of attempts made to re-deploy employees. Records of employer attempts to search for alternative jobs and the reasons why the redundancy was necessary should be retained (in the event a claim is made). Additionally records should be kept of the discussions with employees in connection with these matters. Employers should update the personnel file to note the reason for termination was redundancy.

Legal advice

If you are unsure whether the circumstances constitute a redundancy, you should seek legal advice. 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.

Before carrying out a redundancy, employers should review any applicable agreements and awards to ensure they comply with any relevant requirements relating to redundancy e.g. consultation and notification requirements.

Mandatory severance pay

National system employers should be aware that the Act mandates severance pay for employees made redundant in workplaces that are not a 'small business employer' as defined by the Act.

An obligation to provide severance pay under the Act applies from 1 January 2010. Importantly, continuous service (relevant to the calculation of severance pay) under the Act will only start to accrue from 1 January 2010, where an employee previously had no entitlement to severance pay as at 31 December 2009.

Advice should be sought in relation to severance payments if you are unsure of your obligations.

What do I need to do before making a position redundant?

Before making an employee redundant and in order to avoid legal claims arising on termination, an employer should ensure:

• the redundancy is genuine (ie 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
• it complies with any consultation and notification requirements that apply under relevant legislation, contracts, awards, or agreements. In this regard, many industrial instruments require employers to notify employees of any ‘significant changes’ which may affect their employment, including decisions to make employees redundant, and consult in relation to the effects of those changes;
• it considers 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; and
• it notifies Centrelink of the redundancies prior to any termination where the employment of 15 or more employees is proposed to be terminated due to redundancy. A form of that notification is available on this website.

 

These steps must be taken before making the employee redundant.

Appropriate care also should be taken in selecting employees for redundancy, to minimise the risk of other potential claims such as discrimination claims.

Other relevant correspondence 

In the event you decide to make an employee redundant after issuing this letter, the HR Advance website can assist you to prepare the final letter to the employee(s) advising them of the termination of their employment by reason of redundancy.