Who can use this correspondence?

This correspondence can be used by all employers.

Commentary

This letter seeks expressions of interest for voluntary redundancy. However, the letter also reserves the employer’s right to reject particular volunteers, based on the operational requirements of the business. In particular situations an employer may have broader or lesser discretion — this letter is simply put forward as a possible approach.

Consistent with the approach taken in the letter, an employer's acceptance or rejection of employees who apply for voluntary redundancy should be determined by applying lawful objective selection criteria, similar to those used when selecting employees for involuntary redundancy.

The letter advises employees that if insufficient numbers of suitable volunteers come forward, the employer may need to implement an involuntary redundancy process.

What is a redundancy?

Termination of employment due to redundancy is a form of dismissal by the employer.  It carries with it the concept of involuntary termination of the employee’s employment.  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
• it was not unreasonable in all the circumstances for the person or persons to be redeployed within the employer's enterprise or an associated entity of the employer.

Possible redeployment

By ensuring that any redundancy is a genuine redundancy and exploring redeployment opportunities this is essential to assist employers in defending an unfair dismissal claim brought by an employee on the basis that the redundancy was harsh, unjust or unreasonable.

Accordingly, even in the case of voluntary redundancy, employers should 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.

Record keeping

Employers should keep records of:

• attempts made to re-deploy employee(s)
• attempts to search for alternate jobs
• the reasons why redundancy was necessary; and
• the discussions with employees in connection with these matters.

Employers should update the personnel file to note termination was for redundancy.

Legal advice

If you are unsure when terminating the employment of an employee whether the circumstances constitute a redundancy, you should seek legal advice about this matter. 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.

Additional obligations apply when you are terminating the employment of 15 or more employees (see below). Before carrying out a redundancy employers should consult their agreements and awards to ensure they comply with any relevant requirements.

Mandatory redundancy pay

Employers should be aware that the Act introduces mandatory 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. if you are unsure whether your employees may have has an entitlement to redundancy pay as at 31 December 2009, you should seek legal advice about this matter.

Further considerations

Where 15 or more employees will be terminated due to redundancy, employers must notify Centrelink of the redundancies prior to any termination. If any of the employees is a member of a union, employers must also notify the unions prior to the termination of the employees. A form of that notification is available at this website.

Appropriate care also should be taken in selecting employees for redundancy in order to avoid discrimination claims.