Being a business owner or manager comes with its share of exciting tasks that fuel your satisfaction and your company’s progress. But there are also less glamorous duties to tackle. And right at the forefront of those less thrilling responsibilities is handling employee redundancy.

It’s a delicate task that entails adherence to Australian employment laws and a compassionate approach towards those affected. Therefore, understanding the redundancy process is essential to avoiding legal claims, such as unfair dismissal, and ensuring a seamless transition for everybody involved.

In this redundancy guide, we dive into key terms and obligations you must fulfill to carry out an employee redundancy in Australia lawfully.

What is redundancy?

Redundancy refers to the termination of an employee when the employer no longer requires anyone to occupy that role or when the company faces insolvency or bankruptcy. It can happen due to various factors, such as operational changes, technological innovations, financial challenges, and other similar reasons. 

What is genuine redundancy?

The Fair Work Act 2009 (the Act) specifies the minimum criteria companies must meet when implementing the redundancy process. These standards define genuine redundancy and include obligations regarding redundancy consultation, a notice of termination, and redundancy payment. Thus, they serve as a protective framework ensuring fair and transparent procedures for employers and employees.

Let’s take a closer look at each of the genuine redundancy criteria.

Redundancy consultation

According to the Act, when there are major changes in the workplace, such as redundancies, all employees under awards and registered agreements must go through a consultation process. This means you have to organize a redundancy-related meeting to discuss the matter further.

However, even if no award or enterprise agreement applies, we suggest conducting a redundancy consultation. This practice promotes transparent employer-employee relations, demonstrates your commitment to treating employees responsibly, and helps prevent potential disputes.

When conducting redundancy process consultations, you can find the specific requirements outlined in the relevant award or registered agreement. Here, we summarise some of the general guidelines that can assist you:

  • Conduct meetings before making any irreversible decisions.
  • Approach consultation sincerely, with a genuine intent to communicate transparently.
  • Provide data and findings, and thoroughly explain the issue.
  • Discuss potential alternatives to redundancy.
  • Encourage employees to share their thoughts on the suggested changes.

Download the complete redundancy consultation meeting checklist.

Notice of termination

Notice of termination is another crucial aspect you must consider during the redundancy process. The Act specifies that you must provide written redundancy notice and that it should only become valid from the day it’s given. 

Furthermore, a notice of termination should include the minimum redundancy notice period, which duration depends on how long the employee has been working for the company.

Period of continuous service

Minimum notice period

1 year or less

1 week

More than 1 year – 3 years

2 weeks

More than 3 years – 5 years

3 weeks

More than 5 years

4 weeks

Redundancy payment

Redundancy pay is financial compensation for redundancy-affected employees. You can calculate the redundancy payment amount by calculating the total earnings an employee would have received over a specific period. This “redundancy pay period” is established using the following table, which considers an employee’s years of service.

Years of service

Redundancy pay period

At least 1 year but less than 2 years

4

At least 2 years but less than 3 years

6

At least 3 year but less than 4 years

7

At least 4 year but less than 5 years

8

At least 5 year but less than 6 years

10

At least 6 year but less than 7 years

11

At least 7 year but less than 8 years

13

At least 8 year but less than 9 years

14

At least 9 year but less than 10 years

16

At least 10 years

12

Consider using the Fair Work Ombudsman’s redundancy pay calculator and researching relevant awards for the most accurate redundancy payment criteria.

Important!

The following are exemptions to the obligation of providing redundancy pay:

  • Small businesses with up to 15 employees.
  • Employees with less than 12 months of continuous employment.

Achieving a genuine redundancy

Navigating redundancy in Australia requires adhering to intricate legal obligations while approaching the process with organization and empathy. Above, we’ve discussed essential criteria for implementing redundancy, ensuring legal compliance and transparent work relationships. 

For an in-depth look at the redundancy process in Australia, download our comprehensive manual on effective redundancy implementation. It helps you understand crucial terminology and get expert advice on the best steps and approaches to achieving genuine redundancies.

Sources: