Understanding Redundancy: Essential Guide for Employers

As an HR consultant, providing small business owners with clear and comprehensive advice on managing redundancy is crucial. It is not just about the fact that the business needs to consider redundancy as an option but also about doing the right thing by your employees who may have often served you loyally for a period of time. It is never an easy process.

Redundancy is a complex process that requires careful planning and adherence to legal requirements. One missed step within the process can lead to significant risks, particularly where redundancy may be deemed unfair dismissal because you have missed the vital consultation step with those at risk of redundancy before making a final decision.

In this article, I will explore the key aspects of redundancy, what employers need to be aware of, and how to handle the process effectively.

Let’s make a start.

What is Redundancy?

Redundancy occurs when an employer needs to reduce their workforce due to operational changes, such as restructuring, downsizing, or technological advancements. It is important to differentiate redundancy from other forms of termination, as it involves specific legal obligations and entitlements.

Legal Obligations for Employers

Understanding your legal responsibilities is crucial to managing redundancy correctly. Employers must comply with the Fair Work Act 2009, which outlines the procedures and entitlements related to redundancy.

Employees who don’t get redundancy pay

The following employees don’t get redundancy pay under the NES:

  • employees whose period of continuous service with the employer is less than 12 months
  • employees employed for:
    • a stated period of time
    • an identified task or project
    • a particular season
  • employees terminated because of serious misconduct
  • casual employees
  • trainees engaged only for the length of the training agreement

 

Notice and Consultation

Employers are required to provide affected employees with written notice of redundancy. The notice period depends on the employee’s length of service. Additionally, employers must consult with employees about the redundancy process, including discussing the reasons for redundancy and exploring any alternatives to dismissal.

Redundancy Pay

Eligible employees are entitled to redundancy pay based on their continuous service with the employer. The Fair Work Ombudsman provides detailed information on calculating redundancy pay and the applicable rates.

Steps to Manage Redundancy

Managing redundancy involves several critical steps to ensure compliance and minimise the impact on employees.

Planning and Preparation

Effective planning is essential for a smooth redundancy process. Identify the roles that will be affected, develop a clear timeline, and prepare all necessary documentation. It’s also important to consider the potential impact on remaining employees and maintain clear communication throughout the process.

Providing Support to Affected Employees

Offering support to employees during redundancy can help ease the transition and maintain morale. This can include providing career counselling, offering outplacement services, and assisting with job search.

Seeking Expert HR Support

Navigating redundancy can be challenging for small businesses. Seeking expert HR support can ensure you comply with legal requirements and manage the process effectively. Fresh HR Insights provides comprehensive HR consulting services, including employment law advice and redundancy management.

Conclusion

Redundancy is a challenging but necessary aspect of business management. By understanding your legal obligations and following a structured approach, you can manage redundancy effectively and minimise the impact on your employees. For expert HR support and advice book a time with us below.

Small Business and Redundancy: What You Need to Know

A small business in Australia is defined as one that employs fewer than 15 employees.

Under the National Employment Standards (NES), most small businesses are not required to pay redundancy pay when making an employee redundant.

Determining Small Business Status

To determine if your business qualifies as a small business, count all employees employed at the time of the dismissal, including:

  • The employee being terminated and any others being terminated simultaneously.
  • Regular and systematic casual employees employed by the business at the time of the redundancy (not all casual employees).
  • Employees of associated entities, including those based overseas.

The time of dismissal is when you provide an employee with their notice of termination, regardless of whether they work out their notice period.

Exemptions to Small Business Redundancy Rules

The following information is applicable from 15 December 2023.

Generally, small business employers are not required to pay redundancy pay under the NES when making employees redundant. However, starting from 15 December 2023, there are specific circumstances where this rule changes:

  • If an employer downsizes and becomes a small business as part of this process, they may still be required to pay redundancy pay under the NES.
  • This applies particularly if the employer becomes bankrupt or goes into liquidation.

In these cases, employees who are made redundant after their employer becomes a small business may be entitled to redundancy pay under the NES. This exception only applies if the redundancies leading to the employer becoming a small business occurred on or after 15 December 2023.

Additional rules apply, including those regarding when and how terminations took place.

For more detailed information and expert advice, book a time with us.

 

Feel free to reach out to us for personalised guidance and advice