A redundancy occurs where an employee’s job is no longer required by the employer, this may happen due to various reasons such as introduction of new technology, financial stringency or restructure.
The key to a redundancy is the disappearance of a job or position, however, in some cases, an employer may terminate an employee and distribute their work among remaining employees. Or they may replace an employee’s job with a new position that involves some, but not all of their former duties. In both these situations there can be a redundancy.
For a redundancy to be genuine, it cannot occur on account of any personal act or default by the employee. If after the termination, the employee’s position still remains, to be filled by someone else it may be found that there is no redundancy – giving rise to an unfair dismissal claim.
How does Redundancy pay work?
When an employee’s job is made redundant, their employer may need to pay them redundancy pay. Under the Fair Work Act 2009 (Cth) (FW Act), an employee is entitled to redundancy pay if the employee’s employment is terminated due to:
- the employer no longer requiring the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
- because of the insolvency or bankruptcy of the employer.
Employees receive redundancy pay based on their continuous period of service with their employer.
The scale of payments an employee is entitled to is mandated by the FW Act. It starts at 4 weeks’ pay for an employee with one year’s service and rises to 16 weeks’ pay for employees between 9 and 10 years of service. Once an employee has 10 years of service, the redundancy payment reduces to 12 weeks’ pay. This reflects the fact that in most jurisdictions an employee with 10 years of service is entitled to long service leave.
The Fair Work Ombudsman provides a helpful table which details the scale of payments an employee is entitled to based on their period of service.
Employees may also be entitled to higher redundancy payments depending on whether they are covered by a modern award, enterprise agreement, employment contract or employer’s policies.
How much Notice is needed?
In addition to the redundancy pay, employees are also entitled to written notice. Notice is either in accordance with the FW Act or an additional and different provision within the employee’s employment contract, modern award or enterprise agreement.
The Fair Work Ombudsman also provides a helpful table which details the period of notice an employee is entitled to.
Need support?
If you are considering making a job redundant and would like to understand your rights, National Employment & Labour Lawyers have a dedicated team who can assist you with your employment matters. We offer a free and confidential initial consultation, where we can discuss your situation and provide you with tailored advice. Get in touch with us today!
