07 Apr REDUNDANCY- A GUIDE FOR SMALL TO MEDIUM SIZED BUSINESSES
Due to the unprecedented disruption caused by coronavirus (COVID-19), at HRM we understand you may need to consider options to reduce expenditure over the coming weeks and months.
Before consideration of redundancies, we strongly suggest you consult with your employees about reducing their hours of work by agreement or taking annual leave first until the business is able to recover. However, should these options prove unsuccessful, the only option that may be available to you is to make positions redundant.
For a redundancy to be “genuine”, the following elements must be complied to (to avoid unfair dismissal)
- The employee’s job was no longer required to be performed by anyone because of changes in the operational requirements of your business;
- compliance with any obligation in a modern award or enterprise agreement to consult about the redundancy; and
- assess whether redeployment is an option within your enterprise or an associated entity.
For example, if a store being closed, if you did not consult with the employee about the closure, the dismissal may still be found to be unfair. We strongly recommend you consult about a redundancy where it is required under a modern award or enterprise agreement that applies to the employee.
It is important to distinguish between the employee’s job and the employee themselves. it is not appropriate to rely on redundancy as a reason to exit underperforming employees whose job is otherwise required to be performed.
The employee’s job
If the duties an employee performs will continue to be required, then it is important to redistribute to other employees. We suggest you consider whether their job still exists in some form when work resumes. If you do decide to re-advertise the same position in the future, then consider obtaining advice from HRM first.
Consultation with your employee
There is a requirement to consult about any redundancies where it is required under a modern award or enterprise agreement that applies to your employee.
The amount of redundancy pay is depending on the employer’s enterprise agreement, modern award or contract of employment. It is important to note that redundancy pay is payable in addition to an employee’s other entitlements, such as accrued but untaken annual leave, long service leave, and payment in lieu of notice. It is possible to provide your employee with notice of when a redundancy takes effect rather than make payment in lieu of notice, however this should occur alongside any consultation that may be required.
There is no requirement to pay redundancy pay where:
- the employee is engaged on a casual basis;
- the employee has less than 12 months’ continuous service;
- the business has less than 15 employees;
Steps for employee redundancy (if re-deployment has been discussed)
- Decision to make employee redundant with relevant decision makers/stakeholders
- Check the modern award your employee is working under for obligations around consultation with employees- almost ALL modern awards (including the General Retail Industry Award 2010, the Fast Food Industry Award 2010, and the Clerks–Private Sector Award 2010)
- Obtain advice from HRM if required for suitable letters and redundancy pay requirements
- Arrange a meeting with employee offering a support person in the meeting
- Have a copy of the letter to hand to employee
- Suggest date of redundancy- effective immediately from the date of the meeting.
Note regarding “redeployment”, while discussions may not change the decision, a failure to consult with your employee first may implicate a case of genuine redundancy.