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Redundancy – What to know

Published September 27, 2020

Going through redundancy can be a difficult time for any person. However, not all redundancies are genuine redundancies. It is important to know your rights and responsibilities.

Legislation

The Fair Work Act 2009 (Cth) (the Act) sets out an employee’s entitlements to redundancy pay as well as the prerequisites for redundancies. ¹

Redundancy versus termination

There are subtle yet important differences between being made redundant and being terminated.

Termination relates to the ending of employment in circumstances which could relate to poor work performance, a breach of an employment agreement or otherwise. Termination is generally broader than redundancy, and it essentially includes the ending of employment other than where an employee is made redundant.

Redundancy is generally more specific and happens when the employee’s position is no longer required or can no longer continue. Redundancy occurs in relation to the actual position rather than the employee. Redundancy will occur when:

the employer decides they do not need an employee’s job to be done by anybody; ² or
the employer becomes bankrupt or insolvent. ³

A position can become redundant in circumstances including when a business:

closes down;
has less work coming in;
becomes more efficient in managing its workload (for example, through new technology);
relocates interstate or overseas; or
goes through a restructure due to a takeover or merger.

If you are unsure if you were terminated or made redundant, you can call our office and speak with one of our employment solicitors.

Requirements

To be eligible to receive redundancy pay from your employer, you will usually need to have:

Continuously worked with the employer for 12 months or more; and
worked for an employer who was not a small business employer at the time you received notice of redundancy (i.e., an employer having fewer than 15 employees) (exceptions may apply). ⁴

12 months’ continuous service

If you have not worked for your employer for 12 months at the time notice is given to you, then you will usually not be entitled to redundancy pay. Instead, this would fall within the scope of termination which provides a minimum period of notice.

If a transfer of employment is involved between related entities, then the employee’s continuous service will generally carry over. There are other circumstances that may affect whether a worker engaged in 12 months’ continuous service with their employer.

Small business employer

A small business employer is an employer that has, at the time notice is given, fewer than 15 employees. ⁵

To determine whether the employer has met this requirement, it is a good idea to keep in mind that:

any associated entity of the employer will generally be part of the same entity; ⁶
the employee being dismissed, and any other employee being dismissed at the same time will usually be counted; ⁷ and
casual employees are not to be counted unless, at that time, the casual employee was employed on a regular and systematic basis. ⁸

Entitlements – redundancy pay

Redundancy pay depends on how many years of continuous service the employee has with the employer. ⁹ Below is a table which is set out in the Fair Work Act showing the redundancy pay period coinciding with an employee’s continuous service.

Employee’s period of continuous service	Redundancy pay period
At least 1 year but less than 2 years	4 weeks
At least 2 years but less than 3 years	6 weeks
At least 3 years but less than 4 years	7 weeks
At least 4 years but less than 5 years	8 weeks
At least 5 years but less than 6 years	10 weeks
At least 6 years but less than 7 years	11 weeks
At least 7 years but less than 8 years	13 weeks
At least 8 years but less than 9 years	14 weeks
At least 9 years but less than 10 years	16 weeks
At least 10 years	12 weeks

Redundancy pay is based on an employee’s base rate of pay for their ordinary hours. It does not include:

incentive-based payment and bonuses;
loadings;
monetary allowances;
overtime or penalty rates; or
any other separately identifiable amount.

In other words, if a worked was earning $1000 per week but was also receiving daily meal allowances and overtime rates on a consistent basis, the redundancy pay would only be based on the $1000 per week for that employee’s ordinary hours of work, and would not include the additional allowances. ¹⁰

Exceptions to paying redundancy pay

An employer may not have to pay redundancy pay to its employee when factors are considered such as:

whether the employer can afford to make the redundancy payment; ¹¹
whether the employer finds other acceptable employment for the employee; ¹²
the terms of a modern award applicable to the employee; ¹³ and/or
whether the employee was an apprentice or employed for a specified period of time or task. ¹⁴

Redundancy disputes

We act for employers and employees, and have experience from both sides of the argument. If you have a dispute relating to redundancy, we can assist you.

Quite often, employment disputes can arise where:

an employer terminates an employee when it really should have been a redundancy;
an employer does not pay the correct amount in redundancy pay; or
an employer makes an employee redundant when in reality it was dismissal because of:
- a reason that is harsh, unjust or unreasonable;
- discrimination; or
- another protected right.

If a worker is terminated but they think they should be entitled to redundancy pay, or if they were made redundant but the employer has not paid their redundancy pay correctly or at all, legal advice can go a long way. Sometimes it only takes a letter that sets out the issues in dispute and the worker’s entitlements to resolve the dispute. However, in some cases, the worker may need to apply to the Fair Work Commission.

Redundancy versus unfair dismissal

This is generally not a straightforward process because evidence is needed to show that the position was not actually made redundant or that there was an ulterior motive behind terminating the worker. For example:

An employer might make a position redundant but then advertise for the same or similar position shortly after; or
The worker may have been subjected to discriminatory behaviour leading up to their redundancy.

If you intend to bring an unfair dismissal claim, you will need to act fast. You have 21 days after the date of dismissal to lodge an application for unfair dismissal (although exceptions may apply).

For more information about unfair dismissal, you can read our article on unfair dismissal.

Contact Gibbs Wright Litigation Lawyers

We act for employers and employees. If you have a dispute regarding redundancy pay, unfair dismissal, or whether a redundancy is genuine, we can help.

For a confidential discussion about your matter, please feel free to call our office and speak with one of our employment solicitors.

References

[1] Fair Work Act 2009 Part 2-2, Division 11.

[2] Fair Work Act 2009 s 199(1).

[3] Fair Work Act 2009 s 199(1).

[4] Fair Work Act 2009 s 121(1).

[5] Fair Work Act 2009 s 23(1).

[6] Fair Work Act 2009 s 23(3).

[7] Fair Work Act 2009 s 23(4).

[8] Fair Work Act 2009 s 23(2)(a).

[9] Fair Work Act 2009 s 119(2).

[10] Fair Work Act 2009 s 119(2).

[11] Fair Work Act 2009 s 120(1)(b)(i).

[12] Fair Work Act 2009 s 120(1)(b)(ii).

[13] Fair Work Act 2009 s 121(2)-(3).

[14] Fair Work Act 2009 s 123(1).

The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.

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Redundancy – What to know

Table of contents

Legislation

Redundancy versus termination