What is redundancy?
An employee is redundant when the employer no longer needs the employee to do the job the employee has been doing. This doesn’t necessarily mean that the work that is performed is no longer required – it could be that, for example, you had three people on assembly and you now only need two people, so one person is redundant.
How should an employer choose who will be made redundant?
Employers must be certain to choose who is made redundant in a fair way. For example, the person with the lowest level of skill would be an obvious choice, provided it is objectively clear that the person chosen really does have the lowest level of skill. Length of service can be used provided it does not result in the employer indirectly discriminating against the employee. Choosing someone to be made redundant on the basis of their performance will not be fair unless they have previously been warned about poor performance. Making an employee redundant because they have a history of absenteeism or WorkCover claims could be unlawful.
What does an employer need to pay to a redundant employee?
Notice of termination
The National Employment Standards set out a sliding scale of minimum notice based on length of service that must either be given to an employee, or the employee must be paid a certain number of weeks in lieu of notice.
Redundancy
A redundant employee may also be entitled to redundancy payments. This is also covered by the National Employment Standards, and is based on a number of weeks’ pay depending on length of service.
Another factor that is relevant in the payment of redundancy is the size of the business. The National Employment Standards exclude small businesses (with fewer than fifteen full time equivalent employees) from the requirement to pay redundancy. This means that for most small businesses, they do not have to pay any redundancy at all.
However, under the Furnishing Industry National Award 2003 and the Timber and Allied Industries Award 1999, employees of small businesses were still entitled to redundancy payments because the award had been varied to introduce this type of payment prior to 2004. Because the award had a long-standing history of providing redundancy payments to employees of small businesses, the Timber Industry Award 2010 has retained the provision requiring those payments to be made.
The scale of payments for a small business is different, with a maximum payment of 8 weeks’ pay for an employee with more than four years’ service, compared to the maximum a larger company would have to pay of 16 weeks’ pay for more than nine years’ service.
Long service leave
Any employee in Victoria who is covered by the Long Service Leave Act 1992 and whose employment is terminated after more than seven years’ service is entitled to pro rata payment of long service leave. The rate of pro rata payment is 0.867 weeks of leave for every year of service.
Other leave entitlements
An employee who is made redundant is entitled to payment of all accrued annual leave, and to payment of annual leave loading of 17.5% on all accrued annual leave.
There is no automatic payout of personal/carer’s leave on redundancy in the award.
For advice on redundancy situations, please contact Emma Watt on (03) 8822 3712 or 0411 708 073, or by email on emma@emmawatt.com.au.
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