Deciding to make roles redundant in your business can be challenging and stressful, and the effect of not handling redundancies correctly can significantly impact the business. The potential for unfair dismissal claims and negative publicity, both internal and external, can be a real risk. Therefore, it is important to manage the steps carefully when going through the redundancy process.

What is a genuine redundancy?

Redundancy can occur when there is a genuine need that a job is no longer required within the business, therefore is not required to be completed by anyone. Or the business becomes insolvent or bankrupt. Some genuine reasons that a job may no longer be required are due to:

  • A new technology;
  • Work slows down due to lower sales or production;
  • The business closes down or relocates; or
  • Business restructure or merger.

Consultation

The Fair Work Act, Modern Awards and Enterprise Agreements call for employers to consult with employees prior to redundancies being made. Failure to do so exposes the business to unfair dismissal claims. Consultation is done by making an announcement about the changes to the business and that redundancies will likely be made. Consultation requirements include:

  • Notification to those who may be affected;
  • Providing employees with information about the changes and how it may affect them;
  • Discussing steps to avoid negative impacts to employees; and
  • Consideration of employee ideas or suggestions about the changes (eg. employee may be happy to work part-time or take extended leave).

Review

When considering redundancy, it is important to remember that it is the role that is made redundant, not the person. Employers must attempt to reassign the employee to another role within the business or associated entities, when they have transferable skills or experience, and if there is a suitable role available. Where there may be multiple roles impacted by redundancy, it’s important to show you’ve followed a fair process, which may include a skills matrix to assess one role over another.

Check Entitlements

Once the appropriate selection has been made, review and calculate the various entitlements and notice periods the employee is required to receive based on their relevant modern award or industrial instrument.

Meeting

Delivering the notice of redundancy should be done in person. The meeting is an opportunity for the employer to discuss the reasons for the redundancy and answer any questions the employee may have. Finally, a termination letter should be issued to the employee, stating the reason for termination of their employment together with the details of the payments due to be paid out to them.

It is critical to understand that a dismissal is not considered a genuine redundancy if the employer still requires the role to be done by another person, has not followed the correct consultation process, or could have reassigned the individual within the business or another entity. By not following the correct process, your business could be left vulnerable to a potentially costly unfair dismissal claim.

If you need help to understand your obligations and the process involved when considering redundancy, contact our specialist team for a no obligation chat today.