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Big or small, all businesses may undergo changes – whether it be in size, structure, operations, or something else. While this may result in improvements and better outcomes for your business, it could also lead to some tough calls.
Introducing new technology or machinery, changing locations or restructuring your business may result in an employee’s role becoming redundant.
As an employer, it is important to know what your obligations are if you are looking to make your employees redundant. This article will take you through what your employees are entitled to when they are made redundant.
When Is A Redundancy A Genuine Redundancy?
An employee may be made redundant in the following scenarios:
- When the organisation is closed, or is closing
- When their employer no longer needs the employee’s job to be done (for example, if less roles are required)
- If the organisation is changing location
Before you make someone redundant, you should make sure that the employee’s job doesn’t need to be done by someone else and you have followed the appropriate consultation and selection processes.
What Is Not A Genuine Redundancy?
A dismissal will not be a genuine redundancy in the following circumstances:
- The job or role performed by the employee made redundant still needs to be done by someone. For example, you hire someone else to complete their job.
- You haven’t followed the relevant consultation requirements provided for by an award or agreement.
- It would have been reasonable to redeploy or relocate the employee to another job within your business.
It’s important to follow fair processes when making an employee redundant and ensure that any redundancy is a genuine redundancy. If not, the employee made redundant may take legal action against you for an unfair dismissal. If you find yourself in this situation, it is best to seek advice about what your options are from a lawyer.
What Is A Consultation Requirement?
Industry modern awards and other registered agreements provide for certain consultation processes to be followed where a business undergoes major changes, particularly if they are likely to result in redundancies. As a business owner, you should carry out these consultation processes as soon as possible after you decide to make these changes.
Consultation requirements may include:
- Notifying any employee who may be affected by the proposed changes
- Providing your employees with information about what kinds of changes your business will be making and the potential effects they have on their employment
- Having discussions with your employees about the actions that can be taken to avoid or minimise any negative consequences the changes may have on their employment
- Considering any ideas or suggestions your employees have in relation to the changes
Notice Of Termination
When you terminate an employee, you must give them the notice set out in your contract with them, or the statutory minimum notice period. However, you don’t always have to give notice.
If you dismiss an employee, you must show a valid reason for doing so, and prove that you acted reasonably in the circumstances. Employees also have a right to request, in writing, the reasons for their dismissal.
How Much Redundancy Do I Need To Pay?
Employees facing genuine redundancy are entitled to receive redundancy pay. The amount they are entitled to will depend on their continuous period of service with you, and is paid at their base pay rate for ordinary hours worked. As such, redundancy pay does not include any incentive-based payments and bonuses, loading, allowances, overtime or penalty rates.
Generally, you need to provide redundancy pay to employees who worked with you for two years or more. You can find more information about how much your employees can receive in redundancy pay here.
Who Doesn’t Get Redundancy Pay?
Some employees won’t be entitled to redundancy pay if their job is made redundant. You will not need to give redundancy pay to any employees you have made redundant if:
- You offer to keep them on
- You offer them alternative work and they do not accept it
There are also some additional scenarios where you will not need to pay redundancy pay if you are a small business. For example:
- Former registered dock workers
- Crown servants
- Members of armed forces or police services
- Apprentices who are not employees by the end of their training
- Domestic servant who is a member of the employer’s immediate family
Do Small Businesses Need To Pay Redundancy Pay?
Most small businesses won’t have to. But certain industries will require even small businesses to pay redundancy under the relevant modern awards.
Are you a small business? Small businesses are businesses that employ less than 15 employees. Employees include all permanent part-time and full-time employees employed at the time of the redundancy.
Casual employees are not counted unless they are employed on a regular and systematic basis.
What If An Employee Brings An Unfair Dismissal Claim Against Me?
Generally speaking, if a redundancy is a genuine redundancy, then you will be in a good position to defend an unfair dismissal claim brought against you.
It is a good idea to keep written records of the processes taken when you have made an employee redundant, as they may assist in proving that you have treated the employee fairly.
If you are facing an unfair dismissal claim, it is always best to seek professional legal advice that is specific to your circumstances.
Need Help?
If you’re looking for advice around taking care of your employees when your business encounters change, speaking to a lawyer will help you explore your options and make sure you are meeting your obligations as an employer.
Get in touch with our team of expert lawyers on 08081347754 or [email protected] for a free no-obligations consult.
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