It may be necessary for you as the employer, to make a role redundant in your business.

Here are a number of things to consider;

Ensure that this is a genuine redundancy and not an opportunity to ‘get rid of people’.

Redundancy is about the role, not the person.  As an employer you can decide that a role is no longer necessary or required for the following reasons;

  1. New technology means that the job is done by a machine or program
  2. The business or an arm of your business closes down
  3. The business relocates to another country or state
  4. The business has slowed down, in relation to turnover
  5. The business restructures due to a merger or even due to a downturn
  6. Or a combination of all of the above

Make sure you also follow the consultation requirements that part of an award or registered agreement.  Regardless, having open and regular communication with your employees about issues in the business that may lead to redundancy is encouraged.

Are you required to pay a redundancy amount?

That depends;

If you are a small business with fewer than 15 employees at the time that notice is given, no you do not have to pay a redundancy amount.  However, to get to the count of fewer than 15 people make sure that

  1. All employees (including the redundant roles) are counted
  2. Casuals count in the number of employees if they are employed on a regular and systematic basis
  3. Associated entities are taken to be one entity
  4. Check your modern award, there could be specifics you need to consider

If you have 15 or more employees, there are still a few employees who don’t get redundancy pay

  1. Employees with a continuous service of fewer than 12 months
  2. Employees who were employed on a fixed-term contract, or for a specific project
  3. An employee terminated for serious misconduct
  4. Casual Employees
  5. Apprentices
  6. Trainees engaged for a period of time, to train.

Redundancy payment amounts are based on service periods (i.e. how long the employee has been working for you)

For example, if a full-time employee has been with you for a period of 1 year but less than 2 years, they will be paid 4 weeks’ redundancy pay.

Don’t forget about the notice period

As well as redundancy pay, when you make an employee redundant, you will also need to pay the relevant notice period.  This again is dependent on the length of service.

Usually, an employee is made redundant and their employment is often terminated immediately, which means that the notice period is paid in lieu of service.  Although there are circumstances where employees have worked their notice period, to finalise or handover their role or projects. Either way, the notice period needs to be paid.

Other entitlements

In addition to redundancy pay and notice period payment, employers may also have long service leave and annual leave to payout.  Note that if you have an employee who has been with you for more than 2 years and is over 45 years of age, they are entitled to an additional week (of notice).

As you can see, the numbers can really add up.

Be well informed and understand your numbers;

  1. What is the length of service of each employee
  2. Who is over 45years and worked with you for at least 2 years
  3. Will they be owed Long service leave, even partial (at 7 years)
  4. What are their current annual leave balances

For more information about redundancy go to this section on the fair work website, you will also be able to review payment amounts dependent on the length of service.  If in doubt, speak to a specialist in this field.