By understanding the legal nuances of redundancy and establishing a clear process, organisations are better placed to assist the employee/s involved, while reducing the risk of an unfair dismissal claim.

First and foremost, the reason for redundancy should always be about the role, not the individual. Unfortunately, this is not always the case as organisations use it to solve perceived problems that performance improvement plans (PIPs) may be better suited to. PIPs are intended to provide clear, measurable goals with a defined timeline, detailing the support the employer will provide for an employee to ideally improve their work performance.

A genuine redundancy on the other hand, will be the result of a specific business reason, such as a business downturn, restructure, new technology like AI, business relocation, merger or acquisition, redistribution of tasks for efficiency, or business closure.

1.   What to consider when making decisions about redundancy?

Here are some things to consider before you make any decisions about role redundancies. Please note that there are some scenarios, such as business closure, where not all may will apply.

• Have you considered the potential cost of a redundancy payment?
• Do you have a redundancy plan in place?
• Which role/s and why?
• Does the cost benefit make sense for the health of the business? (i.e. is this really necessary?)
• Have you considered the impact on the remainder of the team?
• Has a skills matrix been completed for all relevant people?
• Are there any other roles that employees can be offered?
• Is it just one person from the team or more?
• Are you able to call for volunteers?
• Does the employee/s need to work the notice period?
• Will more than 15 people be made redundant?

2.   What are the key legal obligations for redundancy?



Before initiating any redundancy, employers should familiarise themselves with the Fair Work Act and the relevant modern awards/enterprise agreements. The main legal requirements are detailed below.

• Genuine redundancy: The role must genuinely no longer be required.
• Consultation: Employers must consult with affected staff, especially if covered by an award or agreement, as a redundancy will trigger the major change clause, which requires a formal meeting to consultant with workers. Please note that this may also include on-hired employees, depending on their employment arrangements. In this scenario, you will need to consult with the provider of on-hired employees, who is responsible for managing the redundancy process.
• Formal notification: If more than 15 people are made redundant, employers have an obligation to provide written notice to Services Australia (formerly Centrelink). Services Australia also provides guidance to employees being made redundant.
• Notice periods: Employees must be given adequate notice of termination or pay in lieu of notice. An employer must provide an employee with written notice of the day of termination when ending their employment, although some exceptions apply.
• Redundancy payment: Eligible employees are entitled to severance pay based on their length of service, with 12 weeks for people who have been employed for more than 10 years.  Small businesses are generally exempted from the requirement to make redundancy payments. However, in some awards there may still be a requirement to make a redundancy payment. These payments are a minimum – employers have the option to provide additional support to assist employees during their transition.

Please note that some organisations will have longer notice periods or higher redundancy payments in their employment contracts, depending on length of service. Failing to follow Fair Work or contractual obligations can result in underpayment or unfair dismissal claims and damage an organisation’s reputation.

3.   What key steps should your redundancy process include?

Redundancy should never be rushed, and every step ideally will be managed from a place of empathy and support. A redundancy process that maps out all elements of messaging, consultation, support and payments prior to communicating with affected employees is best practice.

1. Develop a business case: A business case should be created with identified roles, rather than individuals. The rationale for redundancy, such as financial pressure, restructure or technological change, needs to be developed to ensure clear and consistent communication across the business.
2. Hold a consultation meeting: This should be a private meeting to explain the situation clearly. Avoid jargon and deliver the news with empathy. Consultation isn’t just a legal box to tick, it’s an opportunity to seek alternatives, such as redeployment, job sharing, reduced hours, or training for new roles. Encourage employees to share their views and suggestions, as they may change the business case. If redeployment is possible, offer support to help staff transition to new positions within the organisation.
3. Provide written documentation: This includes notice period, redundancy pay, and support options so the employee can be informed and seek advice. It is best to have this at hand if alternative options cannot be found. Be prepared to answer questions and allow time for employees to process the information.
4. Hold an outcome meeting: Inform the employee of the reason why your organisation can or cannot accept any alternatives discussed in the consultation meeting, ensuring the outcome is clear. Support services may also need to be discussed further in this meeting, along with the employee’s preferences for saying goodbye.
5. Provide support services: Redundancy can be emotionally and financially stressful. Offer access to Employee Assistance Programs (EAP), counselling, and outplacement services that may include retraining options to help employees secure new work. Many people may not have had to liaise with Centrelink before, so it is also useful to provide information about how this works.
6. Handle final payments correctly: Ensure all final pay entitlements are calculated correctly, including accrued annual leave, long service leave, notice pay, and redundancy pay. Clearly communicate when and how these payments will be made. Mistakes in final pay can cause unnecessary distress and legal problems.
7. Communicate with and support remaining employees: Redundancy affects the morale of all staff. Communicate openly with remaining employees about the changes and future direction. Acknowledge the impact, answer questions, and reinforce organisational values. Engage employees in reorganising team workflows and consider planning other activities that will help to boost morale and teamwork.

If you need assistance in designing and managing redundancies, contact our workplace relations experts today.