January 6, 2019

Genuine redundancy meaning & payments

Photo credit: Alex Knight, Unsplash

Genuine redundancy meaning & payments

Updated: 24 December 2019

Below is a simple guide to genuine redundancy.

Genuine meaning

A redundancy is genuine if you no longer need a position because of business changes and there has been consultation with the employee per any award or enterprise agreement that applies.

And, it won’t be a case of genuine redundancy if redeployment was an unexplored option in the employer’s entity or an associated entity. 

Next, let's look at some ideas to help you avoid legal trouble.

Avoid legal trouble

Now, it's wise to consult with your employees and follow the process that's typically included in an award (even if an award does not apply) for risk management.

So, here's what it takes to comply with a consultation clause

  • as soon as a definite decision has been made about redundancies, notify the changes to all employees; and
  • discuss with the affected employees the changes, likely effect and measures to avoid or reduce adverse effects; and
  • write to the affected employees about the change and include the nature, likely effect and other matters to impact employees.

You should also explore and offer suitable jobs.

Also, you should get legal advice if you are unsure about any of the steps.

Further, here are some easily avoidable scenarios that usually lead to an employee making a claim against an employer: 

  • Immediate dismissal with no consultation; or
  • Job ad for the employee's former role appears; or 
  • Suitable positions the employee could have taken up. 

Now, let's look at when employees are paid redundancy pay.

When employees are paid

Redundancy is paid if these criteria below are met:

  • the employer has more than 15 employees; and
  • it is a case of genuine redundancy; and
  • there's been 12 months or more work history. 

However, a small business with fewer than 15 employees won't have to pay (section 121 Fair Work Act 2009 (Cth)).

Small business exception 

Despite section 121 of the Fair Work Act, there are some small businesses (with fewer than 15 employees) that still need to pay redundancy because of a provision for this in their applicable award. Here are some examples:

  • Joinery and Building trades Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010 
  • Textile, Clothing, Footwear & Associated Industries Award 2010 
  • Timber Industry Award 2010

How much $?

Minimum redundancy pay is in section 119 of the Fair Work Act and below. 

Finally, if an employment contract or enterprise agreement has more favourable terms, those more favourable terms will apply and override the Fair Work Act.

Do you have questions or comments about redundancy? Leave them below.

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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