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19 July 2022

No one wants to be in the situation of needing to consider making a role redundant. Sometimes, this is the reality of business. Redundancy could be necessary for several reasons, including introduction of a new technology, a downturn in sales, permanent closure or needing to restructure.

Regardless of the reason, the best we can do when redundancy is necessary is ensure communication is clear, decisions are fair and transparent, and everyone’s treated with respect.

Each situation is unique, however, it’s important to consider the specifics of your business and employees (including your size and industrial agreements) prior to making any decisions.

Important points to consider and remember:

  • A role is made redundant not a person
  • Genuine redundancy is when a role is no longer required to be done by anyone in your business
  • Consultation is essential prior to any final decisions being made
  • Consultation requires notification and information to the affected employees, discussion to attempt to minimise impacts, and consideration of any suggestions made
  • Small business with fewer than 15 employees (including regular and systematic casuals) follow the Small Business Fair Dismissal Code
  • Often small businesses do not need to make a redundancy payment however the individual may still be entitled to other payments such as notice
  • Medium and large business will need to make a redundancy payment in addition to notice which is determined by the relevant industrial agreement
  • If redundancy is payable and made under the National Employment Standards rather than an award, businesses can make an application to the Fair Work Commission to have the redundancy payment reduced (potentially to zero) in some circumstances
  • Businesses can decide to include an ex gratia payment as part of a final payment. Ex gratia means ‘by favour’ and is paid to an employee by choice without obligation
  • Following a redundancy decision, employees are entitled to time off work to look for other employment without loss of pay. This entitlement is up to one day each week during the notice period

Starting the consultation process with employees can be daunting. We find it is made easier if a script is written prior to meetings. The script provides a template for how the conversations will run, allows you to repeat this with others in the business (so the message is consistent) and provides some common questions employees may ask, and how to answer these.

Note taking is essential during consultation with employees. The more detailed your notes are the better, especially if employees provide suggestions as to what could be changed to minimise impact. These will need to be considered and responded to, to ensure the consultation process is considered genuine.

Consultation meetings are understandably difficult and stressful times. If you find an employee is unable to communicate clearly during these meetings, (due to shock), we suggest you offer to talk to them again later when they’ve had time to put their thoughts together. If pushed too hard at this stage, the consultation process may not be considered genuine.

Although not required, some employers offer displaced employees additional emotional and career support. We would always suggest including the details of free community services such as lifeline and Beyond Blue in redundancy letters. You may also consider offering time limited CV development or career transition support through external organisations.

Considering redundancies can be complex and difficult, remember our specialists at Impact HR are always available to discuss any concerns or questions you may have.

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