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What to consider when faced with redundancies

The falling iron-ore price means that the rash of redundancies seen in recent times is likely to continue. The current market presents challenges for employers; getting redundancies wrong can increase the risk of claims, negating the cost cutting exercise sought to be achieved by the redundancy in the first place. So, how do employers get redundancies right?

Consult on the redundancy

If an employee’s position is at risk of being made genuinely redundant, speak with them as soon as possible. Regardless of whether or not there is an obligation in an enterprise agreement, individual contract or modern award, consultation is best practice, and mitigates the risk of disgruntled employees bringing claims.

Clearly communicate the reasons behind the redundancy, such as the change in operational requirements.

Consult with the employee on redeployment opportunities, including opportunities in the business, with associated entities, at alternative work sites or interstate. Invite and genuinely consider feedback from the employee on redeployment options. It’s a good idea to keep a paper trail as evidence of the consultation process.

If redeployment is not possible, consider if redundancy pay is available. Individual contracts or employer policies may provide for more favourable redundancy packages, but the Fair Work Act 2009 provides for the minimum entitlement for most employees. Under the legislation, redundancy pay is only payable to employees who have been employed for 12 months or more and whose employer has 15 or more employees. When calculating the number of employees, associated entities are taken to be one entity.  Casuals who work regular and systematic hours are also counted in this system.

Is there any basis to reduce redundancy pay?

Employers may in certain circumstances, such as where an employee has refused acceptable alternative employment, or in circumstances of financial hardship, apply to the Fair Work Commission for orders to reduce the redundancy payment it must pay, even down to zero.

Individual contracts or employer policies may also contain conditions around redundancy payments.

Tip: Remember to consider if redeployment options are “acceptable” as contemplated by the Fair Work Act of 2009 by reference to factors such as pay levels, hours of work, seniority or status and job security.

Common sense approach

Finally, take a common sense approach. Be aware of the risk of a claim in selecting particular employees for redundancy and take steps to mitigate those risks by setting objective and transparent selection criteria, consulting with employees, documenting your process and considering redeployment.

Disclaimer: the purpose of this publication is to provide general summary information only. It is comprehensive and is not specific legal advice. It should not be relied on for that purpose. Seek legal advice on any employment matters affecting you or your business.

This article is an edited version. The full article was first published in the August 2015 issue of HRMonthly magazine as ‘Door policy’. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here

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