What Does the Law Say About Redundancy?


‘It’s not you, it’s me.’ It’s the break-up one-liner you never want to hear, but when it comes from your employer such an excuse needs to be justified.

What is Redundancy?

When an employee is dismissed because their job is no longer required, or where the employer becomes insolvent or bankrupt, the employee is said to be made redundant. A redundancy is not a reflection on the employee’s performance, rather it is the result of changing business needs.

Reasons for redundancy include where a business closes down, moves interstate or overseas. Business restructures or mergers can also lead to redundancy, as can lower sales. In some cases new technology, such as machines or software, can render an employee’s position unnecessary.

The Law and Redundancy

The law recognises that employers need space to grow and shrink their business and account for a changing business environment. Redundancy is a mechanism by which employers are free to do this. As a result employees who are made redundant can not bring an unfair dismissal claim against their employer.

However, the law also protects the rights of employees. Redundancy can not be used as an excuse to dismiss an employee. Redundancy must be genuine.

Genuine Redundancy

Redundancy is genuine only when a position is no longer required or the business is insolvent. A redundancy is not genuine if the employer still requires someone to fill the position, or where the employer could have given the employee another position within the business. For example, if an employee is made redundant and someone else is hired to perform their duties, the redundancy is not genuine.

In situations where someone is employed based on an award or another agreement, an employer must follow the consultation process set out in the award or agreement. Failure to do so could mean the redundancy is not genuine.

Redundancy Pay and Entitlements

A full time or part time employee who has been made redundant is entitled to redundancy pay (also called severance pay). Redundancy pay is calculated based on the length of time the employee was employed by the business.

For example, an employee who has been with the company for 3 years will be given their base rate of pay for 7 weeks. The notice required is also determined by the length of time the employee has been with the company. You can calculate how much you are entitled to using the Notice and Redundancy Calculator on the Australian Government Fair Work website.

Employees on an award or other agreement will be given redundancy pay based on the terms of the award or other agreement.

Under some circumstances an employee is not entitled to redundancy pay. These circumstances include:

  • where the employee is a casual, an apprentice or trainee
  • if an employee has been with the company for less than 12 months
  • employees who were employed for a specified time, task or season
  • employees of some small businesses (businesses with less than 15 employees)

Visit the Fair Work website for a full list of redundancy pay exceptions.

Redundancy Problems

Problems can arise when an employee claims they have been unfairly dismissed or the redundancy is not genuine. An employee may feel they have been discriminated against, or the dismissal is unjust or unreasonable. In these cases, an employee may be able to make a claim in relation to unfair dismissal or general protections, or sometimes unlawful termination. Such applications are first conciliated in the Fair Work Commission.

In other situations, an employee may think they haven’t been paid everything they are owed and a dispute between employee and employer ensues. It is therefore important that employers understand their obligations under redundancy laws and carry out all necessary actions including notice and final pay.

Do You Need a Lawyer?

Taylor & Scott Lawyers have been assisting both employees and employers in the area of employment law for many years.

If you’ve been made redundant and you feel it isn’t justified or you haven’t been paid correctly then a Taylor & Scott lawyer can help resolve your dispute. We focus on your rights and achieving what you’re entitled to in an efficient manner.

Taylor & Scott Lawyers can offer valuable advice to employers with regards to redundancy, ensuring that any action is carried out legally and according to the law. With experienced lawyers on your side you can prevent any disputes and minimise claims.

Contact Taylor & Scott Lawyers on 1800 600 664 or fill out the online contact form for more information on how we can help you in the area of redundancy.

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