If you’re planning on making structural changes which may result in an employee’s role no longer being required, don’t forget to address your obligations around redundancy.
Those obligations may be found either in the Fair Work Act, a contract of employment, or any award or enterprise agreement applying to your employees.
When is redundancy pay due?
Under the Act, unless you’re a small business employer, an employee with more than 1 year’s continuous service is entitled to redundancy pay if their employment is terminated because the employer no longer requires the employee’s job to be done by anyone or the employer has become insolvent/bankrupt.
Rates of entitlement are prescribed under the Act by reference to the employee’s length of service.
You may have obligations to consult with an employee about the redundancy. Those obligations are usually found in awards (and can be found in enterprise agreements), and require that you do more than just tell the employee that his or her days are numbered.
Consultation should take place after you have made the decision to introduce the restructure but before you decide on the effects that change may have on the employee (i.e. that their employment will terminate on account of redundancy). You must then consider the matters the employee raises at the consultation before making a final decision.
An employee won’t be able to access the unfair dismissal jurisdiction of the Act if their termination was on account of ‘genuine redundancy’ (which is defined in the Act). Relevantly, the termination will not be a case of ‘genuine redundancy’ if it would have been reasonable to redeploy the employee in your or an associated entity’s business.
So, if there’s another role for which they’re qualified, you need to offer it to them, even if it involves a pay cut. Don’t assume that the employee won’t be interested in taking up the offer.
The other issues
As usual you must also ensure any termination is not for an unlawful reason noting that the general protections and, for employees with 6 months’ service (12 for small business employees) earning less than $133,000 a year, unfair dismissal provisions of the Fair Work Act are always sitting in the background for eligible employees.