Redundancy occurs when a company is forced to terminate an employee due to a company restructuring, downsizing or closure. In such cases, the employer may terminate the affected employee’s employment if they adhere to specific requirements. Employers who wish to make an employee redundant must give them a notice period, redundancy pay, and other entitlements. The redundancy pay afforded to employees will depend on how long they worked at a company and the role they held there. The requirements for redundancy for Australian employees are outlined in the Fair Work Act 2009. Continue reading this Legal Kitz blog post to learn more about redundancy in Australia.
Lawful redundancy due to company restructuring
The requirements for redundancy due to company restructuring may vary depending on the company’s jurisdiction is based. However, some standard requirements may include the following:
Compliance with relevant employment laws
The company must ensure the redundancy process complies with all relevant employment laws and regulations. This may include providing employees with notice, offering consultation and providing appropriate severance pay.
Objective selection criteria
The company should use objective criteria to decide whether they need to make an employee redundant. The employee’s skills, qualifications, performance, attendance, and disciplinary record should be analysed to ensure the company is abiding by all relevant criteria and avoid claims of discrimination or unfair treatment.
Consultation with employees
The company must consult with affected employees and their representatives throughout the redundancy process. This can help identify any alternative redundancy options, such as redeployment or retraining.
Notification and timing
The company should provide employees with sufficient notice of the redundancy in accordance with local laws and regulations. The timing of the redundancy should also be carefully considered to avoid causing undue stress or inconvenience to employees.
Fair and reasonable compensation
The company should provide fair and reasonable compensation to employees who are made redundant, including severance pay, unused leave entitlements, and any other benefits that they are entitled to under their employment contract or local law.
Overall, any redundancy process should treat employees fairly and respectfully while ensuring the company’s long-term viability.
How to avoid redundancy
To avoid making an employee redundant, business owners should take the following steps:
- Review your business needs: Business owners should always review their business’s requirements before hiring an employee to ensure their current cash flow can support them for the foreseeable future.
- Before making any staffing decisions, review your needs to ensure the employee’s role is redundant. You may be able to restructure or redistribute the employee’s duties instead of letting them go.
- Consider alternative options: Explore options such as reducing work hours, offering a temporary leave of absence, or adjusting the employee’s responsibilities. You may also want to consider offering training or professional development opportunities to help the employee grow in their role.
- Communicate openly: If you are considering redundancy, communicate openly and transparently with the employee. Explain the reasons for the decision and explore options for retraining or redeployment within the company.
- Follow legal requirements: Ensure that you follow all legal requirements for redundancy, including providing appropriate notice periods and consultation with the employee.
- Treat the employee with respect: It’s essential to treat them with respect and empathy throughout the process. Offer support and guidance to help them find new employment opportunities or access any available benefits or resources.
By taking these steps, you can avoid making an employee redundant and potentially find alternative solutions that benefit both the employee and the business.
Legal advice
Deciding whether you should make an employee redundant and, if so, how to go about it can be confusing and complex, especially for those without legal expertise. You can always contact Legal Kitz to assist you. To arrange a FREE 30-minute consultation with one of our highly experienced solicitors, contact us at [email protected] or 1300 988 954. You can also check out our sister company – Business Kitz’s Subscriptions, to access our full range of legal, commercial and employment document templates to begin your business with a solid foundation that ensures compliance.