Redundancy occurs when an employee decides they no longer need an employee’s job done by anyone; effectively, they eliminate an employee’s position from their company entirely. Continue reading this Legal Kitz blog post to learn more about navigating redundancy as a small business in Australia.
What is involved in making someone redundant?
Redundancy can only occur when changes in the company’s operation requirements force the employer to make the employee’s current role redundant or the employer suffers from insolvency/bankruptcy. The Fair Work Act 2009 regulates the procedure for redundancy which employers must follow; it prescribes that they must provide the employee in question with a written notice, sit with them for a formal consultation and consider alternate places within the company in which they could deploy the employee before making the final decision to let them go.
Employees subject to redundancy are often entitled to monetary compensation; the amount they are afforded will vary depending on how long they were employed at the company. These amounts are outlined in the Fair Work Act; compensation starts at four weeks of pay for those who worked between 1-2 years and up to twelve weeks for employees who worked at a company for ten years or more. Rules on redundancy can differ depending on the corporation’s size; small businesses, for example, have entirely different rules; this will be explored below.
What is a small business?
In Australia, a small business is one with fewer than 20 employees. The Australian Taxation Office (ATO) uses a turnover threshold to define small businesses for tax purposes. A business is considered a small entity if its turnover is less than $50 million per year.
Do small businesses have to pay redundancy?
In some circumstances, businesses with fewer than 15 employers can be exempt from the Fair Work Act‘s redundancy provisions. The Fair Work Ombudsman will not count casual employees as a part of the 15 employees unless they are employed regularly and systematically. Small business owners are not required to give employees they make redundant monetary compensation unless certain agreements cover them. This can be checked on the Fair Work Ombudsman website. In the rare instance that a small business is required to pay redundancy to an employee, they can apply to the Small Business Code for protection against unfair dismissal. Small business owners must comply with redundancy obligations, as failing to do so may result in legal action by an aggrieved employee.
Legal advice
The importance for small, medium and large business owners to comply with the Fair Work Act‘s redundancy requirements cannot be understated, as failure to do so will significantly increase the chances of legal action. Deciding whether you can or should make an employee redundant can be a confusing and complex ordeal; this could be complicated if you own a small business. You can always contact Legal Kitz to assist you with the legal complexities surrounding redundancy. To request 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.