One of the most difficult things businesses face is terminating employees. On top of that, determining the correct type of termination further complicates the situation. There are a number of different types of termination, including terminating with or without notice, resignation, redundancy and abandonment of employment.
Commonly, businesses misuse redundancy to terminate, instead of performance managing an underperforming employee. Under the Federal Fair Work Act 2009, employers cannot simply make an employee redundant. They must ensure they meet the definition and requirements of a ‘genuine redundancy,’ to minimise the risk of receiving an unfair dismissal claim.
The generally accepted concept of ‘redundancy’ is that a job becomes redundant when the employer no longer requires the position the employee has been doing to be performed by anyone and is not on account of any personal act or fault of the employee dismissed. ‘Retrenchment’ is normally where the employer requires less people to perform a particular task or tasks.
However, the Federal Fair Work Act 2009 provides more extensive and onerous criteria than the generally accepted concept of redundancy and retrenchment. In addition to the employer no longer requiring anyone to perform the person’s job or less people are required to perform a particular job, an employer has to ensure that the redundancy or retrenchment is a ‘genuine redundancy’.
It is important to note that the term redundancy incorporates both redundancy and retrenchement under the Federal Fair Work Act 2009 in relation to the principles, concepts and legislative requirements for terminating employees under such circumstances.
Issues to consider
The following are critical factors that should be examined as part of the decision to make employees redundant; however, other factors may be relevant depending on the circumstances of the situation.
- What is the basis of the employment?
- Is the employee currently engaged as an apprentice or trainee under a Contract of Training?
- What are the reasons for restructuring and reducing staff and can they be objectively justified?
- Have you discussed and consulted with the employees as soon as practicable after a decision has been made to implement redundancies in accordance with the provisions of the relevant industrial instrument?
- Have long-term casuals been included in the consultation process?
- Have you identified whether suitable vacancies exist in the organisation and in relation organisations that are part of the same corporate group, which affected employees could be appointed to?
- If suitable vacancies exist, have you assisted affected employees to pursue appointment?
- Has objective criteria been used when selecting employees for redundancy?
- Are there any reasons for selection of the employees concerned which are prohibited?
- If over 15 employees are to be made redundant, have Centrelink and the relevant union (if applicable) been notified?
- Has the termination been put in writing?
- Has the required period of notice of payment in lieu of notice been provided in accordance with the relevant industrial instrument or legislative provision?
- Have you identified the amount of redundancy pay that the employee is entitled to under the relevant industrial instrument, legislative provision or employment contract?
- Have all relevant termination payments, including redundancy pay, in accordance with the relevant industrial instrument or legislative provision, been prepared and provided to the employee?
If you answered ‘no’ or ‘not sure’ to any of the above questions, you may not have complied with the terms of a ‘genuine redundancy’ or followed the correct procedure. Call the Telephone Advisory Service to ensure you are compliant and have adhered to the legislative obligations of employers when making employees redundant.
Need more help?
Business SA has a Terminating Employment in South Australia Booklet which highlights key criteria, definitions, guidelines and procedures, as well as sample letters and documentation.
If you need help or advice, you can call Business SA’s team of experienced and dedicated team of Business Advisers. The service is free for members. Call now on 08 8300 0101.
Business SA is also running a training course on Disciplining and Terminating Staff to Avoid Unfair Dismissalson 26 June 2012. The course is designed to help employers avoid unfair dismissal claims by providing an overview of the correct processes of disciplining and terminating employees.
For more information, visit our Training Courses or call the Customer Service Centre on 08 8300 0103.