Redundancy

Steve Kennedy , 10 September 2012

When does redundancy occur and what are your obligations as an employer?

All employers, no matter what size of business they operate, have an obligation under the Architects Award regarding the termination of employment through redundancy. In the Architects Award the appropriate clauses dealing with this issue are Clauses 12 and 13, which refer to Termination and Redundancy, and Clause 9, which addresses an employer’s obligations with regard to the notification of workplace changes with employees.

When does redundancy occur?

A job becomes redundant only when it ceases to exist because the employer no longer desires to have the job performed by anyone. 

This can occur when the duties of the job have changed to such a degree that for all practical purposes the original role no longer exists.

It can also occur when the employer still requires the duties attached to a job to be performed, but decides to redistribute those duties among other employees with the effect that for all practical purposes the original role no longer exists (i.e. the employee in that role is left with no duties to discharge).

What are an employer’s obligations with regard to redundancy?

The Architects Award refers to the National Employment Standards (NES) with regard to an employer’s responsibilities with redundancy. Under the Fair Work Act, through the regulations in the NES, all employers are required to give employees notice of termination. This termination notice is separate from any redundancy pay an employer may be required to provide.

Except for the Architects Award, the awards we deal with defer to Section 117(3) of the NES, which sets out the minimum period of termination notice required, varying from one to five weeks, depending on the length of service and age of the employee.

In the case of the Architects Award, Clause 12 over-rides the NES provisions, and the notice period for any employee is one month, no matter what period of time they have been employed.

  • This notice is either worked out or payment in lieu is made with the agreement of the parties involved. 
  • Such agreement cannot be unfairly withheld. 

In addition, Section 119 of the NES provides for redundancy payments of between four to sixteen weeks, depending on length of service. This is a separate, one-off payment to the employee on termination. There is no mechanism to require an employee to ‘work out’ their redundancy period.

There are, however, important exemptions to who is obligated to provide/entitled to receive redundancy pay. These are as follows:

  • Employers running a ‘small business’ are exempt from the obligation to pay redundancy pay. Fair Work Australia currently defines a ‘small business’ as one with less than 15 employees.
  • Employees with less than 12 months service are not entitled to redundancy pay.
  • Casuals and Apprentices are not entitled to redundancy pay.

What to do in relation to redundancy?

  • Check your employment contract with your employee.
  • Read the Award.
  • Read the NES.
  • Each situation can be different so it pays to seek advice prior to making an employee redundant.

Steve Kennedy is ACA National President. This item was first published in ACA Communique, September 2012. Links were updated on 30 August, 2016. 

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