Redundancy is one of the tougher parts of managing a workforce. It affects real people, and it often arises at a time of uncertainty or change for a business. In New South Wales, the legal requirements around redundancy are strict, and employers need to approach the process carefully to avoid missteps. If you’re considering making a role redundant, it’s important to understand both the legal framework and the practical steps involved.
Let’s walk through how redundancy works, what makes a redundancy genuine, and what you should be doing at each stage of the process.
When Is a Role Redundant?
Redundancy happens when a particular job is no longer needed. It might be because the business is restructuring, a new system has automated certain tasks, or demand has dropped off. The key point is that it’s the role, not the person, that is no longer needed and will cease to exist. This distinction matters because if the position is still required and you simply want to dismiss the employee, redundancy is not the correct pathway.
What Is a ‘Genuine’ Redundancy?
The main concern for employers considering making an employee redundant is whether this dismissal could be considered ‘unfair’. To ensure that an allegation for unfairness does not arise, the dismissal must be a ‘genuine redundancy’. If the redundancy is not genuine, employees can take legal action against the employer for unfair dismissal.
Under the Fair Work Act 2009 (Cth), a dismissal will only be a genuine redundancy if three conditions are met:
- The employer no longer requires the role to be performed by anyone.
- The employer has complied with any consultation obligations under the applicable modern award or enterprise agreement.
- There are no reasonable opportunities to redeploy the employee elsewhere in the business or in any associated entities.
Failing to meet these conditions can mean the employee may bring a claim for unfair dismissal, even if the business was acting in good faith.
Redeployment
To ensure that redeployment is appropriately factored in, employers need to consider whether it would have been reasonable in the circumstances for the person to be redeployed to either another position within the organisation, or another associated organisation. Employers must make genuine efforts to consider redeployment options to satisfy the requirements.
Employers should think about whether there might be any relevant jobs you could move the employee to and whether they have the skills to move into that role. Roles with lower income and less responsibility can be considered. Employers should never assume that the employee will turn down a suggested redeployment.
Once you’ve identified that a genuine redundancy may be necessary, the next step is to plan the process carefully.
How to Manage the Redundancy Process
Start by reviewing your employment contracts and any applicable awards or enterprise agreements. These documents may impose specific requirements around consultation or notice. Importantly, decisions should be based on the role, not on who occupies it, and the selection criteria should be objective and defensible.
When it comes time to speak with employees, communication is critical. You should notify those who may be affected as early as possible and provide them with clear information about the proposed changes and the reasons behind them. The consultation must be genuine, it is not just a formality. You should listen to feedback and consider alternatives, such as reduced hours or changes to duties, before confirming any redundancies.
If more than one employee is in the same or a similar role, you will need a fair and non-discriminatory method for selecting which roles are to be made redundant. Avoid any criteria that could be seen as targeting employees based on age, gender, union involvement, or other protected attributes.
Even if a position is no longer required, you must still consider whether the affected employee can be redeployed. Look at other available roles within the business and any related entities. If a suitable position exists and the employee could reasonably perform the duties, you should offer it to them.
If there is no suitable alternative and the redundancy proceeds, you will need to give formal notice in writing or provide pay in lieu of notice. Employees may also be entitled to redundancy pay under the National Employment Standards, depending on their length of service and whether your business qualifies for a small business exemption (fewer than 15 employees). Accrued leave and other final entitlements will also need to be paid.
Common Mistakes to Avoid
Employers often fall into trouble by failing to consult, skipping over redeployment options, or applying subjective or biased selection processes. These mistakes can expose the business to legal claims, even when the redundancy decision was based on genuine business needs.
Another risk is under-documenting the process. Keeping good records, such as meeting notes, selection criteria, and copies of correspondence, can be crucial if a decision is later challenged.
Supporting Affected Employees
Redundancy is a significant life event for many employees. While not legally required, offering practical support such as outplacement services or access to counselling can go a long way in helping them transition. It also helps maintain morale among the remaining staff, who may be feeling uncertain themselves.
In Summary
Redundancy needs to be handled with care. There are clear legal rules about when a redundancy is genuine and what steps employers must follow. Done properly, the process can reduce risk for the business and help ensure employees are treated fairly and respectfully. For complex situations, please contact us to discuss how we can assist your organisation.
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