No one wants to be in this position but the reality is that, at some point, you are likely to have to make a role redundant. It’s important for the continued commercial viability of your business to be able to be nimble and respond to changing environments and change your structure, if required. In business today, the ‘only constant is change’ and you need to be able to react and respond.
Redundancy happens when employees are no longer required for work – through no fault of their own. Typically it is either because of a financial turndown for the business or simply the role is no longer required to be done by anyone. But let us be very clear here, it is the role that is not required, not the individual. Don’t be tempted to use redundancy as a disguise for not correctly managing poor performance.
Prior to the introduction of Fair Work, only employees that had retrenchment terms written into their employment contracts were entitled to any form of retrenchment payment. This was typically only in finance or professional services.
Now everyone is entitled to a redundancy payment after twelve months service – that is unless you have fewer than 15 employees. If you have fewer than 15 employees, you can make the role redundant and just pay out the notice period requirements plus any accrued leave.
The main challenge to business with a redundancy situation is that there is a prescribed process that needs to be followed for the termination to be deemed ‘fair’. The process is:
- Meeting with the individual – to advise that their role is at risk of redundancy and why this is the case. Confirm that you are looking for alternative roles within the business or group of companies and that you would encourage them to do the same. If no alternative role is available, share an indicative view of the redundancy payment owing (remembering that redundancy payments are taxed more favourably). Send the individual home to consider their options with a document outlining the discussion.
- Second meeting – meet again with the individual within a couple of days to discuss any alternative roles for consideration. If an alternative suitable role is found look to move the individual into this role. If no alternative role is identified, move to finalise the redundancy termination. Document this meeting and the payment which is due on or before the next pay run.