Redundancy payments

Redundancy arises in the workplace when an employee’s job no longer needs to be performed. It usually occurs due to the outsourcing of staff or cutting staff numbers and assigning the duties involved in the role equally amongst other staff members. It may also occur due to a business ceasing to make a line of product service.

Over time, there has been an increase in employee expectations of receiving a lump sum (over and above pay instead of notice and any leave entitlements ) when they are made redundant. While this right was limited to award employees or those under various company schemes in the past, the introduction of the Fair Work Act in 2010 made the payment of redundancy a universal right in such circumstances.

However, not all employees are paid a redundancy. In the following circumstances, employers are not obliged to pay redundancy to staff who lose their job:

• when an employer has fourteen or less employees at the time of the termination

• when the business is sold and the employees are taken on by the new employer

• when employees are on a fixed term contract that has expired

• when employees are employed on a casual basis

There is also a further exception for employers if they can prove to the Fair Work Commission that they were proactive in finding new roles for employees. To do this, it may be a good idea for employers to work collaboratively with their HR or management to secure interviews for their staff and assist staff with preparation of CVs.

Categorised in: Firm journal

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