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HR to Go podcast episode 10: Mastering redundancy management (transcript)

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Welcome to HR to Go by Effective Workplace Solutions. In this episode of HR to Go, we'll be chatting about mastering redundancy management.

I suppose before we start talking about redundancy, we probably need to understand exactly what redundancy means. Redundancy is defined as the state of being not or no longer needed or useful in terms of a workplace. This occurs when a business no longer needs a specific role to be performed by anyone.

Redundancy refers to the termination of an employee's job position by an employer, and this can be due to various factors such as changes in economic conditions, business restructuring, technology advancements, or a decrease in the demand for certain skills or services.

Its redundancy is typically characterised by the involuntary nature of the termination and unlike fault-based dismissal, where an employee is let go due to poor performance or misconduct, a redundancy is usually driven by external circumstances beyond the control of the employee.

Employers may choose to make position redundant when they need to streamline operations, cut costs or adapt to changes in the business environment.

In cases of genuine redundancy, employers are often required to provide redundancy pay, which is a form of financial compensation based on the employee's length of service. And I'll talk about that a little bit in a little bit more detail further into this podcast.

Redundancy can have some legal implications for employers, and employers really do need to be aware of their obligations under employment laws and under any relevant award or aid that applies to their workplace. It's extremely important that employers follow proper processes when carrying out a redundancy so as to avoid any potential unfair dismissal claims or indeed a general protections claim.

I now just want to talk briefly about a genuine redundancy versus a non-genuine redundancy or what might be termed to have been a dismissal. A genuine redundancy occurs when an employee's position is no longer required to be carried out by them or anyone else. And once an employer has followed all of the consultation requirements and considered any options for redeployment for the affected employee or employees.

When an employee's dismissal is a genuine redundancy, the employee is not in a position to file for an unfair dismissal claim, but it's important to note that a redundancy is not considered a genuine redundancy when the employer requires the employee's job to be carried out by someone else.

So that might be a case if you've actually made the person redundant, not the position. The employer has not adhered to the consultation requirements with the affected employee or employees, or if the affected employee or employees may have been able to be redeployed within the company using a similar skill set. And this option wasn't exercised.

Next we're going to talk about the redundancy process. It is really important that employers step through the process and follow the requirements under the legislation to ensure that their redundancy is considered a genuine redundancy and wouldn't be deemed a dismissal as we were just talking about.

So, the first step is to identify the redundant position and the reasons for the redundancy. As we've already discussed, the reasons for redundancy can include factors such as economic conditions, business efficiency or technical technological development.

The next step is to determine which employee or employees will be affected.

If more than one employee holds the same position, then you are going to need to identify which employee will be made redundant and consider whether you're going to offer voluntary redundancies. The next step is to explore potential redeploy payment opportunities. This is a crucial step from the employer's perspective because you do need to demonstrate that you've exhausted all avenues of employee redeployment in the company before making them redundant.

This doesn't mean you have to create a position for the employee to move into or make room for them. But you do need to demonstrate that you've genuinely considered all redeployment options.

The next step is to schedule a meeting and advise the affected employee or employees. And then when this meeting occurs, you need to be communicating with the affected employees or employee as to why the redundancy is occurring.

It's important that you demonstrate a desire to consult with the affected employee or employees and ensure that the affected employee or employees are aware that there will be discussions around possible redeployment opportunities and that you will be looking at ways to reduce the impact of the redundancy for those affected by the redundancy process.

After you've had that meeting, we suggest adjourning for a period of at least 24 hours to allow time for the employee or employees to digest the information and before having further discussions, this allows them time to think about redeployment options and also demonstrates that the consultation process is genuine when consulting with the affected employee or employees.

It's extremely important to ensure that they feel they're involved in the process and that they're able to explore opportunities for redeployment and opportunities to mitigate against the effects of the redundancy before the redundancy takes place. It's really important that the consultation process is actually meaningful.

On the topic of consultation, it is important that the employer avoids a one-sided approach to communication. Employers really should be showing empathy and a willingness to sit down and listen to the suggestions made by the affected employees in terms of possible redeployment and ways to mitigate against the effects of the redundancy.

Finally, the last step in the process is to plan the exit process. This includes considering the notice period that's going to need to be provided the redundancy payments, if they're applicable, arranging property return and things like passwords and also being cautious of potential issues such as sabotage.

The next thing I want to talk about in a little bit more depth is the consultation process, because this is a really key element to the redundancy process. So consultation involves having discussions with the affected employee or employees and looking at ways to mitigate against the impact of redundancy.

This can involve looking at restructuring options, providing extra training so that that employee might be able to step into a different role within the business, working with external employment agencies to assist in finding alternative employment, adjusting notice periods, and even reminding the affected employee or employees of your company's employee assistance program if you have one.

It's really important to note that a failure to consult with employees about redundancy can mean that the Fair Work Commission may deem that your redundancy was not a case of genuine redundancy and therefore the avenue of unfair dismissal becomes available to the employee or employees who were part of that redundancy process.

The next element of the process in the redundancy that I want to talk about is how you determine which employee might be made redundant if you've got more than one employee in a position that is being made redundant.

So the first thing to note is that selection for possible employees to be made redundant cannot be on discriminatory grounds. Employers must have fair and reasonable grounds as the basis for their selection.

Performance of an employee is a stand and defensible reason for selecting one employee over another, in terms of which employee will be made redundant. And it's for this reason that we really do encourage active processes in terms of performance management.

It's really important that you do remember to document all your correspondence arising from formal and informal performance management discussions, because this will be the information that we use if we ever had to defend why you made a decision to make one individual redundant over another when their position was no longer required.

And I also just want to touch on the myth that last on first off, is an option for redundancy.

We probably don't see that myth circulating as much anymore because the redundancy process is now so structured. But you know, many years ago there was a myth that if a position had to go with the last person on was the first person off. That is a myth and it is important that if you are considering redundancy within your workplace, that you are going through the process that I just outlined, because suggesting that you're going to just off board the last person you employed may result in the redundancy being considered non-genuine and therefore opening your business up to exposure to an unfair dismissal claim.

I also now want to touch on redeployment. Redeployment is a key consideration in the redundancy process. A redundancy will not be considered genuine if redeploying the person within the business would have been reasonable based on their skills and abilities and redeployment efforts must be reasonable, consistent and exhaust all avenues before you consider making someone redundant.

So it is a key element in that process and you need to be able to demonstrate that you have explored all options for redeployment within the business. But as I said earlier, you don't have to create a position. But if there is a position available that that individual could have reasonably done, then you need to be exploring if that's an option.

The next thing I want to touch on is notice. So employers will need to pay a notice period to all employees who are made redundant. The notice period will be based on the length of service. And you should note that if an employee's over the age of 45 and they've had at least two years of service, they are entitled to an additional week of notice.

In addition to notice there are redundancy payments that may be payable to an employee as a result of being made redundant. The amount of redundancy pay varies between each employee as it's based on their continuous service with their employer. That is, it's based on the length of time that they're employed by the company and I want to point out that continuous service does not include periods of unpaid leave.

So it's important to be making sure that you're checking that when you're looking at calculating redundancy payments. Now there are a few exemptions from redundancy payments.

Small businesses with fewer than 15 employees are exempt from redundancy payments, but not the notice provisions.

So if you are a small business, you will still need to pay the notice period, but you won't need to pay any additional redundancy payments. There are a few other exemptions in addition to small businesses, so even an employee who has been made redundant has had a continuous service with the employer of less than 12 months. They're not entitled to redundancy payments.

If the employee was only employed for a select period of time or a specific task or project or employed for a particular season only, they may be exempt from redundancy payments and casual employees are not entitled to redundancy payments.

Trainees engaged for only the length of the training agreement are exempt from redundancy payments. Apprentices are exempt from redundancy payments and if an employee was terminated due to serious misconduct whilst the redundancy process was on foot, they may be exempt from redundancy payments because they've been summarily dismissed for serious misconduct and therefore they are no longer participating in the redundancy process.

So as you can see from our discussion today, redundancy is a really complex process and it is really important that the process is followed. So message action is anyone considering undertaking a redundancy does seek some advice and ensure that they are stepping through the process correctly so as to avoid any claims that a redundancy was not genuine.

Thank you everyone for listening to another episode of HR to Go.

If you'd like to know more, visit ewsolutions.com.au/contact

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