Unfortunately the COVID-19 pandemic is forcing many organisations to make employee's redundant. In this blog post we look at frequently asked questions on this topic.
The following content is based on information available at the time of publishing.
A redundancy is where an employer no longer requires an employee's position to be performed by anyone because of genuine changes in the operational requirements of the employer’s enterprise.
Itis a form of dismissal at the employer's initiative but rather than being as a result of performance or conduct, a redundancy is usually caused by business downturn or economic conditions.
For employers, redundancy isa last resort to keep a business viable during the COVID-19 pandemic. If possible employers are encouraged to explore all available alternatives before implementing a redundancy such as:
On Monday 30 March the Prime Minister and the Treasurer announced a new JobKeeper Payment to support employment in bunsinesses and other organisations.
Generally, businesses will be eligible if they have experienced a reduction in turnover of 30 per cent or more. Businesses with an annual turnover of more than $1 billion will be eligible if they experience a reduction in turnover of 50 per cent or more. The JobKeeper Payment will be paid to eligible employers and the wage subsidy will be $1,500 per fortnight for each eligible employee.
Full-time and part-time employees are eligible as are casual employees who have been employed by the business for 12 months or more. Regardless of the level of wage paid, the subsidy will be $1,500 per fortnight and employers will be obliged to pay the employees at least this amount (which is a pre-tax amount).
For further information see our Member Advice 'NAT 025/20 – Coronavirus - JobKeeper: Eligibility and further details'.
Where overtime work is common in an organisation, reviewing the need for overtime when there is a downturn is essential. A review of a set roster that includes overtime can help bring down costs. However, any changes to a roster should only be implemented after consultation with the affected employees. Where an amount of overtime is guaranteed in a contract of employment, the contract can only be varied with the individual agreement of employees.
In some circumstances, there may be work available but not enough to fill a whole week for full-time employees. One option is to seek agreement from full-time employees to reduce their hours of work to part-time. This can only be done by agreement and is not something the employer can direct employees to do. The reduction in hours can be temporary, e.g. for three months, and may be reviewed on an ongoing basis, and if work picks up, the employees will revert to their full-time status. Consultation and managing expectations is key here. For more information see 'Reducing employee hours from full-time to part-time'.
An employer should assess whether it is reasonable in the circumstances for employees to be redeployed within the organisation or an associated entity.
Note: to ensure a ‘genuine redundancy’ employers must assess the redeployment opportunities available for affected employees.
Where employees have significant leave accruals, they can be encouraged to take their leave, or perhaps reduce to a four-day week and take the fifth day as annual leave. The parties must agree to the taking of leave, however, in some circumstances the employer may have the right to direct an employee to take leave.
Like the concept of reducing to part-time hours, an employee may agree to take a period of unpaid leave where they do not have any other paid leave available. Similarly, an employee can agree to remain full-time but take a day of unpaid leave each week until work picks up again.
It is important to note that unpaid leave cannot be forced upon an employee. Employers do not have the right to stand down employees without pay simply because there is insufficient work. Unpaid leave can only be taken by agreement, and a record of this agreement should be kept.
There are two scenarios which might arise where an employer has identified a particular role to be made redundant.
In the first scenario, there might only be one person performing the role or all roles of the same type are being made redundant. If this is the case, no selection process will need to be undertaken as everyemployee in the role or roles will be selected. Employers are advised to provide information to the employee(s) as to why their position will be made redundant.
In the second scenario, there might be a pool of employees who are all performing the same or similar role, but some of the positions will remain. In this situation, the employer will need to select which employees from this group will have their employment terminated due to redundancy. For further information see our 'Redundancy selection process' article.
Yes, employee'sare entitled to redundancy pay (or severance pay) based on the industrial instrument that covers them. Redundancy pay entitlements underthe Fair Work Act 2009 (FW Act)and modern awards are considered below, but members also need to be mindful of any terms in a collective agreement (such as an EBA) or contract of employment that may apply.
Under the National Employment Standards (the NES),which form part of the FW Act, an employee may be entitled to a sum of money as compensation for being terminated by way of redundancy with the amount of redundancy pay based on the years of continuous service the employee has worked for the employer. For the amount of redundancy pay under the NES see Redundancy pay (National Employment Standards).
There are a number of circumstances where redundancy pay is not applicable under the FW Act. The following employees are not entitled to receive redundancy pay:
A small business employer, for the purpose of determining redundancy pay, is an employer who, at the time of redundancy, employs fewer than 15 employees. This is based on a simple head count of employees immediately before the relevant person was terminated, or at the time when the person was given notice of termination (whichever happened first).
When calculating the number of employees employed at a particular time, all the following factors are to be considered:
Some modern awards contain industry specific redundancy schemes which apply instead of the redundancy entitlements in the NES. Such schemes may be more or less generous than the NES entitlement such asan industry specificredundancyschemedefining ‘redundancy’ inbroader terms.
For example, thePlumbing and Fire Sprinklers Award 2010definesredundancyat cl 18.2 as “a situation where an employee ceases to be employed by an employer other than for reasons of misconduct or refusal of duty”. This means that an employee would be entitled to ‘redundancypay’ under that award in situations other than when their role was no longer required, such as when they had resigned. A similar clause is also contained in theBuilding and Construction General On-site Award 2010(cl 17.3).
Industry specificredundancyschemes can also apply in different circumstances. For example, the industry specificredundancyscheme of thePlumbing and Fire Sprinklers Award 2010will applyeven to employers that are small businesses.
There can also be interactions between industry specificredundancyschemes and portableredundancyfunds. The terms of the award will therefore need to be considered to determine the interaction betweenredundancypay paid under the award and further obligations under portableredundancyfunds. For example, see cl 15.7 of theElectrical, Electronic and Communications Contracting Award 2010.
For assistance in determining which redundancy provisions apply, please call the Workplace Advice Line on 1300 55 66 77.
If an employee is made redundant then they are entitled to redundancy pay under the NES (or any applicable industrial instrument or contractual entitlement). This payment is due on termination and unfortunately cannot be delayed.
The Fair Entitlements Guarantee (FEG) is a federal legislative safety net scheme that provides financial assistance to employees who are owed certain entitlements after losing their jobs because of redundancy or other business reasons i.e. bankruptcy or liquidation.
During the COVID-19 pandemic,it is likely that the FEG will be accessed more as more businesses are unable to make redundancy payments to staff. Employers should direct any affected staff to the following resources from the Attorney General’s Department:
Assistance is available for:
• Unpaid wages up to 13 weeks
• Unpaid annual leave
• Unpaid long service leave
• Payment in lieu of notice - up to five weeks
• Redundancy pay - up to four weeks per full year of service.
Unpaid Superannuation Guarantee Contributions cannot be claimed via the FEG. Employees will need to pursue these through the Australian Tax Office.
The FW Act provides that where an employer decides to terminate the employment of 15 or more employees for reasons of ‘an economic, technological, structural or similar nature’, then the employer must notify Centrelink. The notification must be in writing and in the prescribed form, and set out:
The notification must be given as soon as practicable after a decision is made and before the employees are dismissed in accordance with the decision.
There is also an obligation under the FW Act to notify a union which any affected employee is a member, and which is entitled to represent the industrial interests of the employee. This only applies where 15 or more employees’ roles will be made redundant. The union must be notified of:
The notification must be given as soon as practicable after a decision is made and before the employees are dismissed in accordance with the decision.
This is a situation that may occur during the COVID-19 pandemic and afterwards.
The redundancy provisions of the NES do not prevent an employee being re-employed after they have been made redundant, nor is there a provision disqualifying redundancy pay to an employee whois re-employed within a particular period after the original redundancy occurred.
As long as the redundancy was genuine at the time it was made, and subsequent events have meant that vacancies open up, there is nothing stopping the employee from re-hiring any employee they made redundant; there is also no requirement to do so either. It is important that the employer did not know at the time of making the redundancies that the new work was coming up.
For example, if they were renegotiating a new contract but continued with redundancies despite the negotiations, then got the contract, the redundancies may not be seen as genuine, and the employees may make a successful claim for unfair dismissal.
When an employer is considering rehiring an employee they have made redundant, consideration needs to be made as to how this re-employment affects certain leave entitlements.
It is important to consult the relevant industrial instrument in relation to long service leave and personal leave, as many will recognise continuous service of an employee where they are re-employed after a period of redundancy. An example is theManufacturing and Associated Industries and Occupations Award 2010, which provides that where an employee is re-employed within six months after being dismissed by the employer, their unused personal leave balance is re-credited (cl. 42.2).
For long service leave, service is often considered continuous where the employee is re-employed within three or six months after being made redundant.
Members who are considering introducing shorter working hours arrangements during the COVID-19 crisis are urged to contact Ai Group or Ai Group Workplace Lawyers for specific advice or call the Workplace Advice Line on 1300 55 66 77.
More Coronavirus (COVID-19) advice and resources can also be found at Ai Group'sdedicated webpage. Specific COVID-19 HR Resource Centre and Health & Safety Resource Centre content to assist memberscan be foundhere.
Clinton is the Publications Manager at Ai Group. He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres. Clinton has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.
