Is redundancy a genuine risk?

Making an employee, or a group of employees redundant is never an easy process. There are financial and emotional consequences for those directly affected, as well as the inevitable disruption and reduced productivity which impacts the whole business.

Redundancy is often viewed as a necessary evil; a strategy that is sometimes required to ensure the long-term viability of the business. However, it can quickly become a time-consuming and expensive nightmare for those who get it wrong.

What is a genuine redundancy?

Under the Fair Work Act 2009, redundancy is only allowed if it’s considered a ‘genuine redundancy.’ There are three limbs to ensure that a redundancy is genuine:

1. There is no longer an operational requirement for the person’s job to be performed by anyone;
2. The employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to engage in a consultation with the employee about the proposed redundancy; and
3. Reasonable re-deployment opportunities have been explored.

Do I have to offer another role?

The answer, in short, is yes. The redundancy won’t be genuine if the employee could’ve been given another job within the business or an associated entity. Failing to consider options of reasonable re-deployment can expose the company to risk, including unfair dismissal. In the case where an employee accepts a redeployment opportunity, the employment remains ongoing as the employee is simply performing a new role – redundancy pay isn’t payable.

What if they refuse another role?

If the employee refuses redeployment, the payment of redundancy will depend on the similarity between the redeployment role and the job from which the employee is being made redundant.

In some cases, where an employee refuses redeployment, the Fair Work Commission (FWC), on application by the employer, may order a reduced redundancy pay, taking into consideration the offer of other suitable duties.

Do I have to pay redundancy?

In most scenarios, redundancy pay will be payable, however there are exceptions. These include the case where:

• The employee’s period of continuous service with the employer is less than 12 months.
• The employee is engaged as a casual.
• The employer is a small business employer (less than 15 employees in total).

It’s crucial businesses proceed with caution when proposing redundancies. Redundancy can be tricky, but if you follow a fair and compliant process, there is no need to fear an employee making an unfair dismissal risk on the basis of the redundancy not being genuine. This is where Citation HR’s industry-leading HR Software and workplace relations specialists can guide you through the complexities of redundancies, helping ensure that you meet all provisions for redundancy and the requirements for consultation outlined in relevant modern awards or enterprise agreements.