Does Redundancy Fall Under The National Employment Standards?
Redundancy pay is one of 11 minimum standards of employment which apply in workplaces nation-wide, called the National Employment Standards (NES). The NES are mandatory regardless of business type or size, and regardless of an employee’s award, registered agreement or contract. They also cover maximum weekly hours of work, flexible work arrangements, leave, public holidays, and notice of termination. The federal Fair Work Act 2009 guarantees the standards, and the Fair Work Commission and Fair Work Ombudsman ensure compliance with them.
When does redundancy occur?
A redundancy can occur when an employer no longer needs the employee’s job to be done by anyone, or when the employer becomes insolvent or bankrupt. This can be the result of circumstances such as closure, decreased production, closure, relocation or restructure.
A genuine redundancy is when the person’s job no longer needs to be done by anyone and the employer has consulted with affected employees as required under an award, enterprise agreement or other registered agreement. Consultation includes notifying employees who may be affected, providing information about the changes and their effects, discussing steps to minimise negative effects on employees, and considering employees’ ideas or suggestions about the changes.
A redundancy is not genuine when the employee’s job still needs to be done by someone, employees have not been consulted as required, or the employee could reasonably have been given another job in the business or an associated entity.
When a redundancy is genuine, an employee cannot make an unfair dismissal claim.
Redundancy pay and entitlements
The amount of redundancy pay is based on the period of continuous service by the employee. It is paid at the employee’s base rate of pay, not including loadings, bonuses, allowances, overtime or penalty rates.
Period of continuous service and redundancy pay
At least 1 years but less than 2 years – 4 weeks
At least 2 years but less than 3 years – 6 weeks
At least 3 years but less than 4 years – 7 weeks
At least 4 years but less than 5 years – 8 weeks
At least 5 years but less than 6 years – 10 weeks
At least 6 years but less than 7 years – 11 weeks
At least 7 years but less than 8 years – 13 weeks
At least 8 years but less than 9 years – 14 weeks
At least 9 years but less than 10 years – 16 weeks
At least 10 years – 12 weeks
When does redundancy pay not have to be paid?
Redundancy pay does not need to be paid to employees who:
- have worked for a continuous period of less than 12 months;
- are employed for a specific period of time, an identified task or project, or a particular season;
- are terminated because of serious misconduct;
- are casual;
- are trainees engaged for the period of a training agreement;
- are apprentices;
- work in some small businesses.
An employer can apply to the Fair Work Commission to have the amount of redundancy pay reduced if the employer finds other acceptable employment for the employee, or if the employer cannot afford to pay the full redundancy amount.
Bankruptcy or liquidation
When a business goes bankrupt or is placed into liquidation, and an employer cannot pay wages and entitlements to employees, the Fair Entitlements Guarantee (FEG) may be available to such employees. Those entitlements can include up to 13 weeks of wages, annual leave, long service leave, up to 5 weeks’ pay in lieu of notice of termination, and redundancy pay of up to 4 weeks per full year of service. They do not include superannuation, reimbursements, commission or bonuses.
Notice of termination
This NES standard also establishes a minimum notice period or payment in lieu of notice, to end a person’s employment. A payment in lieu of notice must be paid at the employee’s full pay rate, including bonuses, loadings, allowances, and overtime or penalty rates, as if the employee had worked the minimum notice period.
Period of continuous service and minimum notice period
1 year or less – 1 week
More than 1 year up to 3 years – 2 weeks
More than 3 years up to 5 years – 3 weeks
More than 5 years – 4 weeks
An employee aged over 45 who has worked for the employer for at least 2 years must be gin an extra week of notice.
An employee can leave employment during the notice period with agreement from the employer. If an employer gives more notice than required, the employee can choose whether to work beyond the minimum notice period.
For advice or representation in any legal matter, please contact Armstrong Legal.