Redundancy occurs when an employer determines that a position is no longer required to be performed by anyone, typically due to changes in operational requirements such as business restructure, technological advancements, or economic pressures. Redundancy is not related to any personal act or fault of the employee, nor does it include situations where an employee is dismissed for performance reasons or where the termination is due to the ordinary and customary turnover of labour. The courts have clarified that redundancy arises when the job ceases to exist, either because the role itself is abolished or its duties are redistributed among other employees, so that the original position no longer exists for all practical purposes.
Employers manage redundancy by following a structured process, which generally includes:
- Identifying and documenting the operational basis for redundancy.
- Consulting with affected employees and their representatives, as required under modern awards, enterprise agreements, or the Fair Work Act 2009 (Cth) (FW Act).
- Implementing objective and verifiable selection criteria for redundancy, especially where multiple roles are affected.
- Exploring redeployment and alternate employment options for affected employees.
- Providing notice of termination or payment in lieu of notice.
Paying redundancy entitlements, which may be derived from the statutory minimum under the National Employment Standards (NES), relevant enterprise agreements, modern awards, or the contract of employment.
Employers must also be mindful of legal risks during the redundancy process, including compliance with unfair dismissal laws, general protections provisions of the FW Act, anti-discrimination legislation, and workers’ compensation laws. A dismissal is considered a “genuine redundancy” if the employer no longer requires the job to be performed by anyone, there is no suitable position available for redeployment, and consultation obligations have been met. Employees are excluded from unfair dismissal claims if their termination meets the criteria for genuine redundancy.
Redundancy pay is generally owed to employees whose positions are made redundant, unless exclusions apply (such as casual employment or insufficient length of service). The amount and entitlement to redundancy pay may be affected by legislative provisions, industrial instruments, or contractual terms. Employers may apply to the Fair Work Commission to vary redundancy pay in certain circumstances, such as when other acceptable employment has been obtained or the employer cannot pay due to financial difficulties.
Redundancy Tips for Employers
- avoid using redundancy as a means to address underperformance,
- ensure objective selection criteria,
- maintain records of consultation, and
- comply with all relevant legal obligations to minimise the risk of claims for unfair dismissal, adverse action, or discrimination.
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