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How do you “trim the fat” in your business? Is redundancy an option?
There are numerous ways that an employer can terminate an employee – one of those ways is called a redundancy, or making an employee redundant. A business may make an employee ‘redundant’ when the business genuinely no longer requires anyone to do that employees job. This can occur at any time and for a number of reasons such as:
- The business downsizing,
- Becoming insolvent or bankrupt
- Re-structuring within the organisation
- Introducing automated systems or processes to do the job.
There are many factors that need to be considered if an employer is looking to make an employee redundant.
· It can be a complicated process
· It can be a confusing process
· One needs to ensure that you remain compliant in the process.
The 8 most common questions WE are asked are outlined below:
1) What if I just want to get rid of an employee?
A redundancy must be ‘genuine’, for example – a termination cannot be called a redundancy if the employee can be ‘reasonably’ used somewhere else in the business or in an associated entity. It is also NOT a genuine redundancy if you don’t like a particular employee and just want to get rid of them!
2) Is there a “one size fits all” approach to making an employee redundant?
No! Just as every business is different, there are various considerations to be weighed up.
3) What should be considered when considering redundancy packages?
Is this a GENUINE redundancy? i.e. that exact position genuinely no longer needs to be filled.
An official consultation with the employee is required. Often employees are able to throw a different light on the position in terms of their ideas, thoughts and perspectives. This also often opens the door for employees to share their goals and personal objectives which may add even more value to the business in the long term.
What other options can be presented? The employee may be offered another position within the business or associated entity. The employee does not need to TAKE the position but it does need to be offered if this is an option. This may result in a them moving to a lessor position and / or a reduction of pay.
4) What if we are wanting to save payroll costs by Automating systems?
Automation systems and procedures to reduce “human power” is a great way to reduce payroll and costs, BUT losing loyal staff can have an adverse effect. It can be demoralising for “those left behind”; the business ultimately loses talent that they may have invested in, and often the culture of a team is made up of each individuals contribution within that team.
5) Can the staff be redeployed within the business? / What are the options?
This is a great way to keep and utilise talented staff whom you have invested in and is a great alternative.
A Redeployment in essence is moving an employee from one position to another with the business or associated entity.
6) What if it is decided that there are no other viable options other than redundancy?
It is essential that business remains fully compliant through the process.
All fair work provisions for terminations must be followed and all steps in the process must be fully documented.
This includes but is not limited to: the consultation process as per the consultation provisions in the applicable award or enterprise agreement (i.e. consulting with the employee on other options as above), the notice to the employee and the final payout calculations.
7) With the end of Jobkeeper what does this look like in the new environment?
Any termination payout needs to be calculated to the letter of the law and must include all appropriate items correctly calculated.
For example: employees who have been on quarter, half time or stand down for the last year due to the Jobkeeper provisions, will be entitled to the last years leave allowance accrual as if it was “business as usual”
ie if the employee worked 40 hours a week before Jobkeeper, while on Jobkeeper all leave was required to keep accruing at this same level no matter how much or little they worked while on Jobkeeper.
8) A redundancy appears to be my only option – now what?
If you are unsure about anything in relation to making an employee redundant and what your options may be, please ensure you consult with a professional BAS Agent, Accountant or HR consultant who can help you clarify the issues to make sure you consider the outcome for all parties, remain compliant, and avoid a wrongful dismissal claim.
Amber Business Support is a Bookkeeping and Business Mentoring practice who are passionate about helping business set themselves up for success and growth, especially under trying and changing circumstances.
We are compassionate and professional business advisors because we know the value your team brings to your business.