Redundancy as a Reason for Dismissal? Employers Beware

As a small business employer, termination of employees is probably the most challenging HR task you can perform. Unfortunately, many business owners are faced with making this difficult decision.

However, you’ll want to think long and hard before settling on redundancy as a dismissal tactic. In June 2022, Human Resources Director Magazine published an article that reported, “Redundancies that are not genuine can fall under unfair dismissal.”

We have spoken about being more mindful or sensitive about making an employee redundant, an area companies often struggle with. But are you sure that redundancy is the best solution? This article discusses redundancy as dismissal and whether it’s the right move for your business.

What Is Redundancy?

To start, you must know what exactly redundancy is.

Redundancy happens when either an employer doesn’t need an employee’s job done by anyone or if an employer goes bankrupt or insolvent.

The COVID-19 pandemic has forced many NSW companies to make budget cuts, which led to dismissing much of the workforce.

In 2021, the Institute of Public Affairs said, “Rolling lockdowns have destroyed almost all of the jobs restored in the private sector over the past ten months across Australia. In the four weeks to 17th July, over 360,000 jobs were lost.” Even in 2022, things haven’t turned around as quickly as people hoped.

With so many people being let go, it has been easy for companies to blame the pandemic and cite redundancy as the reason for dismissal. But if that job is still required, technically, the job is not redundant, and an employer cannot make that person redundant. This opens the door for the employee to make an unfair dismissal claim stating a lack of genuine redundancy.

What Is Genuine Redundancy?

The Australian Fair Work Act claims that a genuine redundancy happens when:

  • The person’s job doesn’t need to be done by anyone, and
  • The employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.

Your employee can’t make an unfair dismissal claim if you adhere to these two points of employment law for genuine redundancy as dismissal.

However, a dismissal is not a genuine redundancy if any of the following are true:

  • If the employer still needs someone to do the job and/or hires someone else to do it
  • If the employer has not followed the requirements to consult with employees about the redundancy
  • If the employer could have reasonably offered the employee another job within the organisation

It’s essential to follow these rules when using genuine redundancy as dismissal, or you may end up in litigation with your employee.

Consultation with your employees is one of the most important aspects of genuine redundancy as dismissal. Let’s take a look at what that entails.

When to Warn Employees About Potential Redundancy

Some employers don’t give their employees any warning before letting them go. However, not only is this disrespectful to your employees, but it also goes against the rules of the Fair Work Ombudsman about genuine redundancy and the general protections employees have against sham redundancy.

When you decide to make significant changes to your business, it’s essential to make sure that you follow the proper procedures for consultation while making those changes. That includes notifying your employees of the intended changes and how they may affect their positions as soon as possible to avoid an unfair dismissal application.

The following are the requirements in redundancy law set out by the Fair Work Act:

  • Notify the employees who may be affected by the potential change, even if it hasn’t been finalised yet.
  • Tell the employees what the changes are and about the effects of the changes.
  • Provide them with the rationale and how you as the employer are working to minimise the negative impact of these changes.
  • Have an open discussion with employees to hear their opinions, ideas, and suggestions on what’s happening.

HRonHand recommends that an employee be fully consulted before deciding on redundancy. Keeping employees informed on the redundancy process and decisions you make for your organisation keeps employee morale up and demonstrates respect for your employees.

Redundancy as Dismissal: Best Practice Tips

Suppose you do decide to proceed with using redundancy as dismissal after evaluating that you would indeed be executing genuine redundancy. In that case, you must know the best practices to reduce the impact on the affected employee.

Here are a few tips to help you out:

  • Prepare a redundancy document with a clear objective to help you stay on track. This will help you better manage your redundancies.
  • Notify your staff ahead of time of the upcoming changes that will be happening in your organisation.
  • Set a face-to-face meeting with your employees to notify them of their dismissal. Impersonal methods such as email will leave a negative impression on your employees.
  • Offer additional support to help your employees cope with their dismissal. This may include contacting a recruiter in their industry to find alternative employment, offering severance pay or a redundancy payment, or mental health resources.

Using redundancy as a dismissal reason requires a keen understanding of what is involved in genuine redundancy to avoid any negative consequences. Executing redundancies with respect and empathy is vital to keeping a positive relationship with your employees.

Contact us if you’d like help further on this topic. To learn more about using redundancy as dismissal, you can read our article on “Six ways to mindfully manage redundancies.”

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