Redundancy can be a difficult process but it may be necessary where a business needs to respond to operational, financial or structural pressures. 

This may be particularly relevant for allied health businesses in light of changes under the Health Professionals and Support Services Award 2020, including phased increases to minimum wages for health professional employees. 

Even where there are genuine business reasons for considering redundancy, the process must be handled carefully and fairly.

What is redundancy? 

Redundancy occurs when an employer no longer requires a particular job to be performed by anyone. 

This may happen because of changes in operational requirements, financial pressures, restructuring, new technology, outsourcing, relocation or a reduction in staffing needs. 

Importantly, redundancy is about the job, not the individual employee. 

It should not be used as a substitute for managing poor performance or misconduct. If the real reason for termination is related to an employee’s conduct, capacity or performance, the matter should be managed through the appropriate performance or disciplinary process instead. 

For a redundancy to be considered a genuine redundancy under the Fair Work Act 2009 (Cth), the employer must no longer require the job to be performed by anyone, must comply with any consultation obligations in the applicable award or enterprise agreement and must consider whether redeployment is reasonable in the circumstances. 

Consultation obligations 

Consultation is a critical part of the redundancy process. Where an employee is covered by a modern award or enterprise agreement, the employer will usually be required to consult before a final decision is made.

This means employers should not simply tell an employee that their position has been made redundant. 

Instead, the employer should explain the proposed workplace changes, why they are being considered and the likely impact on the employee’s role. 

The employee should then be given a genuine opportunity to provide feedback, ask questions and suggest alternatives.

Alternatives may include delaying the proposed termination date, reducing hours by agreement, changing duties, redeploying the employee into another role or considering other ways to minimise the impact of the change. 

The employer must genuinely consider the employee’s feedback before making a final decision.

Failing to consult properly can expose the business to legal risk, even where there is a genuine operational reason for the redundancy. Redeployment Before proceeding with a redundancy, employers must consider whether it would be reasonable to redeploy the employee within the business or an associated entity. 

This involves looking at whether there are any suitable alternative roles available, taking into account the employee’s skills, experience, location, remuneration and capacity to perform the role. 

Redeployment does not always mean the employer must create a new position or place the employee into any available role.

However, if a suitable vacancy exists and the employee could reasonably perform it, failing to offer redeployment may affect whether the redundancy is considered genuine. 

Where a role is lower paid, less senior or otherwise less favourable, the employer should discuss this with the employee rather than assuming it is unsuitable. 

In some cases, an employee may prefer redeployment into a different role rather than termination, even if the role is not identical to their previous position. 

Notice and redundancy pay 

Employees are generally entitled to notice of termination, or payment in lieu of notice, even where their employment ends due to redundancy. 

Notice entitlements form part of the National Employment Standards (NES) and usually increase based on length of service.

Redundancy pay may also be payable under the NES, depending on the employee’s length of service and the size of the business. 

Employees with less than 12 months’ continuous service are not entitled to NES redundancy pay. 

Small business employers are also generally exempt from NES redundancy pay obligations, although award, agreement or contractual obligations should still be checked.

Redundancy pay is calculated using the employee’s base rate of pay for their ordinary hours and does not include loadings, allowances, overtime or penalty rates. 

Employers should also ensure that final pay includes any other applicable entitlements, such as accrued annual leave and long service leave where relevant. 

Practical steps 

Where redundancy is being considered, both employers and employees should take a structured and informed approach. 

This may include: 

• understanding the reason for the proposed workplace change
• reviewing the applicable award, enterprise agreement, employment contract and workplace policies
• participating in consultation in good faith before any final decision is made
• considering feedback, questions and possible alternatives to redundancy
• exploring whether redeployment or other changes could minimise the impact
• confirming notice, redundancy pay and final entitlements
• keeping clear records of discussions, decisions and any agreed outcomes. 

In summary 

Redundancy can be a lawful response to genuine operational or financial pressures but it should be handled carefully and respectfully. 

Both employers and employees should understand the reason for the change, participate in consultation, consider alternatives and ensure that any final entitlements are properly addressed. 

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