An Employee’s Guide To Understanding Redundancy

Redundancy is a major fear for many employees, as it means that your services are simply no longer required and you have been relieved from your role. Redundancy occurs when an employee, for any variety of reasons, is no longer needed. In this case, the employer is unable to redeploy the employee to a different role or offer them an alternative position within the company. When this happens, the employee is let go and made redundant.

Employee made redundant

There are however cases whereby you can appeal against redundancy. For example, if you were to find out that the position that was announced to be rendered redundant was subsequently offered to someone else, you might have a case.

With the help of experienced redundancy lawyers, you could challenge your redundancy. While this is certainly possible, most redundancies are genuine and occur for a number of different reasons. Machinery may have replaced management work, cost cuts are necessary because the business is facing bankruptcy, the company is closing or relocating, a merger is taking place, or roles being redistributed within the organisation are all genuine reasons for genuine redundancy.

Understanding redundancy is important so you can take the right action if you find yourself in this unfortunate situation. Let’s take a closer look at what redundancy is so you can make the right decisions if you or a colleague is ever in this difficult set of circumstances.

Voluntary Redundancy

Voluntary redundancy is when an employer calls for employees who would like to volunteer to be made redundant. Typically, the employees who volunteer will receive financial compensation for leaving their jobs early which is known as a “redundancy package.”

Employees that are close to retirement were considering a change of careers any way or who find the allure of the compensation too good to pass up are all likely candidates for voluntary redundancy. This type of redundancy often saves the business from having to make difficult decisions, keeping morals high after the redundancies have taken place.

Compensation For Redundancy

Despite what you might think, employers are not always obligated to compensate their employees in the case of redundancy. While many people associate healthy redundancy packages with people being made redundant near the end of their careers, this is the Cinderella story and is not always the case. For example, if you are an employee in a business of fewer than fifteen employees, compensation is not required as the business is deemed to be too small.

If the employee is an apprentice, they are also not entitled to redundancy. What’s more, those employees with a casual or fixed-term employment contract, are also not entitled to compensation in the case of redundancy. Make sure to take the time to look into what you are entitled to so you know where you stand.

Overview Of Redundancy Payments

If you are made redundant and you are to be issued a redundancy payment, you can expect your first payment as soon as all of the redundancy consultations have been completed. The employee will be made aware of the terms of the redundancy and will be asked that they are aware they are making an informed decision, and then the agreement can be signed.

Redundancy payments are typically tax-free, so long as the redundancy is genuine and the payments do not exceed the tax-free limits outlined by the ATO. However, it’s important to keep in mind that the tax limits are adjusted every year so last year’s limit could be higher or lower than the limit that is set for this year.

Redundancy packages will generally include payments as a substitute for the required notice period, as well as a severance package that will include unused sick leaves, compensation for length of service with the company and other similar issues. A significant one-time payment will also be included as compensation for the redundancy taking place.

Who Does Not Get Redundancy Payments?

Unfortunately, not every employee that is made redundant will receive redundancy pay. Under the law, there are some employees who are not entitled to redundancy pay due to the nature of the employee’s arrangement. Some circumstances when an employee is not entitled to redundancy pay include employees with less than twelve months of service, employees terminated due to serious misconduct and employees employed for a set time period such as for a particular season or a project.

Employees of casual employees, apprentices and those in small businesses that hire a team of fifteen people or less, also do not receive redundancy payments. While being informed about who does get redundancy payments and what they are entitled to get, it’s equally important to understand that not everyone will be looked after.

Research Redundancy To Find Out Where You Stand

Redundancy is every employee’s worst nightmare. The tips outlined above will help you to get a better understanding of what redundancy is and how it can impact your life. However, it’s also wise to do some research of your own that is specific to your unique circumstances.

With the right information, you can ensure that you are prepared for the worst-case scenario and that you will have a plan in place to continue moving forward.


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