Redundancy payouts: What you need to know
Facing redundancy can be a stressful time, but knowing your rights and entitlements will help you navigate this difficult period.
Arthur Hambas, senior associate with employment law firm McDonald Murholme explains what you need to know and where to find the extra information or support you may need.
Is everyone entitled to a redundancy payout?
The Fair Work Act 2009 allows for employees to receive a redundancy payout when their employer no longer requires their job to be done by anyone, but a payout is not guaranteed.
Hambas says there are some situations where you won’t receive redundancy entitlements, such as:
- where you have been employed for a period of less than 12 months;
- where you have been employed for a fixed term, project or season;
- where you have been dismissed for serious misconduct;
- where you are a casual employee, apprentice or trainee engaged only for the length of the training agreement;
- where your employer employs fewer than 15 employees;
- where the redundancy was due to the "ordinary and customary turnover of labour".
“In the above situations, the employer is not obligated to make a redundancy payment to the departing employee,” Hambas says. “Another common situation affecting the entitlement to redundancy pay involves transfers of business. More complicated rules apply here, and you should speak to a lawyer if you are concerned.”
Redundancy notice periods
Your employer must usually give you written notice of the day of termination, by delivering it to you personally, leaving it at your last known address or sending it by mail to your last known address.
The notice period you’re entitled to depends on how long you’ve worked for your employer. If you’ve worked one year or less (of continuous service), the minimum notice period is one week, whereas if you’ve worked more than five years, you’re entitled to four weeks’ notice. You can find more about minimum notice periods here.
If your employer goes bankrupt or into liquidation, you may be entitled to a maximum of five weeks payment in lieu of notice of termination.
How much am I entitled to?
“Any employee who is trying to calculate their redundancy entitlement should first look to the Fair Work Act 2009, which provides a minimum floor on the value of an employee's redundancy entitlement,” Hambas says.
Under the Fair Work Act, your redundancy entitlement depends on the period of continuous service you’ve had with your employer.
“For example, an employee who has been employed for between one and two years is entitled to a payment of four weeks,” Hambas says. “An employee who has been employed for a period of 10 or more years is entitled to a payment of 12 weeks.”
As well as looking at the Fair Work Act, Hambas recommends a couple of other resources. He says the next place to look is for what’s known as an ‘industrial instrument’ that applies to you. Depending on your role and situation, this could be the modern award for your industry or occupation – a document that sets out the minimum terms and conditions of employment. Or, it could be an enterprise agreement, which sets out the employment conditions for a business or group of businesses. “These instruments may provide for more than the minimum entitlement under the Fair Work Act but not less,” Hambas says.
Finally, look at your contract of employment and your employer’s policies on redundancy. “These documents may provide for more generous conditions than what you would receive under either the Fair Work Act 2009 or the applicable industrial instrument, but not less,” Hambas says.
Can I get more than the minimum amount?
Lucrative redundancy payouts worth years of pay are not very common, but many employers still do offer above-minimum redundancy entitlements to their employees. “Generous redundancy packages are often a draw card for prospective employees and can incentivise loyalty,” Hambas says.
What is voluntary redundancy?
Voluntary redundancy refers to a situation where an employer, who could be wanting to downsize or restructure, invites staff to volunteer to apply to be made redundant, Hambas explains.
“Precisely how the process is conducted will depend on the given situation and organisation,” he says. Often voluntary redundancies attract a higher payout, but this is not always the case.
When are redundancies paid out?
According to Hambas, there is no general rule regarding when entitlements must be paid out. “You should look to the industrial instrument applying to your employment to determine when such payments must be made,” he says.
Redundancy terms and conditions
Some enterprise agreements and contracts impose certain conditions upon employees whose employment has been terminated due to redundancy. Hambas says these include preventing the employee from being rehired by the organisation for a period of time.
What you must know about redundancy
The first thing to do if you’re made redundant is to determine is if your role is genuinely redundant, Hambas says. “If it is not, then the employee may have rights against their employer in respect of the termination, for instance under unfair dismissal,” he says.
If your employer is refusing to make a redundancy payment where required or if you have questions about redundancy payouts, you can contact the Fair Work Commission or an employment lawyer. You can also calculate your entitlements by using this redundancy calculator.
Information provided in this article is general only and it does not constitute legal advice and should not be relied upon as such. SEEK provides no warranty as to its accuracy, reliability or completeness. Before taking any course of action related to this article you should make your own inquiries and seek independent advice (including the appropriate legal advice) on whether it is suitable for your circumstances.
