Redundancy pay and period of notice: is notice included in calculation?

Q&A

Redundancy pay and period of notice: is notice included in calculation?

What are the employer’s obligations when calculating the appropriate period of notice of termination and the appropriate amount of redundancy pay?

WantToReadMore

Get unlimited access to all of our content.

What are the employers obligations when calculating the appropriate period of notice of termination and the appropriate amount of redundancy pay?

This question was recently sent to our Ask an Expert
 service.

 
Q  A position within the company has become redundant and the affected employee has completed just under three years service with the company. The employee will work out the appropriate period of notice (two weeks for between one and three yearsof continuous service). We have calculated the employee’s redundancy pay on the same basis as the period of notice – ie six weeks pay for more than two years of service but less than three years continuous service with the employer. The employee has queried this, stating that they will have completed three years of continuous service with the company at the end of the period of notice. If this is the case, the employee would be entitled to additional notice and redundancy pay (which would also require a change to the date of termination). What is the employee’s entitlement to period of notice of termination and redundancy pay in this circumstance? The employee is part of management and not covered by a modern award.
 
A  The Fair Work Act 2009 provides two different obligations when calculating the appropriate period of notice of termination, and the appropriate amount of redundancy pay. 

Notice of termination 

Under the Act (s117(3)(a)), the appropriate period of notice of termination is determined by the employee’s period of service with the employer at the end of the day the notice is given. In this case, the employee has completed less than three years of service with the employer at the time the notice was given by the employer and, therefore, the minimum period of notice is two weeks. If the employee has at least two years of continuous service with the employer and is aged over 45 years he or she is entitled to an additional one week’s notice. Also, the Fair Work Act (s22(4)) provides a different definition for “service” with respect to notice of termination. The only absence excluded from service for the purposes of calculating the amount of notice of termination required to be given by the employer to an employee is any period of unauthorised absence (eg unprotected industrial action). 

Redundancy pay 

With respect to the calculation of redundancy pay, the Act (s119(2)) provides that the amount of redundancy pay is determined by the employee’s period of continuous service with the employer on termination. This means that the appropriate amount of redundancy pay is based on continuous service of at least three years but less than four years service with the employer (not less than three years service when notice was given). In this case, the employee would be entitled to seven weeks of redundancy pay based on the scale prescribed by the National Employment Standards (NES).
 
What counts as service for the purposes of redundancy pay differs from the definition of service relating to notice of termination. Redundancy pay is based on the number of years of continuous service the employee has completed with their employer. The Fair Work Act states that all employment with the employer counts as service, except for the following absences: 
  • any period of unauthorised leave
  • any period of unpaid leave or authorised unpaid absence, other than community service leave and a period of stand down (the latter means when the employer ceases paying wages to employees for whom it has no work, until work is again available, but the employee remains employed by the employer).

Need more help with people management?

Australian Business Consulting and Solutions has a dedicated team of HR experts who can assist you with your specific people management issues and problems. If you would like a free and obligation-free initial assessment of what you require in terms of professional assistance, you can obtain more information from our website.
Post details