Letter of notification of redundancy

Outline of the details which a letter notifying an employee of redundancy should cover.

Termination of employment due to redundancy is a form of dismissal by the employer. It carries with it the concept of involuntary termination of the employee’s employment. However, rather than being a fault based dismissal, redundancy is usually caused by factors such as economic conditions, business efficiency, or technological development.
 
Under the Fair Work Act 2009 (Cth) a dismissal will not be unfair where the person’s dismissal was a case of a genuine redundancy. Under the Act a redundancy will be genuine if:
  • the job will no longer be required to be performed by anyone because of the changes in the operational requirements of the employer’s enterprise; and
  • the employer has complied with any obligation to consult contained in an applicable modern award or enterprise agreement.
In order to avoid the risk of an unfair dismissal claim, employers must consider, prior to terminating an employee due to redundancy, whether it would be reasonable in all the circumstances for the person to be redeployed within:
  • the employer’s enterprise; or
  • the enterprise of an associated entity of the employer.
If the termination of an employee's employment is incorrectly classified as a redundancy and a redundancy payment made, there may be taxation consequences for both the employer and employee. You should obtain taxation and legal advice about these issues if you are unclear as to the true nature of the termination.
 
Mandatory Severance Pay
 
From 1 January 2010, employers should be aware that mandatory severance pay is payable on redundancy to eligible employees. There are however certain exemptions from that obligation.
 
Some of the common exemptions from the obligation to provide severance pay are detailed below:
  • the employer employs less than 15 employees
  • an employee has less than 12 months continuous service with the employer
  • the employee is a casual
  • the employee is terminated because of serious misconduct
  • the employee is employed for a specified task, or a specified period of time, or for the duration a specified season
  • a training arrangement applies to the employee (other than an apprentice) and his/her employment is for a specified period of time, or limited to the period of the training arrangement
  • the employee is an apprentice
  • an industry-specific redundancy scheme in a modern award applies to the employee, or the industry specific redundancy scheme from the modern award which covered the employee is incorporated into an enterprise agreement which applies to the employee.
Modern awards may also include exemptions from the obligation to provide severance pay. A number of other potential exemptions apply from the obligation to provide severance pay. Given the complexity of this area, it is advisable for employers to seek advice to confirm that they can apply a relevant exemption from the obligation to provide severance pay.
 
The letter should include:
  • a clear statement that the position has been made redundant
  • an offer to apply for voluntary redundancy (optional — only if this is being offered)
  • the time-frame over which the redundancy will take place
  • a schedule of entitlements setting out the monetary entitlements available to the employee as a result of the redundancy
  • an outline of meetings which will take place concerning the redundancy and the opportunity for the employee to respond to the decision, raise issues and propose alternatives
  • an expression of regret that the redundancy is necessary, and
  • an invitation to contact the HR Department and/or relevant manager to discuss any further issues in a confidential manner.
For an extensive library of policies, agreements, forms, correspondence and checklists, designed to make human resources (HR) management easy for your business see our HR Advance website.
 
 

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