Redundancy - minimum award standards

Analysis

Redundancy - minimum award standards

Employers with interstate operations or employees covered under different federal and state awards within the same workplace, can be exposed to a myriad of different minimum standards for severance pay when confronted with staff redundancies.

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Employers with interstate operations or employees covered under different federal and state awards within the same workplace, can be exposed to a myriad of different minimum standards for severance pay when confronted with staff redundancies.

These redundancy standards vary among federal and various state jurisdictions.

This article summarises the minimum standard scales of severance payment applicable under the various jurisdictions.

Minimum severance payments

The entitlement to redundancy payments is generally restricted to award-covered employees. The severance pay entitlements for non-award employees are generally determined by the individual contract of employment or the relevant redundancy policy negotiated by the employer.

The following is a summary of the minimum severance pay entitlements for award-covered employees under both the federal and state industrial relations systems.

Federal awards: Following a decision of the Australian Industrial Relations Commission in the federal Redundancy Test Case 2004, federal awards may now be varied to provide for a new standard of severance pay, subject to application for variation by the relevant union.
 
The scale of redundancy pay provided by the test case decision does not apply to federal agreements, however, such agreements will presumably be varied to the test case standard when the agreement is re-negotiated at the expiration of the agreement. There are two scales of payment under the new standard - firstly for employers employing fifteen (15) employee or more, and secondly, a scale for employers with less than fifteen (15) employees. The two scales are:

    1.Employer with 15 employees or more

Less than one year's service - nil; 1 year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 6 weeks' pay; 3 years and less than 4 years service - 7 weeks' pay; 4 years and less than 5 years service - 8 weeks' pay; 5 years and less than 6 weeks' service - 10 weeks' pay; 6 years and less than 7 years service - 11 weeks' pay; 7 years and less than 8 years service - 13 weeks' pay; 8 years and less than 9 years service - 14 weeks' pay; 9 years and less than 10 years service - 16 weeks' pay; more than 10 years service - 12 weeks' pay. The scale reduces to 12 weeks pay after 10 years service because employees are usually entitled to pro rata long service leave after 10 years continuous service.

    2.Employer with less than 15 employees

Less than one year's service - nil; one year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 6 weeks' pay; 3 years and less than 4 years service - 7 weeks' pay; 4 years service and more - 8 weeks' pay.

Employers bound under a federal award should refer to the relevant award to establish the current redundancy provision applicable to their employees.

New South Wales: In the absence of a redundancy provision in the relevant state award, the Employment Protection Act 1982 [NSW] provides severance payments for a redundant employee covered by a State award. The Act only applies to an employee covered by a State award, it does not apply to non-award employees. Subject to the relevant provision in the award, severance pay under a State award generally does not apply to an employer who employs less than 15 employee in total. The scale of severance payments under the Act is:

Less than one year's service - nil; one year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 7 weeks' pay; 3 years and less than 4 years service - 10 weeks' pay; 4 years and less than 5 years service - 12 weeks' pay; 5 years and less than 6 years service - 12 weeks' pay; 6 years service or more - 16 weeks' pay. An employee aged 45 years or more is entitled to an additional 25%.

Victoria: In this State, workers are usually covered by the provisions of a federal award or enterprise agreement. This means the federal 'standard' scale of redundancy payment would apply to these workers. Reference should be made to the above commentary on federal awards.

Queensland: Following the Queensland Redundancy Entitlements Test Case, a scale of severance payments applies to Queensland workers whose award has been varied to incorporate the test case provisions, where the employer employs fifteen (15) employees or more. Generally, a 'week's pay' is defined as the ordinary rate of pay excluding overtime, penalty rates, disability allowances, shift allowances, special rates, fares and travelling time allowances, bonuses and any other ancillary payments. The scale of severance payment is:

Less than one year's service - nil; one year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 6 weeks' pay; 3 years and less than 4 years service - 7 weeks' pay; 4 years and less than 5 years service - 8 weeks' pay; 5 years and less than 6 years service - 9 weeks' pay; 6 years and less than 7 years service - 10 weeks' pay; 7 years and less than 8 years service - 11 weeks' pay; 8 years but less than 9 years service - 12 weeks' pay; 9 years and less than 10 years service - 13 weeks' pay; 10 years and less than 11 years service - 14 weeks' pay; 11 years and less than 12 years service - 15 weeks' pay; 12 years service and more - 16 weeks' pay.

South Australia: The standard scale of payments for full-time and part-time employees in South Australia is provided by the relevant State award. The normal scale of severance payment is:

Less than one year's service - nil; one year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 6 weeks' pay; 3 years and less than 4 years service - 7 weeks' pay; more than 4 years service - 8 weeks' pay.

Western Australia: There is no statutory requirement for employers to make a specific redundancy or severance payment to full-time and part-time employees. Some State awards contain redundancy provisions and establish a scale of payments which are usually:

Less than one year's service - nil; one year and less than 2 years service - 4 weeks' pay; 2 years and less than 3 years service - 6 weeks' pay; 3 years and less than 4 years service - 7 weeks' pay; more than 4 years service - 8 weeks' pay - however, reference should be made to the applicable award or agreement to determine an employee's entitlement to redundancy pay.

Tasmania: There is no standard scale of severance pay which operates in Tasmania. The Tasmanian Industrial Relations Commission has determined that persons retrenched or made redundant from positions reasonably regarded as permanent or on-going should, if the employer does not enter into some suitable arrangement with those persons, be able to take their case to the Commission to obtain relief. The Commission orders a reasonable severance payment based in the individual circumstances of each case.

Northern Territory: Most private sector workers employed in the Northern Territory are covered by the provisions of a federal award, therefore, reference should be made to the applicable award to determine an employee's entitlement to redundancy pay. Also, reference should be made to the above commentary on federal awards.

Australian Capital Territory: Most private sector workers in the ACT are covered by the provisions of a federal award or enterprise agreement, therefore, reference should be made to the applicable award to establish an employee's entitlement to redundancy pay. Also, reference should be made to the above commentary on federal awards.

Related
Federal redundancy test case changes the standard 
 
Redundancy
 
 

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