Can we re-employ someone we made redundant?


Can we re-employ someone we made redundant?

Is an employer prevented from re-employing a person who has recently been made redundant by the same company?


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Is an employer prevented from re-employing a person who has recently been made redundant by the same company?
This question was recently sent to our Ask an Expert service.

Q  Our company made an accounts payable employee’s position redundant approximately three months ago. However, a vacancy has occurred in our sales administration area, which we would like to offer to the ex-employee. The employee received redundancy pay and other payments on termination. Our finance people have cast some doubt about the legality of re-employing someone to whom we previously paid redundancy pay. The company also has a policy that prevents re-employment of a person previously made redundant, although it does allows some discretion on the company’s part. Is an employer prevented from re-employing a person who has recently been made redundant by the same company? Would the person have to repay the company the redundancy pay before being re-employed?
A  Company policy that prohibits the re-employment of a former employee whose job was made redundant, or the re-employment by a subsidiary of the same employer, is usually introduced as a consequence of taxation law, not employment law. While there is no requirement under employment law to repay redundancy pay if an employee is subsequently re-engaged by the same employer, the treatment of the redundancy pay for tax purposes may be different depending on the circumstances associated with the original redundancy.

Concessional tax treatment is given to ‘genuine redundancy payments’. If a payment qualifies, part of the payment is tax free, with the tax-free component based on the number of years of service with the employer. The Australian Taxation Office identifies the conditions that must be satisfied so that a redundancy payment is regarded as genuine. One condition is that there is no arrangement between the employer and the employee (or between the employer and another entity (a subsidiary or another employer) for the dismissed employee to be re-engaged after the termination, although this condition would not prevent the former employee from being employed as a contractor.
Previous service — leave accrual
A modern award may contain a provision that reinstates the employee’s personal/carer’s leave balance that applied at the time of termination. For example, the Manufacturing and Associated Industries and Occupations Award 2010 (cl 42.2) provides that if an employee is terminated by his/her employer and is re-engaged by the same employer within a period of six months then the employee’s unclaimed balance of paid personal/carer’s leave continues from the date of re-engagement. Reference should be made to the applicable modern award or enterprise agreement to determine whether the employee’s unclaimed balance of personal/carer’s leave balance is reinstated when the employee is re-engaged.
Under the National Employment Standard (NES), previous service with the same employer is not recognised by the Fair Work Act 2009 for the purpose of accruing personal/carer’s leave or annual leave if the employee is subsequently re-engaged.
In the case of long service leave, the relevant state or territory long service leave legislation may recognise previous service when an employee is terminated by their employer and subsequently re-engaged within a specified period (usually three months), although the period during which the employer was not employed does not count as service for the purposes of calculating total service. These provisions were intended to broaden the scope of the relevant legislation to include casual employees in recognition of the irregular nature of casual employment. However, the legislation is usually couched in terms that would apply to the above circumstances.

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