Redundancy — what’s included in severance pay?

Q&A

Redundancy — what’s included in severance pay?

Redundancy entitlements under the Fair Work system may be traced to various sources, and a key question that arises is: ‘What is the applicable source when assessing an employee’s redundancy pay?’

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Redundancy entitlements under the Fair Work system may be traced to various sources, and a key question that arises is: ‘What is the applicable source when assessing an employee’s redundancy pay?’

This question was recently posed to WorkplaceInfo.

We are a business operating as a call centre in New South Wales and will shortly be making a number of positions redundant within our organisation.
 
We have received some conflicting advice on what amounts are included in an employee’s ordinary pay for the purposes of calculating the required redundancy pay.
 
All employees who have been selected for redundancy work are on a seven-day continuous shift roster, which includes regular work on weekends and public holidays.
 
According to the National Employment Standard (NES), an employee is to be paid redundancy pay at their ‘base rate of pay’ per week (which excludes payments including shift loadings and penalties).
 
Are the employee’s also entitled to have their weekend shift penalties and public holiday penalties included in their redundancy pay calculation in this case?
 
The redundancy pay entitlement is determined by the NES, the redundancy pay provisions of the applicable modern award and, in certain circumstances, the redundancy pay provisions of the previously applicable NAPSA.
 
Section 119 of the Fair Work Act 2009 provides that an employee is entitled to be paid at the scale of redundancy pay at the employee’s ‘base rate of pay for his or her ordinary hours of work’. Section 16 of the Fair Work Act  defines ‘base rate of pay’ as ‘the rate of pay payable to the employee for his or her ordinary hours of work’ to exclude: incentive-based payments and bonuses; loadings; monetary allowances; overtime and penalty rates; any other separately identifiable amounts.
 
Modern awards and NAPSAs
 
Most modern awards contain a transitional provision that preserves those redundancy provisions of a previously applicable NAPSA that are in excess of the employee’s entitlement to redundancy pay under the NES, usually until 31 December 2014. This would not only preserve a more beneficial scale of redundancy pay but also a more beneficial definition of an employee’s ordinary pay.
 
The applicable modern award (ie the Contract Call Centres Award 2010) contains such a transitional provision with respect to redundancy pay. Therefore, if the previously applicable NAPSA contained redundancy pay provisions more beneficial to an employee, the NAPSA’s redundancy pay provisions will prevail over the NES.
 
Prior to 1 January 2010, call centre operations in New South Wales were usually covered under the Clerical and Administrative Employees (State) Award NAPSA.
 
This NAPSA prescribes a more beneficial scale of redundancy pay for employees (depending on the employee’s service) than the NES, while the NAPSA defines ‘ordinary pay’ for the purposes of redundancy pay to mean the ‘ordinary rate of pay, including overaward payments, shift allowances and allowances provided for in the NAPSA’. Because of the transitional provisions of the modern award, the more beneficial redundancy pay provisions of the NSW clerical NAPSA will prevail over the NES in this case.
 
Source: Paul Munro, IR Consultant.
 
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