Redundancy: does parental leave count as service?

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Redundancy: does parental leave count as service?

What effect does unpaid parental leave have on redundancy payments?

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What effect does unpaid parental leave have on redundancy payments?

This question was recently sent to our Ask an Expert service. 
 
Due to a downturn in business several positions within our organisation will become redundant at the end of the year. One employee will have been employed by the company for about four years at the time of termination. Based on the scale of redundancy pay under the National Employment Standards, she would be entitled to eight weeks’ pay (more than four years but less than five years' continuous service).

However, the employee took 12 months' unpaid maternity leave during the course of her employment, meaning she has only three years' completed service. Payroll are unsure as to what amount of redundancy pay is due to the employee.

Does the period of unpaid maternity leave count as service in calculating redundancy pay under the National Employment Standards? And what minimum period of notice of termination (or payment in lieu) should be provided by the company to the employee in this circumstance?
 
A The Fair Work Act determines what absences count as service for the purpose of calculating redundancy pay and notice of termination. This will vary depending on the entitlement under the National Employment Standards. 

Redundancy pay

The FWA (s22(2)) provides a specific definition of “service”. Under this definition, periods that do not count as service (excluded periods) are:
  •  any period of unauthorised leave, for example, when an employee has abandoned his or her employment, is engaging in industrial action or is otherwise absent from work for a period contrary to a direction made by an employer; or
  • any period of unpaid leave, for example, unpaid parental leave or unpaid carer’s leave, or unpaid authorised absence, such as leave without pay granted by the employer.
The period of unpaid maternity leave does not count as service when calculating the period of continuous service with respect to redundancy pay. In this case, under the Standard (s119(2)), the employee would be entitled to seven weeks’ redundancy pay, based on more than three but less than four years’ continuous service with the employer. An excluded period does not break the employee’s continuity of service but does not count towards the length of the employee’s continuous service. 

Unpaid leave that is service

Unpaid periods of absence that do count as service include a period of stand down, and a period of absence under community service leave. 

Notice of termination is different

Under the Fair Work Act (s22(4)), in relation to notice of termination or payment in lieu of notice, all absences count as service, except a period of unauthorised absence. The effect of this definition is that an employee’s absence from work on unpaid parental leave does count as service for the purpose of determining the minimum period of termination of employment required to be given by an employee.
 
In this case, the employee is entitled to three weeks’ notice of termination (or payment in lieu of notice) under the scale of notice of termination under the National Employment Standards. She had completed between three and five years' continuous service with the employer.

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