Redundancy then re-employment — the implications


Redundancy then re-employment — the implications

Employers need to consider the issues that arise when a business re-employs an employee whom the business recently made redundant.


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Employers need to consider the issues that arise when a business re-employs an employee whom the business recently made redundant.

These issues were noted in response to a recent question sent to WorkplaceInfo.

Q    We made a particular employee redundant approximately six months ago; however, a job that involves a similar skills set to the redundant employee has arisen at one of our nearby work sites.

The site manager wants to re-employ this employee but we are unsure whether his re-engagement may mean the original termination was not a redundancy or, on another point, whether the redundant employee’s previous service with the company counts when a termination of employment happens in the future?

A    Generally, there is no impediment under employment law to the re-hiring of a previously redundant employee by the company or a related company, although the company policy of many employers prohibits this practice.

In the absence of a specific provision in an applicable industrial instrument or employment statute, service with an employer normally ceases when a termination of an employee’s employment occurs.


In the case of the WorkChoices Standard, any leave ceases to accrue upon termination of employment, meaning a redundant employee who is re-hired would not have previous service recognised for the purposes of annual leave, personal/carer’s leave or parental leave entitlement.

However, an exception may occur under long service leave legislation, where some state and territory long service leave statutes recognise previous service with the employer where an employee is terminated and re-engaged within a specified period (usually three months). Reference should be made to the relevant long service leave statute to establish an employee’s entitlement in this situation.


The prime reason an employer may adopt a policy of not re-hiring a previously redundant employee is for tax-related reasons.

The Australian Tax Office (ATO) defines 'genuine redundancy' (or bona fide redundancy) when the job the employee was doing is no longer required and the employment is terminated for this reason. This means the employee will not be replaced by another person, and there is no agreement with the employer to be re-hired.

The ATO definition of redundancy does not refer to a period of time before an employee may be re-hired to obtain preferential tax treatment. Failing to comply with this definition will mean a higher level of taxation on the original severance or redundancy payment.


Redundancy, re-employment and tax


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