Redundancy – your questions answered

Q&A

Redundancy – your questions answered

Many of the questions posed to WorkplaceInfo ‘Ask an Expert’ involve termination of employment issues.

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Many of the questions posed to WorkplaceInfo ‘Ask an Expert’ involve termination of employment issues. The following selection of Q&As focuses on redundancy:

Selecting employees 

Q. The recent redundancy test case states redundancy payments beyond retirement age are not required.

What is the retirement age – is it 55 or 65 or something in between eg pensionable age for men and women? 

A. You need to separate the issues. The issue of redundancy should be addressed fairly and reasonably. When the decision is taken on the grounds of skills and other factors that are reasonable and fair, you can then identify the employees who would be made redundant.  If some are on maternity leave then you should consult with them (and all employees so affected) to mitigate the impact.

The point is that the employee's maternity leave or status as a parent should play no part in your decision. 

If this basic approach is taken then you should not confront discrimination issues.  Keeping good records as supporting evidence is advisable.

Calculating redundancy pay for non-award employees (NSW) 

Q. The recent redundancy test case states redundancy payments beyond retirement age are not required.

What is the retirement age – is it 55 or 65 or something in between eg pensionable age for men and women? 

A. A non-award employee could seek reasonable redundancy or severance payments through NSW unfair contract legislation (s106 of the Industrial Relations Act 1996 [NSW]).

The NSW Industrial Relations Commission, in determining a fair and reasonable amount of severance pay, has regard to number of factors including, but not limited to: the age of the employee; the employee's length of service; the nature and status of the employee's position; the degree of responsibility involved in the position; the employee's prospects of finding alternative employment; the employee's salary package; the employee's qualifications and necessary experience; and any relevant trade, custom or practice.

In Westfield Holdings v Adams [2001] NSWIRComm 293, the Full Bench of the IRC (NSW) commented ‘The scale fixed in the Redundancy Awards Case (also the scale under the Employment Protection Act 1982), was fixed on a "safety net" basis. In making money orders under s106(5) the Court may have regard to the Redundancy Awards Case scale but is not bound to apply it in the context of the case before the Court’. See the NSW Employment Protection Act.

Of course, any contractual provision applicable to the employee in this regard must be checked as that may determine the question.

Retirement age and redundancy case – what does it mean?

Q. The recent redundancy test case states redundancy payments beyond retirement age are not required.

What is the retirement age – is it 55 or 65 or something in between eg pensionable age for men and women? 

A. The answer provided by the Full Bench of the AIRC is not totally clear:

Extracts from the decision are provided below to indicate the Commission's thinking. The view of the Commission is that there is a good understanding in particular circumstances of ‘normal retirement date’: 

‘The ACTU application seeks to remove the provision in the TCR standard clause which limits severance payments to the maximum amount a retrenched employee would have earned had their employment proceeded to their retirement date. The provision reads:

“Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee’s normal retirement date.”

…..AiG seeks to vary the existing provision by replacing the current reference to “normal retirement date” with “age 65 years”.

...It seems to us that despite the passage of age discrimination legislation, the concept of a normal retirement date will continue to be relevant where a particular occupation or industry continues to have a fixed retirement date.

...Where employees and employers agree in advance to a retirement date the principle underlying the current provision will also continue to be relevant. It is not uncommon for employees and employers to discuss and plan retirement dates in advance. Where they do so, the principle underlying the existing retirement age provision remains relevant – if the employee is retrenched before the agreed retirement date, severance pay should be capped so that the employee does not receive more than if the employee had worked through to the retirement date.

...Nor are we persuaded to amend the current retirement date limitation in the manner proposed by AiG. While the proposal has the virtue of clarity it seems to us that it erroneously assumes that 65 years of age is the common retirement age across federal awards. Further the proposed amendment does not seem to take into account the prospect that an employer and employee may agree on an earlier retirement date.'

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