Redundant then re-employed — the issues

Q&A

Redundant then re-employed — the issues

Employees who are made redundant may sometimes be asked to work for the same employer within a relatively short time due to changes in the circumstances of the business. What issues does this scenario raise?

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Employees who are made redundant may sometimes be asked to work for the same employer within a relatively short time due to changes in the circumstances of the business. What issues does this scenario raise?
 
The question below was recently sent to WorkplaceInfo.
 
We have a number of positions within our manufacturing area that are likely to become redundant.
 
We have been continuing their employment in the hope that the current adverse business conditions in our industry, which we considered temporary, would improve.
 
While those employees selected for redundancy will be terminated, if business conditions improve within the next few months (which is considered likely), we would like to re-employ some, or all, of these employees because of their good service and knowledge of the company’s process.
 
Where an employee is made redundant, can the employee be re-engaged at a later time and, if so, is there a minimum period of time that must elapse before the employee can be re-employed?
 
There is no statutory provision that prohibits the re-employment of a person made redundant by the same employer. However, there may be recognition of previous service with the employer in relation to certain employment conditions such as long service leave and personal/carer’s leave.
 
Recognition of previous service will depend on the relevant state or territory statute (in the case of long service leave) or the applicable industrial instrument (in the case of personal/carer’s leave).
 
For example, s62(2)(g) of the Vic Long Service Leave Act 1992 states that an employee who is terminated by the employer and re-employed by the same employer within 3 months is deemed to have continuous service with the employer, except for the period between the periods of service when the employee was not employed. Other state and territory long service leave statutes contain similar provisions in this circumstance.
 
Awards
 
In the case of personal/carer’s leave, the Manufacturing and Associated Industries and Occupations Award 2010, for example, provides that if an employee is terminated by their employer and is re-engaged by the same employer within a period of 6 months then the employee’s unclaimed balance of paid personal/carer’s leave continues from the date of re-employment.
 
Taxation
 
There may also be taxation considerations, because a bone fide redundancy payment is deemed an ‘eligible termination payment’ (ETP) under taxation law. However, an employee whose position is made redundant, and is re-employed almost immediately, may jeopardise the concessional tax arrangements associated with an ETP. This should be checked with the company’s taxation adviser.
 
 Source: Paul Munro, IR Consultant.
 
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