A clear, thorough redundancy process is critical for any business—even if you don’t plan on making any redundancies in the near future.
What is a redundancy consultation process?
A redundancy consultation process sets out what the employer needs to do when they are planning to make changes to the business that may result in redundancies. All awards and registered agreements have a consultation process in place for this purpose.
What does a redundancy consultation involve?
Teams will have conversations and meetings before formally agreeing to the redundancies. This will include discussing:
- Who's likely to be affected
- What redundancies you need to make
- Why you need to make them
- How you're going to choose staff for redundancy
When having these conversations, you need to consider whether each decision can be considered a ‘genuine redundancy’ under the Fair Work guidelines.
Do employers have to consult for redundancy?
Employers are required to consult about redundancy when a modern award or enterprise agreement applies to an employee, and that award or agreement contains requirements to consult about redundancy.
Does this mean not all employees need to be consulted?
It isn’t mandatory to consult with employees who have been selected for redundancy if they are not covered by the award or agreement. However, you must implement a proper redundancy consultation process for all employees.
What happens if you don’t have a clear redundancy process in place?
You could risk appearing unfair if a former employee decides to apply for unfair dismissal with Fair Work. For example, if a claimant can prove you failed to consult them about the redundancy under an award or registered agreement, this would not be considered a ‘genuine redundancy’, and you could face legal action.
How long is a redundancy consultation period?
It depends on the awards and registered agreements in place. 30 days is a common redundancy consultation period, but this is not always the case.
You’ll also need to consult with trade union reps. Alternatively, if your staff don’t belong to a trade union you'll need to speak to their elected employee representatives.
What is the notice period for redundancy?
Once a consultation has taken place, you'll need to provide notice. The amount of notice depends on how long someone has worked for the company.
- Not more than 1 year = 1 week
- More than 1 year but not more than 3 years = 2 weeks
- More than 3 years but not more than 5 years = 3 weeks
- More than 5 years = 4 weeks
On top of this, if the employee is over 45 years old and has completed at least 2 years continuous service with your company, an extra week should be added to their notice.
For example, if an employee is 48 and being made redundant after working at a company for 3 years, they receive 4 weeks’ notice, rather than the normal 3 weeks.
Can an employer increase the notice period?
Yes. The periods we outlined above are the minimum an employer must give to be compliant by law, so you can increase the notice period if you want to.
How to consult with employees about redundancies
Start by speaking to your people. Communicating during the redundancy consultation period is important because everyone deserves to know where they stand. It's typically best-practice to hold a collective consultation followed by individual meetings with affected staff.
Your redundancy consultation meeting checklist
As part of a redundancy consultation, you are required to:
- notify the employees who may be affected by the proposed changes
- provide the employees with information about these changes and their expected effects
- discuss steps taken to avoid and minimise negative effects on the employees
- consider employees’ ideas or suggestions about the changes
If a business is considering redundancy of 15 or more employees, employers also need to notify Services Australia of the proposed dismissals in writing.
What happens after a redundancy consultation?
If you're making redundancies, you'll need to explain, in writing:
- the reason for the termination of the employee’s employment
- the notice period and whether the employee will receive pay in lieu of notice
- the date of the employee’s last day of work
- details of the employee’s redundancy pay entitlements
- how you’ll calculate redundancy payments.
- any other entitlements to be paid (like annual leave and long service leave)
- that redundancy pay will usually result in waiting periods for any applicable Centrelink payments
To help, we’ve put together an example redundancy consultation letter, guided by Fair Work recommendations. Where square brackets have been used, this indicates they should be populated by you as the employer.
Redundancy consultation letter example
Dear [employee’s name],
The purpose of this letter is to confirm the outcome of a recent review by [company name] (the employer) of its operational requirements, and what this means for you.
As a result of [reason for redundancy], the position of [job title] is no longer needed. Regrettably this means your employment will terminate. This decision is not a reflection on your performance.
The employer has made the following attempts to find you an alternative position within the enterprise and any associated entities:
- [Details of redeployment attempt]
- [Details of redeployment attempt]
Your notice period and redundancy pay
The following section contains four options. Select the one most applicable to the redundancy letter you are writing. Before completing the letter, delete this instruction, the title of the chosen option, and the remaining options.
Option A: Employer is required to pay redundancy and the employee will work the notice period.
Based on your length of service, your notice period is [number] weeks. This means your employment will end on [date of end of notice].
Due to your employment ending because of redundancy, you will be paid redundancy pay of $[amount] in accordance with [name of award/enterprise agreement/National Employment Standards/contract of employment].
This amount represents [number of weeks of redundancy pay] weeks’ pay, based on your [number] years of service.
Option B: Employer is required to pay redundancy and the employee will be paid in lieu of the notice period.
Your employment will end immediately. Based on your length of service, your notice period is [number] weeks. Instead of receiving that notice, you will be paid the sum of [amount], plus the redundancy entitlement set out below.
Due to your employment ending because of redundancy, you will also be paid redundancy pay of $[amount] in accordance with [name of award/enterprise agreement/National Employment Standards/contract of employment].
This amount represents [number] weeks’ pay which is based on your [number] years of service.
Option C: Employer is not required to pay redundancy and the employee will work the notice period.
Based on your length of service, your notice period is [number] weeks. Therefore your employment will end on [date of end of notice].
Option D: Employer is not required to pay redundancy and the employee will be paid in lieu of the notice period.
Your employment will end immediately. Based on your length of service, your notice period is [number] weeks. In lieu of receiving that notice, you will be paid the sum of $[amount] .
End of options section. What follows applies to all employees, and should be included in all redundancy consultation letters.
How this affects your entitlements and benefits
You will also be paid your accrued entitlements and any outstanding pay, up to and including your last day of employment.
This includes superannuation, and the balance of any time off instead of overtime paid accrued but not yet taken. This will be paid at the overtime rate applicable when the overtime was worked.
If you have been paid annual leave in advance, any amount of annual leave still owing will be deducted from your final pay.
Where to seek further help and information
You may seek information about minimum terms and conditions of employment from the Fair Work Ombudsman. If you wish to contact them you can call 13 13 94 or visit www.fairwork.gov.au
Claiming for redundancy payments
Redundancy and leave payments will usually give rise to waiting periods for Centrelink payments. You should contact Centrelink to find out how long you have to wait to receive any applicable benefits. The best way to do this is to lodge a claim for payment.
Affected employees and their partners have immediate access to jobactive, prior to becoming eligible for income support. For information about jobactive eligibility and other support services available, you can access the Help for workers who have recently lost their jobs fact sheet. In addition, the ‘What’s Next’ website provides an online self-help resource for affected employees and employers.
For more information, visit www.whatsnext.dese.gov.au
Thank you for your valuable contribution during your employment with us. Please contact me if you wish to obtain a reference in the future.
[Sender’s Printed Name]
[Sender’s Job Title]
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Disclaimer: This document contains general information and is also not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.
Author: Rachael Down
With a passion for words, Content Specialist Rachel Down, is an experienced communicator with skills in journalism, content creation and web copy writing.