Compliantly proceed with a redundancy – part 2: operational requirements

By Amanda Curatore

Welcome to part two in our series of articles on how to compliantly proceed with a redundancy. In this article, we will be explaining what ‘operational requirements’ are, and how they will underpin your reasons for terminating an employee from your business in cases of redundancy.

Many businesses are unfortunately experiencing a downturn in revenue meaning employers no longer have the funds to maintain the status quo. Even where a business is continuing to keep its head above the water during these trying times, it may be a sensible idea to restructure the business now to maintain and increase profitability in the future.

1. Identify your business’s needs

For you to commence a redundancy process, you first need to determine that the job no longer needs to be performed by anyone due to the operational requirements of the business.

So, what does the term ‘operational requirement’ actually mean? Change in the operational requirements of a business can include the following:

a) economic, technological, or structural changes including machinery taking over an employee’s job;

b) a downturn in revenue resulting in the employer needing a reduced headcount to continue with the work, i.e. reducing a team of five to three people; or

c) a restructure in the business to improve efficiency which results in the tasks done by a particular employee being distributed between several other employees and therefore the person’s job no longer exists.

Points (b) and (c) will be the most common reasons regarding changes to your business’s operational requirements, more so off the back of COVID-19.

2. Which roles should you make redundant?

Once you have established that there has been a change in your business’s operational requirements, you must then consider which employee you will select for the redundancy. Where there was previously only one employee in the position you are looking to make redundant, then this is easy. This employee will be chosen for redundancy due to their job no longer existing. However, things get complicated when there is a team of individuals performing similar duties, for example, you may have four administrative assistants but have decided to undertake a restructure which will only require two administrative assistants in the future. How will you choose which two employees to make redundant?

The decisive factor is whether the employee’s ‘job’ continues to exist or not. A ‘job’ involves a collection of functions, duties and responsibilities required to be discharged by an employee. All four of your administrative assistants will likely have varying degrees of responsibilities and somewhat different duties. You will need to then determine which of those responsibilities and duties either no longer exist or will be redistributed to the other team members. The ‘job’ which is the least needed in your business and which can be easily allocated to others in the workforce will be the position which you make redundant.

There will, of course, be some circumstances where you are dealing with multiple employees who perform the same duties. In these circumstances, you will be making a decision about the individual as well as the job, and you should look to establish fair and objective criteria for selecting the individual. Employers need to be particularly mindful of not selecting individuals based on factors which may give rise to a discrimination risk, i.e. choosing the administrative assistant who is pregnant and about to go on parental leave or choosing the individual based on their attendance record where absences are due to personal or carer’s leave.

3. How to test if this is a genuine redundancy

The test is not whether the duties survive. The test is rather whether after the changes to your business’s operations have been affected, including reallocation of duties and responsibilities to other positions, the job previously held by the employee still exists. You must also be mindful that just because the tasks may have been reallocated to other employees, this does not automatically mean the redundancy is genuine. The critical issue to consider is the reason for the redundancy. If the reason is because of the changed operational requirements of the business, then the redundancy will be genuine.

If all four administrative assistants perform the same tasks and have the exact responsibilities, then you will need to consider who to make redundant by performing a selection criteria matrix. This involves you assessing who is most suitable for the position, i.e. this may be the employee who holds the higher qualification, who holds specialised training or has better customer service skills.

A common question which has been recently asked via our Telephone Advisory Service is whether you can make an employee who is receiving the JobKeeper payment redundant. The answer is yes if their ‘job’ is no longer required to be performed. If, however, there is some other motive for the proposed redundancy, that is due to the fact the employee receives JobKeeper payments, rather than the changes to operational requirements, then this will not be a case of a genuine redundancy.

Once you have established what the changes to your operational requirements are and have decided which ‘job’ will be made redundant, you can proceed to the next step in the process which is consultation.

HR Assured is an end-to-end outsourced HR solution for SMEs combining unlimited expert workplace relations advice, award-winning HRA Cloud Software, auditing, and our Advice Promise. Our clients reduce the time they spend on HR by up to 90%! That’s more time for them to run their business and get on with the things that matter.

Disclaimer: Businesses operating as an unincorporated entity in Western Australia should seek specific advice regarding redundancy obligations.

Amanda Curatore is a qualified senior workplace relations consultant at FCB Group and HR Assured. Amanda is highly experienced in providing workplace relations advice and assistance to clients in a wide range of matters including employment contracts, modern award interpretation, managing performance, bullying and harassment, terminations and managing risk.

How to compliantly proceed with a redundancy – part 2: operational requirements

1. Identify your business’s needs

2. Which roles should you make redundant?

3. How to test if this is a genuine redundancy

Other articles in the series:

Backpay obligations for enterprise agreements: the FWC has decided

Fixed and maximum-term contracts are changing. Here’s what you need to know

Small business, big mistake: FWC rules on procedurally unfair terminations

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