By Amanda Curatore

Welcome to our last instalment in our series of articles on how to compliantly proceed with a redundancy. In this article, we will be pointing out payment entitlements.

Now that you have gone through the redundancy process and have made the final decision to make your employee redundant, you will need to ensure that you pay the employee the correct redundancy entitlements.

Who is entitled to redundancy pay?

Employees who have been employed with you for at least 12 months or more are entitled to redundancy pay unless the employee is:

  • a casual employee;
  • employed on a contract for a specified term or task; or
  • employed under a training arrangement and the employment is limited to the length of the training arrangement;
  • an apprentice; or
  • covered by an industry-specific redundancy scheme in a modern award.

What if you’re a small business?

Small business employers are excluded from providing redundancy pay to your employees. A small business is defined as a business that employs less than 15 employees at the time of the dismissal. All employees, including your regular and systematic casual employees, are counted to determine whether you are a small business employer or not.

If I offer my employee a reasonable redeployment opportunity, do I still need to pay redundancy?

Redundancy pay is applicable where you have made the position of an employee redundant, you are not a small business employer and the employee has been employed with you for 12 months or more. However, where you have offered a reasonable redeployment opportunity and the employee has rejected this, you can, on application to the Fair Work Commission (FWC), ask to have the redundancy amount payable reduced or nullified. Only the FWC can determine the amount of redundancy pay which is reduced, so you should never take this matter into your own hands.

So how much redundancy pay do I owe the employee?

The amount of redundancy pay applicable is derived from the National Employment Standards (NES) and is linked to an employee’s length of service. Be sure to cross-check this amount against any award or contractual entitlements which may provide for more beneficial redundancy entitlements. Per the NES, the below table shows the amount of redundancy pay which is payable:

Employee’s period of continuous service with the employer Redundancy pay period
At least 1 year but less than 2 years 4 weeks
At least 2 years but less than 3 years 6 weeks
At least 3 years but less than 4 years 7 weeks
At least 4 years but less than 5 years 8 weeks
At least 5 years but less than 6 years 10 weeks
At least 6 years but less than 7 years 11 weeks
At least 7 years but less than 8 years 13 weeks
At least 8 years but less than 9 years 14 weeks
At least 9 years but less than 10 years 16 weeks
At least 10 years 12 weeks

Redundancy pay is paid at the employee’s base rate of pay. This does not include penalties, loadings, allowances, bonuses and other separately identifiable amounts.

In addition to redundancy pay an employee is entitled to receive, you must ensure you provide them with notice of termination as well as payout all accrued statutory entitlements including annual leave or long service leave. The applicable NES notice of termination pay is as follows:

Continuous service Notice period
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

Remember that if an employee is over the age of 45 and has completed more than two years continuous service with you, then they must be provided with an additional weeks’ notice (however, this is not the case if the employee resigns).

You need to also remember that if you pay an employee in lieu of notice they must be paid at their full rate of pay, which will include all of the separately identifiable entitlements like penalties, loadings and allowances.

After completing each of the steps we’ve outlined in each article, you have now successfully conducted a compliant redundancy process and ensured that all applicable monies have been paid to your redundant employee.

HR Assured is an end-to-end outsourced HR solution for SMEs combining unlimited expert workplace relations advice, award-winning HR Cloud Software, auditing and employment practice insurance. 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.

Other articles in the series:

How to compliantly proceed with a redundancy – part 1: overview 

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

How to compliantly proceed with a redundancy – part 3: consultation obligations

How to compliantly proceed with a redundancy – part 4: redeployment

How to compliantly proceed with a redundancy – part 5: payment entitlements

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