Restructures and redundancies can be difficult and stressful, but sometimes, they’re an unavoidable part of doing business. With thoughtful planning, clear communication, and a little empathy, these processes can be handled in a way that minimizes disruption and supports your team. We understand that deciding who will be affected and how to communicate these changes can feel overwhelming.
When thinking about restructures and redundancies, several considerations need to be taken into account including:
- Are there any legal parameters around who and when redundancies can be made?
- What legal processes must I follow to make an employee redundant?
- How should I choose which positions are made redundant?
- What redundancy payments are required by law?
- Are my current workplace policies and procedures around restructures and redundancies legally sound?
To make this easier, we’ve put together answers to some of the most common questions about restructures and redundancies.
WHAT IS RESTRUCTURING/RE-ORGANISING?
Restructuring refers to significant changes within a business or organization that modify its financial or operational structure.
Typically, restructuring occurs in response to financial pressures, changes in organizational needs, or shifts in the operating environment.
Restructuring may also be driven by a sale, merger, buyout, new strategic goals, or a transfer of ownership. The ultimate goal of a restructure is to create a more economically sustainable and productive business operation.
During this process, employers review their operations and staffing resources to ensure that the right number of employees are allocated to the right roles. In some cases, this may reveal that certain roles or positions are no longer sustainable due to operational and financial factors.
Employers must carefully identify:
- Which positions are no longer required.
- Which employees will be affected by the redundancy.
- Alternative options for these employees, such as redeployment or reduced hours.
WHAT ARE THE POTENTIAL RISKS OF REDUNDANCIES AND RESTRUCTURES?
The announcement of redundancies can significantly affect staff morale, especially for those directly impacted. Employees whose positions are made redundant may seek to challenge the decision, claiming that their dismissal was not a “genuine redundancy.” Under Australian employment law, a genuine redundancy occurs when:
- The employer no longer requires the role to be performed due to changes in the operational needs of the business.
- The employer has adhered to consultation obligations under modern awards or enterprise agreements.
There are also potential claims of unfair dismissal based on failure to follow the correct procedures, such as failing to provide appropriate notice or redundancy payments, or in cases of discrimination as outlined in the Fair Work Act 2009.
While it’s not possible to prevent all claims, the risk of success can be minimized with a clear, legally sound, and transparent redundancy process. Key to this is maintaining a thorough document trail that demonstrates the fairness of the decision, the consultation process, and the criteria for selecting positions for redundancy.
TOP TIPS to MINIMISe RISKS FOR UNFAIR DISMISSAL CLAIms
To reduce the risk of successful unfair dismissal claims, consider the following tips:
- Focus on the role, not the individual: Redundancies should be based on the role becoming unnecessary, not the employee’s performance, conduct, or personal characteristics.
- Consultation is key: Comply with any obligations to consult with employees, including those under modern awards or enterprise agreements. Even if these do not apply, consulting with employees about potential redundancies can uncover alternatives and risks that might have been overlooked.
- Transparency: Communicate openly with employees about the process and the number of staff affected. This will help prevent allegations of unfair treatment or targeting.
- Document the rationale: Clearly document the reasons for the restructure and redundancies, especially from a financial and operational standpoint. This helps demonstrate the necessity of the decision.
WHEN CAN I DECIDE A POSITION IS ‘REDUNDANT’?
A position can only be considered redundant when the employer determines that the job is no longer required, regardless of the individual currently in the role. To declare a position redundant, the employer must show that the position no longer exists, is surplus to requirements, and will not be filled by another employee. However, some duties of the redundant role may be reassigned to other employees.
It’s important to note that redundancies should never be used as a means to terminate an employee due to performance issues or other personal factors. If a role is still required or will be filled by another employee, an employer risks facing an unfair dismissal claim.
DO I HAVE TO FIND ANOTHER POTENTIAL JOB FOR ANY REDUNDANT EMPLOYEES?
Yes, the Fair Work Act mandates that employers explore redeployment options before making employees redundant. Redeployment may involve identifying a new role within the same company, an associated entity, or a newly created position. Employers should consider alternatives such as:
- Reducing casual or labor-hire staff hours.
- Altering work rosters or opening hours (with employee agreement).
- Job-sharing arrangements.
- Offering reduced working hours temporarily.
Exploring these alternatives not only supports employees but can also mitigate the need for redundancies.
HOW MUCH DO I HAVE TO CONSULT WITH EMPLOYEES BEFORE I MAKE A POSITION REDUNDANT?
Once a position has been identified for redundancy and no alternatives are viable, employers must communicate and consult with the affected employee(s). This consultation may take the form of one-on-one meetings, group meetings, or written communication, depending on the size and nature of the business.
Employers must be transparent about:
- The reasons for redundancy.
- Which positions and employees are affected.
- Potential alternatives to redundancy.
- The criteria used to select employees for redundancy (e.g., performance, seniority, skills).
It’s also advisable to invite employees to suggest alternatives to redundancy.
DO I NEED TO PROVIDE NOTICE OF TERMINATION?
Yes, once a redundancy decision has been made, employees must be given the appropriate notice of termination. The Fair Work Act outlines minimum notice periods based on an employee’s length of service. However, contractual or award-based agreements may stipulate longer notice periods.
WHAT REDUNDANCY PAY DO I NEED TO PROVIDE?
Redundancy pay compensates an employee for the loss of their job. Under the Fair Work Act, the minimum redundancy payment depends on the employee’s years of service. However, additional payments may be required based on the employee’s contract or any applicable awards.
Need some help?
The process of restructuring and making redundancies is a complex one, fraught with legal, operational, and emotional challenges. Employers must be mindful of the legal requirements and potential risks, but also of the personal impact on employees.
Navigatingthese processes with care and support can help minimize the stress and risk involved. At Workplace Wizards, our HR and employment law team are here to guide you through every step, ensuring compliance with legal obligations and offering strategies to manage the impact on your workforce. From initial consultations and employee communications to redundancy payments and legal documentation, we can provide the expert support you need to manage restructures and redundancies smoothly and effectively.
Get in contact with our consulting team on 03 9087 6949 or through support@workplacewizards.com.au
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