LawTalk Blog

I'm being made redundant. What are my entitlements?

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Recently, employees of Riot! Art and Craft were notified by text message that their employment was terminated due to the company going into liquidation.

The Fair Work Commission has previously commented on the inappropriateness of dismissing staff by text - see our earlier blog on this topic.

While it was highly inappropriate for Riot! Art and Craft to notify staff of the termination of their employment by text message, for the reasons referred to in our earlier blog, this fact alone is unlikely, in the Riot! Art and Craft case, to render the dismissal of their employees unfair (harsh, unjust or unreasonable).

Where a company is going into liquidation it would be difficult to argue that dismissal, even by text message, is unfair.  This is because termination of employment in these circumstances would almost inevitably constitute a genuine redundancy, which is a bar to making an Unfair Dismissal Application.

When does redundancy occur?

Redundancy occurs when an employer terminates an employee's employment because they do not require that employee’s job to be performed by anyone due to changes in operational requirements of the business. . 

If you are made redundant, you may be entitled to redundancy pay.  The National Employment Standards (NES) set out the minimum entitlement to redundancy pay. The NES apply to most employees in Australia.

How to determine if you are entitled to receive redundancy pay?

To be entitled to receive redundancy pay, you must be a permanent employee who has worked for your employer for at least one year, and your employer must employ at least 15 staff members (unless your contract of employment or Enterprise Agreement or Modern Award states otherwise). The minimum amount of redundancy pay varies according to your length of service, as detailed below.

Period of continuous service

Redundancy pay

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

Are casual employees entitled to redundancy pay?

Casual employees are not entitled to redundancy pay.  However, some employees who are called “casual” and paid casual loading are actually, at law, permanent employees. 

All Modern Awards incorporate the redundancy entitlements outlined in the NES, but even employees who are “award free” are entitled to redundancy pay.  In some cases, a contract of employment or Enterprise Agreement might provide for more generous redundancy entitlements than the minimum set out in the NES.

Redundancy payments are subject to special taxation treatment which means that, for many employees, the redundancy pay component of their final pay is, effectively, tax free. 

What happens if an employer is unable to make redundancy payments?

The Fair Work Act (Cth) 2009 allows for employers to make an application to the Fair Work Commission to have the amount of redundancy pay reduced if they do not have the capacity to pay redundancy pay or if they have found suitable alternative work for the employee.  In such cases the affected employees have the right to be heard and, the Fair Work Commission is, generally, reluctant to reduce redundancy pay.  

In cases where the employer does not have the capacity to pay an employee redundancy pay, that employee may be able to claim their unpaid redundancy pay and other entitlements from the federal government through the “Fair Entitlements Guarantee” scheme. 

In addition to redundancy pay, a permanent employee who is made redundant is entitled to receive notice of the termination of their employment,  or payment in lieu of notice as follows:

Period of continuous service

Notice

Less than 1 year

1 week

1 - 3 years

2 weeks

3 -5 years

3 weeks

Over 5 years

4 weeks


With an additional week for workers who are 45 years or older, and who have at least two years of service.

In addition, any accrued but unused annual and long service leave will be paid out upon redundancy.

What if I haven't been paid all my entitlements?

As detailed above employees who do not receive their entitlements due to bankruptcy or liquidation of their employer, may be entitled to claim payment from the federal government through the “Fair Entitlement Guarantee” scheme. To find out more about whether you are eligible to access the scheme, please click here.

Alternatively, if your employer has the capacity to pay your entitlements, you can bring a claim for unpaid entitlements to the SA Employment Tribunal or the Federal Circuit Court.  You have six (6) years from the date of the alleged underpayment to make such a claim, though we always advise you to act as quickly as possible. We also recommend that you seek legal assistance in preparing such a claim.

If you believe that you have not received your full entitlements if your employment is terminated on the grounds of redundancy, contact Andersons Solicitors Employment Law team today. 


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Get in touch with today's blog writer:
Margaret Kaukas

Special Counsel in Employment Law

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal and South Australian legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.


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