It’s important for both employees and employers to understand a redundancy isn’t the same as being sacked – because that’s where problems can arise. Being made redundant shouldn’t reflect an employee’s skills, output, or conduct at work. Rather, the need for the position no longer exists. Knowing how to approach redundancies the right way can help you avoid making costly mistakes and save you from stressful disputes.
Why do redundancies occur?
Businesses may need to consider redundancies for a few reasons. Your business may be hitting a rough patch and you’re looking to reduce business costs. Or you’ve made the decision the role is no longer required. You may have decided to outsource and cut costs, or make better use of technology apps instead. Redundancies also commonly occur when restructuring after a merger or takeover.
How to avoid a sham redundancy, or redundancy dispute
You may have come across the term ‘sham redundancy’ before. In simple terms, this refers to a redundancy made for the wrong reasons. It can be a sneaky way for employers to try and get away with an unfair dismissal – but it won’t work, even if a ‘redundancy payment’ is made. If you’re looking to make an employee or employees redundant, you’ll need to make sure your reasons for doing so are genuine and reasonable, and in line with the following:
- The current position or job is no longer required.
- You have made attempts to redeploy your employee/s if possible.
- Your employee/s has been consulted about the redundancy prior.
- The redundancy isn’t a result of ill-motivation, such as discrimination.
Businesses often make the mistake of terminating the employee, not the role. But without performance management or warnings, this can lead to fines or investigation from the Fair Work Ombudsman. A dispute with a legal authority is last thing you need when restructuring your business or when making cost-saving decisions.
Ensure you’re compliant by getting the right legal advice
If you’re unsure about making upcoming redundancies, we can help. At Lakis & Knight, we can assist you in drafting redundancy terms in your contracts, helping reduce the risk of, and ensure any redundancies you’re making are compliant with current legislation. Get in touch with us today to find out how we can help.