Common redundancy questions, answered

I get asked a lot of questions regarding entitlements when employees are made redundant. Please see a couple of my most frequent, and the responses I have provided.  If you have thoughts on the below calculations or interpretation please comment and I’d be happy to discuss further. Or, you might have other issues you experience/queries you want answered on redundancy calculations, which I’m happy to respond to as well.

Q – Can casuals who become permanent have their full length of service counted from when they commenced their casual engagement?

The Fair Work Act 2009 (Cth) (“FW Act”) provides that a casual employee’s service does not count towards the employee’s overall period of service unless:
• the employment as a casual was on a ‘regular and systematic’ basis; and
• during the period of service as a casual employee, the employee had a reasonable expectation of continuing        employment by the employer on a regular and systematic basis.

There are a number of definitions of what ‘regular and systematic’ means, which is normally connected with the payment of redundancy and/or the employees’ ability to lodge an unfair dismissal application. There is no black and white answer for this and each case needs to be examined on its own merits.

However, a reasonably straightforward determination could be, if there is a reasonable expectation that the employee would have ongoing work. As a ‘rule of thumb’ only permanent service is counted for the purposes of severance/redundancy.

Q – Why does someone who has been here >10 years gets less redundancy pay than someone <9 years? In the Fair Work fact sheet it says it is because they get Long Service Leave, but as I understand it both these employees would get LSL paid out…

The applicable severance scale derives from s 119 of the FW Act where a redundancy severance scale is included in the National Employment Standards (“NES”). This NES scale is reflective of the fact that long serving employees are eligible to receive Long Service Leave (“LSL”) after 10 years’ service and therefore the Federal Government has reduced the entitlement these employees have to severance, so as to save costs for employers and so those employees could not ‘double dip’ by receiving both severance and LSL if their position is made redundant after 10 years.

The strange part about this, is that even though the new NES Scale was only introduced in 2010 it is, arguably, already out of date and inaccurate. For example, in Victoria employees can – at least under the Long Service Leave Act 1992 (Vic)– receive LSL after 7 years, so there is over two years of ‘double dipping’ occurring already.

It is likely this is owing to the severance scale being ‘phase 1’ of modernisation and national consistency, with the then Federal Labor Government at the time talking up their plans for a nationally-consistent LSL scale, which they were then planning to introduce as a ‘phase 2’ (which would have ‘ironed out kinks’ such as the situation above). However, for whatever reason, this went into the ‘too hard basket’ and was never done, so anomalies like the above will continue to exist.

Recognising the situation above, an employer may want to increase the entitlement above the minimum legislative scale for those with >10 years’ service (to the equivalent for those with 9 years), with the severance scale not ‘capping out’ at 16 weeks. Otherwise, the employer could just explain the anomaly to your employees (as described above) and leave it at that. 

Workplace Wizards provides specialist workplace relations support to Australian companies. Contact us today to have us assist you comply with the pay, allowances and other requirements of your modern award/s, help negotiate your upcoming EBA or resolve any other HR, employee, trade union or workers’ compensation issue holding your organisation back.  

Please contact Mark Ritchie on 0458 6444 69 or email mark@workplacewizards.com.au for specific advice on your restructuring/redundancy queries and needs.

 

Mark Ritchie

Mark Ritchie

Mark is passionate about helping Australian businesses efficiently resolve their industrial relations issues. Mark has demonstrated proficiency advising managers, executives and boards of small to medium-sized enterprises, as well as some of Australia’s best-known companies, on both litigious and non-litigious matters.

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