Restructures and redundancies can be extremely challenging but are unfortunately a necessary part of doing business sometimes. With careful planning and the right communications, restructures and redundancies can be managed well. The decisions around deciding and communicating redundancies as part of a restructure can be a new and difficult task. They require consideration of a variety of factors including:
- are there parameters around who and when I can make redundancies?
- what process must I legally follow to make an employee redundant?
- how do I choose what positions are made redundant?
- what redundancy payment do I need to pay?
- are my current workplace policies and procedures around restructures and redundancies legally sound?
To help you navigate these decisions, we’ve outlined the answers to commonly asked questions about restructuring and/or redundancies in this blog.
WHAT IS RESTRUCTURING/RE-ORGANISING?
Restructuring is when a business or organisation makes significant changes to its financial or operational structure or roles, typically in response to financial pressures, changed organisational needs or a changed operating environment.
Businesses or organisations may also restructure when preparing for a sale, buyout, merger, new strategic direction/goals, or transfer of ownership. Following a restructure, the business or organisation should be left with smoother, more economically sustainable and productive business operations.
A restructure process examines and reviews your operations and needs, and in particularly your staffing resources and needs. This includes asking whether you have the right number of staff allocated to the right areas and, if not, why not.
When restructuring for operational and economic efficiency, an employer will consider whether they have more staff than they need (or can afford), and whether one or more roles (and their associated costs) can be reorganised. A common outcome of this process is to for an employer to find out that they can’t sustain the number of positions it currently has for several operational and financial reasons.
During this process, it is important for an employer to identify:
- the position/s excess to requirements;
- the employee/s that will be affected; and
- alternative options for these employees.
WHAT ARE THE POTENTIAL RISKS OF REDUNDANCIES AND RESTRUCTURES?
News of redundancy and restructuring can, understandably, cause staff attitude and morale to be thrown into disarray, particular with those whose positions are being made redundant. An aggrieved employee may seek to challenge their redundancy by way of an unfair dismissal claim on the basis that their dismissal was not a ‘genuine redundancy’. A ‘genuine redundancy’ is defined as a redundancy where:
- the employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise AND
- the employer has complied with any obligation imposed by an applicable modern award or enterprise agreement to consult about the redundancy.
An unfair dismissal claim may also arise on the basis that the employer has not provided the appropriate notice or payment for notice, or for reasons of discrimination (either direct or indirect) as outlined in the Fair Work Act 2009 (Cth) (“FW Act”).
Whilst you cannot prevent an employee from lodging a claim for unfair or unlawful dismissal claim, you can minimise the likelihood their claim will succeed by having a clear, strategically sound and transparent process. This includes a document trail demonstrating the process undertaken, the communication and consultation undertaken with employees, and the basis upon which selection for redundancy was completed.
TOP TIPS TO MINIMISING RISKS FOR UNFAIR DISMISSAL CLAIMS
There are four top tips to avoid risks of unfair dismissal:
- Make sure the redundancy relates to the job / position, and not the individual attributes, performance, attitude or conduct of the person doing that job.
- Comply with any obligations imposed by an applicable modern award or enterprise bargaining agreement to consult with employees. Even if no modern award or enterprise bargaining agreement applies, consult with the employee performing the role before confirming the decision to make that role redundant. They may raise a good idea or risk you have not yet considered that could help achieve your aims without having to let staff go or avoid making a poor decision.
- Share information about the process and the number of employees affected. Transparency and clear communication about the decision and process can help an employer blunt any allegations that an employee has been specifically targeted by a redundancy.
- Clearly establish (and document) the actual and financial reasons for the restructure leading to the redundancies.
WHEN CAN I DECIDE A POSITION IS ‘REDUNDANT’?
During the restructure process, once an employer has identified one or more positions are excess/infeasible to requirements, the employer may decide to make those positions redundant.
An employer may make a position redundant only where an employer has decided that the job/role is no longer required to be done by anyone, regardless of the employee who occupies that position. Therefore, to declare a position redundant, the employer must be able to demonstrate that it (the position) no longer exists, is in excess to business requirements and will not be filled by another employee. Parts of a redundant position’s duties, however, may nonetheless be allocated to existing staff.
A redundancy can not be used to terminate an employee due to their performance or suitability for the role. Employers who make an employee redundant where the job is still available and/or will be filled by another employee themselves open to unfair dismissal claims.
DO I HAVE TO FIND ANOTHER POTENTIAL JOB FOR ANY REDUNDANT EMPLOYEES?
Yes – it is a requirement of the FW Act that redeployment options are explored. Redeployment involves identifying another position that the employee may be able to be assigned to. This position might be an existing vacant position, a newly created position, or a position within an employer’s ‘associated entity’ (another company).
When it has been determined a position is redundant, consider where there are any alternatives to redundancy, such as:
- Reducing your usage of labour hire workers or casual staff first and tightening up on overtime hours;
- Altering work rosters, or your opening hours (note – this might be only possibly by agreement with the majority of your employees or individual staff);
- Looking at possible job-sharing arrangements (by agreement with the two employees concerned);
- Attempting a decrease in working hours for a determined period of time (by employee agreement);
- Re-deploying the employee concerned into another, more-needed position/area; or
- Employing any other method that may avoid the need for an employee being dismissed.
Remember, an employer must consider the employee’s employment contract obligations before altering working arrangements.
HOW MUCH DO I HAVE TO CONSULT WITH EMPLOYEES BEFORE I MAKE A POSITION REDUNDANT?
Having determined that a position is genuinely redundant and there are no other alternatives to redundancy, you should communicate and consult with affected staff (and their trade union representatives, if required). Communication can take many forms including individual staff meetings, a group staff meeting or provision of material in writing – how it is performed will depend on each business. Please also be mindful that award-covered employees usually will need to consulted in writing.
Ideally, you will communicate to affected staff:
- the reasons leading up to the declaration of redundancy (i.e. the reasons why the redundant positions have been identified as the ones to go);
- the employees that will be affected;
- possible options for employees to consider to mitigate the redundancies (i.e. would staff consider dropping back their hours, not opening on a Friday, taking a 10% pay cut etc.?); and
- where there is more than one employee doing the same role, the criteria that will be used to select which individual/s will be made redundant (i.e. which one of the 10 store assistants will be selected for redundancy).
At this stage, you may also allow employees to put their own ideas forward as alternatives to a redundancy.
DO I NEED TO PROVIDE NOTICE OF TERMINATION?
Once the decision has been made and communicated to an employee, you need to give notice of termination to the employee/s. The minimum notice of termination requirements are provided within the Fair Work Act, and are based on the employee’s service history. For more information on termination, you can have a look at our articles on key employment termination information, employee termination best practice and a brief guide to employment termination. Please note that there may be other modern award or contractual obligations that provide for longer periods of notice.
WHAT REDUNDANCY PAY DO I NEED TO PROVIDE?
Redundancy pay is compensation payable to the employee for the loss of their job. The minimum amount of redundancy pay is provided under section 119 of the Fair Work Act and is based on the employee’s service history. There may be, however, other award or contractual obligations that provide for greater benefits.
CAN WE HELP? (YEs we can!)
The restructuring and redundancy process is quite complex as it has many moving parts and risks to be aware of to. Legal considerations aside, it can also be a stressful and emotionally taxing task for employers to navigate, as it is never easy to decide to make an employee/s redundant.
Workplace Wizards can provide specialist workplace support to ensure that the process is smooth, risk-free and stress free. Our HR and employment law team can help you every step of the way, to help you understand what your options are, what the best course of action is for your business and make certain that you’re meeting all your legal obligations. From initial consultations through to notice periods, severance payments and even communication with unions – we’re here for you. Get in contact with our consulting team on 03 9087 6949 or through email@example.com