small business redundancy

Small Business Redundancy – Can I Restructure?

Restructures and redundancies can be extremely challenging for small business owners. Such processes are, unfortunately, a necessary part of doing business sometimes. With careful planning and the right communications, restructures and redundancies can be managed well.

In this article, we will look at:

  • What a restructure process actually involves;
  • Whether redundancy payouts apply for small businesses;
  • Where you can go for expert consultation and to receive your free ‘How-To Guide’ on restructures and redundancies.

What Is A Restructure Process?

A restructure process examines and reviews the employer’s operations and needs. It asks whether the employer has the right amount of staff allocated to the right areas and, if not, why not.

It is common for an employer to consider restructuring to achieve economic efficiencies. In these situations, an employer will consider whether it has more staff than it needs (or can afford), and whether one or more roles (and their associated costs) can be ‘stripped out’ or reorganised. A common outcome of this process is to for an employer to find out that it can’t sustain the number of positions it currently has for a number of 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 Redundancy Payout Applies for a Small Business?

Firstly, under the Fair Work Act 2009 (Cth) (“FW Act) a ‘small business employer’ (that is, employer who employs fewer than 15 people at the relevant time) is not required to pay redundancy pay to a redundant worker (see s 121). This protects small business employers from a blow out of costs if they find there are redundancies in their business and that there is a need to restructure.

For other ‘non-small’ business employers, redundancy payouts are compensation payable to the employee for the loss of their job. The minimum amount of redundancy payout is provided under s 119 of the FW Act and is based on the employee’s service history. There may be, however, other award or contractual obligations that provide for greater benefits. 

The standard scale in section 119 of the FW Act provides:

Employee’s period of continuous service with the employer on termination
Pay period
At least 1 year but less than 2 years4 weeks
At least 2 years but less than 3 years6 weeks
At least 3 years but less than 4 years7 weeks
At least 4 years but less than 5 years8 weeks
At least 5 years but less than 6 years 10 weeks
At least 6 years but less than 7 years11 weeks
At least 7 years but less than 8 years13 weeks
At least 8 years but less than 9 years14 weeks
At least 9 years but less than 10 years16 weeks
At least 10 years12 weeks

If the employer cannot pay the amount of redundancy pay specified or the employer finds other acceptable alternative employment for the employee, the employer has the option to apply to the Fair Work Commission (FWC), who may make a determination reducing the obligation of payment to a specified amount (that may be nil) if the FWC considers it appropriate.

Need Specialist Help?

Restructures leading to multiple staff redundancies are a complex and difficult workplace relations exercise. There are many traps for employers who do not follow a procedurally fair process or consult sufficiently.

In preparing your restructure strategy, you need to remember employees may still claim an entitlement to redundancy payments or be able to bring a discrimination claim against you even if they remain employed in a post-restructure position, which makes this area especially problematic to say the least! There are no set rules in developing a redundancy strategy that minimises the associated legal risks, but we can help make your redundancy process as smooth as far as possible, minimising legal risks as we go.

Email us to receive your FREE ‘How-To-Guide’ to understand how best to navigate the restructure and redundancy process, and for additional advice tailored to the needs of your business, contact us at Workplace Wizards or 03 9087 6949


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