Notice of Termination and Redundancy Pay

Introduction

This article explains the National Employment Standard (NES) provisions in the Fair Work Ac 2009 (Cth) (FW Act) dealing with notice of termination and redundancy pay. The provisions outlined here begin operation on 1 January 2010. The notice of termination NES will apply to all Australian employers. The redundancy pay NES will only apply to national system and Victorian employers.

There is no corresponding entitlements provided in the Australian Fair Pay and Conditions Standard contained in the Workplace Relations Act (WR Act). However the WR Act provides for an unlawful termination remedy if minimum statutory notice was not given, which will continue to apply for terminations prior to 1 January 2010.

Notice of termination of payment in lieu

An employee will be entitled to the following period of notice or pay in lieu of an employer’s intention to terminate his or her employment:

Required notice is as follows:

·         Not more than 1 year                                                                1 week

·         More than 1 year but not more than 3 years                             2 weeks

·         More than 3 years but not more than 5 years                           3 weeks

More than 5 years                                                                 4 weeks

An employee who is more than 45 years old and who has completed 2 years’ continuous service is entitled to an additional week’s notice.

Employees will be entitled to written notice of the day of termination. However, the day of termination cannot be before the day that notice is given. This entitlement is new. In order to be effective, employers will need to deliver notice to an employee personally, leave it at the employee’s last known address or send it by pre-paid post to the employee’s last known address.

Employees will be entitled to payment in lieu of notice calculated upon the employee’s full rate of pay reflecting the earnings that he or she would have received for the period if his or her employment had not been terminated, which may be inclusive of loadings, penalties, overtime payments and allowances.

Employees who are excluded from the notice NES?

The following employees are not entitled to notice under the notice NES:

·         Employees employed for a specified period of time, for a specified task or for the duration of a specified season;

·         Employees whose employment is terminated for serious misconduct (see below);

·         Casual employees;

·         Employees, other than apprentices, to whom a training arrangement applies and whose employment is for a specified period of time or is limited to the duration of the training arrangement; and

·         Other employees who will be named later in Regulations;

·         Daily hire employees working in the building and construction industry;

·         Daily hire employees working in the meat industry in connection with the slaughter of livestock;

·         Weekly hire employees working in connection with the meat industry and whose termination of employment is determined solely by seasonal factors.

Serious misconduct includes wilful or deliberate behaviour by the employee that is inconsistent with the continuation of the employment contract or conduct that causes serious and imminent risk to OHS or the reputation, viability or profitability to the employer’s business. Serious misconduct refers to theft, fraud, assault, intoxication and refusal to carry out a lawful and reasonable instruction by the employer that is consistent with the employment contract. However, these kinds of conduct are not serious misconduct if the employee can show that in the circumstances the conduct did not make continuing employment unreasonable.

Redundancy pay

Employers who employ 15 or more employees will be entitled to redundancy pay if their employment is terminated:

• At the initiative of the employer because the employer no longer requires their job to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
• Because of the insolvency or bankruptcy of the employer.

In those cases, the employee will be entitled to redundancy pay as follows:

Length of continuous service                                                   Redundancy pay period

 At least1 year but less than 2 year                                                   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

 However, where an employee is award or agreement free and his or her terms and conditions of employment do not already provide for redundancy pay immediately before 1 January 2010, an employee’s service with an employer before that date will not be taken in to account for the purpose of calculating an employee’s entitlement to redundancy pay.

 Redundancy pay will only be based on an employee’s base rate of pay for his or her ordinary hours of work. In the event of a transfer of employment from one employer to another, employees will not be entitled to redundancy pay where:

·         The employee’s prior service is recognised;

·         The employee rejects an offer of employment on substantially similar terms and conditions.

Genuine redundancy for the purposes of deciding whether a dismissal may be unfair

If a dismissal is a genuine redundancy it will not be an unfair dismissal.

Under Commonwealth workplace laws, a person’s dismissal is a 'genuine redundancy' if:

·         your employer no longer needs the person’s job to be done by anyone because of changes in the operational requirements of the business

·         your employer followed any consultation requirements in the modern award, pre-modern award or agreement that applies.

When it's not a genuine redundancy

It's not a genuine redundancy if it's reasonable for you to be redeployed in either:

·         your employer’s business

·         the business of an entity associated with your employer.