Redundancy

REDUNDANCY

Payment for redundancy is provided for in Collective Agreements and the National Employment Standards. An employee is entitled to redundancy pay if the employee’s employment is terminated; a) at the employer’s initiative because the employer no longer requires to job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or b) because of the insolvency or bankruptcy of the employer.

What is redundancy pay?

Minimum amounts of redundancy payable under the National Employment Standards are as provided in the scale below:

Employees Length of Continuous Servicewith the Employer on Termination Redundancy Pay Period
At least 1 year but less than 2 yearsAt least 2 years but less than 3 years            

At least 3 years but less than 4 years            

At least 4 years but less than 5 years            

At least 5 years but less than 6 years

At least 6 years but less than 7 years

At least 7 years but less than 8 years

At least 8 years but less than 9 years            

At least 9 years but less than 10 years

At least 10 years                  

4 weeks pay6 weeks pay

7 weeks pay

8 weeks pay

10 weeks pay

11 weeks’ pay

13 weeks’ pay

14 weeks’ pay

16 weeks’ pay

12 weeks’ pay

 

The reason the amount of pay weeks drops off after 10 years of service is that the scale takes into account the payment in relation to long service leave which becomes payable after 10 years (however, now that employees are entitled to pro rata long service leave after 7 years this table appears to be outdated).

Who is entitled to redundancy pay?

All employees are entitled to redundancy pay provided that: a) they have worked for a continuous period of over 12 months; and b) their employer employed fewer than 15 employees at the time of termination or at the time the employee is given notice of the termination (whichever is earlier).

What is the rate of pay to be applied to redundancy pay ?

This is the most conscientious of all issues when deciding on redundancy as it is unclear whether the rate of pay includes grossed up amounts for car payments, annual bonuses etc. The general rule of thumb is that payment is based on “base rate of pay” which includes all regular allowances but excludes discretionary payments such as bonuses, car payments where this amount is expressly excluded.