The New Redundancy Standard - August 2009

At the heart of the Government’s new industrial relations system is a safety net of minimum employee entitlements comprising the National Employment Standards (NES) and Modern Awards scheduled to start on 1 January 2010.   From 1 January 2010 the NES will replace the existing AFPCS and will apply to all employees in the national system.  As minimum entitlements the NES cannot be reduced, however can be enhanced.

In a significant change, from 1 January 2010, all employees with more than 12 months’ continuous service with an employer who are made redundant and who are employed in workplaces with 15 or more employees will be entitled to a redundancy payment.  An employee is entitled to be paid redundancy pay by the employer if the employee is terminated:

• At the employer’s initiative because the employer no longer requires the job done by an employee 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.

The amount of redundancy pay will be based on the employee’s “base rate of pay” (the rate of pay payable to the employee for his or her ordinary hours of work, which excludes the additional entitlements included in the definition of “full rate of pay”) and is calculated as follows:

Redundancy pay period

Employee’s period of continuous                                  Redundancy Pay Period
service with the employer on termination 

At least 1 year but less than 2 years                                            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

 The notice of termination and redundancy provisions will not apply to the following employees:

• An employee employed for a specified period of time, for specified task, or for a duration of a specified season;

• An employee whose employment is terminated because of serious misconduct;

• A casual employee;

• An employee other than an apprentice to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement.

Importantly pre 1 January 2010 service will only count for the purpose of accruing the new entitlement to redundancy pay if the employee’s terms and conditions of employment (whether under an award, agreement or employment contract) immediately before 1 January 2010 provided an entitlement to redundancy pay.  If the employee’s terms and conditions of employment immediately before 1 January 2010 do not provide for redundancy pay entitlements, service before 1 January 2010 is not counted.  Other than this exception service prior to 1 January 2010 counts for all service–based NES entitlements such as annual leave and personal / carer’s leave, unless the employee has already received the benefit of that entitlement. 

Employers should exercise caution when drafting or updating redundancy policies or redundancy clauses in employment agreements for employees who, prior to 1 January 2010, do not have a redundancy pay entitlement.