In the current world of increasing labour costs, inflation and interest rate rises, we are commonly asked about how to make efficiencies within businesses. This conversation, more often than not, results in our clients seeking our advice on redundancies and the right way to do them. When approached the right way, with empathy, transparency and procedural fairness, redundancies can be a good way to drive efficiencies and cut costs.

But, more often than not we see them rolled out in a rushed, unstructured approach that can cost businesses lots of $$$.

So, let’s take a look at some of the most common mistakes in the redundancy process.

Inadequate communication

One of the most common mistakes that employers make during redundancies is not actively communicating with their people. This inadequate communication can happen at a number of stages throughout the redundancy process including;

• Not communicating the expected changes with senior leaders within the business
• Failing to, or inadequately consulting with the affected employees (I will go into more detail about consultations below)
• Lack of communication with remaining employees about the changes that have occurred

It’s important for leaders to have a communication strategy in place prior to rolling out a significant change process such as a redundancy. Ensuring the comms strategy has an undertone of compassion, empathy, support and honesty will best assist with how the change is received at all levels.

Inappropriate Selection Criteria

Choosing who stays and who goes due to redundancy is a sensitive and challenging task. In most cases, we see employers select their worst performers to exit the business during redundancy because it makes sense to keep your good talent, right?

Well, I hate to break it to you, but this is not a valid reason to make someone redundant. In fact, the Fair Work Commission view this as not being a genuine redundancy and therefore opens up the business for employees to seek recourse under unfair dismissal provisions.

The other common mistake we see when selecting roles to be made redundant is management selecting people based on personal preferences or biases. This opens the business up to allegations of discrimination and unfair treatment.

The key to remember here is that it is the role that is being made redundant, not the person in that role, so developing a strong business case as to why that specific role is no longer required is crucial.

Rushing the Process

More often than not we see businesses rush through a redundancy process without the proper planning and compliance checks. This failure to prepare often looks like;

• Not understanding their legal obligations
• Not having a documented and proper process
• Not seeking external advice about do’s and don’ts
• Failing to consult with the relevant industrial instrument – for example modern Awards or enterprise agreements

The biggest mistake we see in this space is businesses rushing the consultation process. The Fair Work Act and most modern Awards specify that businesses must consult with their employees regarding major workplace changes, such as redundancies. The consultation period should look like this;

• Meet with the employee to discuss proposed changes and the impact it may have on their employment
• Give the employee an opportunity to provide feedback on the changes and any suggestions they may have to lessen the impact
• Consider redeployment opportunities for impacted employees
• Consider the employee’s feedback and responses before making a final decision

It’s important that employers prioritise this step and give it the appropriate time and effort, rather than viewing it as a tick box exercise. Failure to do so will likely undo the whole redundancy process and open the business up to claims of unfair dismissal.

Neglecting Redeployment Opportunities

In order to be deemed a genuine redundancy, employers must have explored possible redeployment opportunities within their business for those affected employees. It’s important to note that businesses need not only to look within their own operation but also in the operation of any associated entities for redeployment opportunities.

Further to this, a recent case has demonstrated that it’s dangerous for employers to make assumptions or fail to offer redeployment opportunities based on their own prejudices. In that case, the Fair Work Commission found that the business failed to offer international deployment opportunities as part of the consultation process because they assumed that the employee would be unwilling to relocate to another country. This amounted to an unfair dismissal.

Having a Predetermined Outcome

It is extremely common that once a business has decided to make redundancies – they’re not changing their mind. This is a common pitfall in the redundancy process, as this demonstrates that the consultation process was a mere formality and not a genuine attempt to discuss alternative options.

It’s important to be careful about the language used throughout the redundancy process to clearly demonstrate that a final decision has not yet been made. The key here is to avoid using definitive type language and to constantly reiterate throughout the process that a final decision has not yet been made.

Failing to Pay the Appropriate Entitlements

Okay, so most employers know that the National Employment Standards sets out the redundancy payment entitlements for employees and this is based on tenure. But on occasion, we do see other mistakes made related to entitlements, including;

• Failing to check employment contracts or enterprise agreements for payment amounts contrary to the NES entitlements
• Businesses assuming they’re a small business and are therefore not required to pay redundancy pay
• Businesses wrongfully classifying employees as casuals therefore assuming that no redundancy amounts is payable
• Employers failing to pay the appropriate notice period. Again, this can happen by failing to check the contract of employment or EBA. This can also occur if you fail to take into account the affected employees age (employees over the age of 45 with 2 years of tenure are entitled to an extra week of notice).

Failing to pay the appropriate entitlements will not only become problematic for the employer from a legal perspective but also result in the affected employee feeling even more impacted by the changes.

Insufficient Record Keeping

Businesses can do everything right in terms of communication, consultation, appropriate selection, paying entitlements etc, but sometimes they will still find themselves needing to challenge a case at Fair Work.

The best defence in these cases is documentation, documentation, documentation! Keep records of everything. Every management conversation leading to the redundancy, documentation about how the affected employees were selected, financial records of a decline in revenue (if relevant), evidence of cancelled customer contracts (if relevant), consultation letters and scripts. Absolutely anything that came about throughout the process should be well documented and put away for a rainy day.

If you need to defend your case, thorough and accurate record-keeping will be your best friend.

Key Takeaways

As you can see from the above, redundancies aren’t exactly clean cut and there is plenty of room for error if you don’t have a well-thought-out strategy. Not only that, but the requirements in this space are also constantly evolving with the development of case law out of the Fair Work Commission so it can be difficult to keep up. Feel free to reach out to HR Gurus for any advice, guidance or templates required for your next round of redundancies.

Written by Madeleine Bray