Receive the latest mybusiness news
Copyright © 2020 MOMENTUMMEDIA

The basics of voluntary redundancy

Julianne Leybag
02 July 2018 2 minute readShare
employer scrutinising employee basics of voluntary redundancy

The concept of redundancy is something that is feared by a lot of employees, but what should employees do once they are offered a voluntary redundancy? My Business discusses everything employees and employers need to know about voluntary redundancy.

What is voluntary redundancy?

Voluntary redundancy happens when a business owner or an employer ask one of their employees to sign an agreement that will terminate their employment contract with the company in exchange for financial compensation. Voluntary redundancy packages are usually offered to senior employees or employees who have rendered more than 10 years of service, although employees, in general, have the option of applying for voluntary redundancy.

Since voluntary redundancy is entirely different from compulsory redundancy, the compensation for voluntary redundancy is higher than what employees would normally receive from a usual redundancy package. However, employees have to keep in mind that while this type of redundancy is voluntary in nature, this is technically classified under dismissal, and employees have the same rights as someone who has received a compulsory redundancy.

What is the difference between voluntary redundancy and compulsory redundancy?

There is no difference as far as the rights of these two kinds of redundancies are concerned. Australian redundancy rules and regulations dictate that since voluntary redundancy is to be treated as a dismissal and not as a resignation, this means that employers will be compelled to go through the usual processes required for compulsory redundancy.

Business owners must be responsible enough to inform employees of their rights especially if they are thinking of implementing any kind of redundancy. They are also encouraged to engage and discuss with their employees regarding redundancy, and other information about redundancy implementations, and financial compensations/packages, and promptly answer any questions that their employees might have regarding redundancy.

What are the requirements for a voluntary redundancy consultation?

Consultations are important not only for redundancy purposes; it is also required every time a business is about to undergo and implement major changes. Keep in mind that employees can actually file for an unfair dismissal if employers fail to engage employees in a proper redundancy consultation before carrying out redundancy agreements. The requirements for a redundancy consultation are also significantly different from those prescribed for awards and agreements.

The requirements for a redundancy consultation usually include the following:

  • Notification from the management that a significant change is about to be implemented within the business (i.e., voluntary redundancies)
  • Informing employees about the impact of voluntary redundancies and its other repercussions
  • Discussion regarding the steps that the management will be undertaking in order to mitigate possible adverse effects
  • Facilitate an open forum for employees regarding their opinions and suggestions for management changes

Aside from being an important legal factor, consultations like these are key to maintaining an open and transparent communication between employers and their employees. More importantly, it ensures that both parties are fully aware of their rights and responsibilities, and will serve as a guide when it comes to making informed decisions before a formal notice of redundancy is doled out by the business.

Are employees entitled to a voluntary redundancy pay?

Voluntary redundancy is still viewed by the Australian government as termination rather than resignation, which means that employees who agree to a voluntary redundancy are entitled to a voluntary severance package. Redundancy payments are usually calculated based on the number of months/years that an employee has rendered to the business.

Calculations for redundancy compensation packages normally start from four weeks’ worth of pay for one year but less than two years’ worth of rendered service, with upward adjustments made for every additional year rendered by the employee to the business.

Aside from a basic redundancy pay, employees are also entitled to receive other entitlements, such as annual leave loading and long service leaves. However, there may be certain instances and conditions wherein an employer is not required by law to pay redundancy compensation to its employees.

Employees must be fully aware of their rights as a working individual before signing into a voluntary redundancy agreement. If an employee receives a voluntary redundancy notice or would like to file for a voluntary redundancy, they are advised to seek assistance from an experienced professional who specialises in employment matters.

The basics of voluntary redundancy
mybusiness logo
Julianne Leybag

Leave a Comment

Latest poll

How satisfied are you with the SME measures in the federal budget?