Avoiding Common Pitfalls with Standard Candle HR

In the current landscape of rising labour costs, inflation, and interest rate hikes, businesses are often seeking ways to improve efficiency. This frequently leads to discussions about redundancies and how to execute them correctly.

When approached with empathy, transparency, and procedural fairness, redundancies can effectively drive efficiencies and reduce costs.

However, many businesses rush through the redundancy process in an unstructured manner, leading to costly mistakes. Let’s explore some common errors and how to avoid them.

Inadequate Communication

One of the most frequent mistakes during redundancies is poor communication. This issue can arise at several stages:

• Failing to adequately consult with affected employees (details on consultations below).
• Not informing staff the expected changes.
• Not communicating with remaining employees about the changes.

Having a communication strategy that includes compassion, empathy, support, and honesty is crucial for how the changes are received at all levels.

Inappropriate Selection Criteria

Choosing who stays and who goes during redundancies is sensitive. Many employers mistakenly select their worst performers for redundancy, but this is not a valid reason. The Fair Work Commission views this as not being a genuine redundancy, which can lead to unfair dismissal claims.

Additionally, selecting employees based on personal preferences or biases can lead to allegations of discrimination.

Remember, it’s the role that is redundant, not the person, so develop a strong business case for why the role is no longer required.

Rushing the Process

Businesses often rush through redundancies without proper planning and compliance checks, such as:

• Not understanding their legal obligations.
• Lacking a documented process.
• Not seeking external advice.
• Failing to consult relevant industrial instruments like modern awards or enterprise agreements.

Most modern awards require consultation with employees regarding major workplace changes. The consultation process should include:

1. Meeting with the employee to discuss proposed changes.
2. Allowing the employee to provide feedback.
3. Considering redeployment opportunities.
4. Reviewing the employee’s feedback before making a final decision.

Prioritising this step and giving it proper attention is crucial to avoid unfair dismissal claims.

Neglecting Redeployment Opportunities

To qualify as a genuine redundancy, employers must explore possible redeployment opportunities within their business and associated entities. Assuming an employee’s unwillingness to relocate without offering redeployment can lead to unfair dismissal claims, as demonstrated by a recent Fair Work Commission case.

Having a Predetermined Outcome

Often, once a business decides to make redundancies, they don’t change their mind. This pitfall indicates that the consultation process was merely a formality. Avoid definitive language during the process and consistently emphasise that no final decision has been made to ensure genuine consultation.

Failing to Pay the Appropriate Entitlements

While most employers know the National Employment Standards set redundancy payment entitlements, mistakes can still occur, such as:

• Not checking employment contracts or agreements for payment amounts.
• Assuming they are a small business and exempt from redundancy pay.
• Wrongfully classifying employees as casuals.
• Not paying the appropriate notice period, especially for employees over 45 with more than two years of tenure.

Ensuring proper payment of entitlements is crucial to avoid legal issues and further impacting affected employees.

Insufficient Record Keeping

Even if you follow all steps correctly, you might still need to defend your actions at Fair Work. The best defence is thorough documentation. Keep records of all conversations, selection criteria, financial records, consultation letters, and any other relevant documents.

Key Takeaways

Redundancies are complex and can easily go wrong without a well-thought-out strategy. Legal requirements and case law developments make it difficult to keep up.

For any advice, guidance, or templates needed for redundancies, reach out to Standard Candle HR. We’re here to help you navigate the redundancy process with confidence and compliance. Feel free to contact Standard Candle HR for expert assistance with your next round of redundancies.

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