Redundancy and retraining

Introduction

When a worker is retrenched, her or his employment contract is ended for lawful and legitimate reasons. Retrenchment, or redundancy, applies mostly to permanent (full-time or part-time) workers. Generally, an employer will negotiate with an employee the circumstances surrounding a potential redundancy and offer the employee the offer to be made redundant. Redundancy normally includes a generous 'lump sum' payment and other benefits, like retraining options and help finding alternative employment. Retraining is emerging as a good way to avoid being made redundant. It involves learning new skills or creating new work opportunities for yourself through education, training and networking. Many employers will help you retrain or help you find alternative employment.

Redundancy and retrenchment

Retrenchment is the act of being made redundant, that is, the job is redundant (of no use) and the employee is retrenched because they no longer have a job to do. Redundancy applies when an employer decides that an employee's job no longer has to be done by anyone. The employee will be retrenched and the position will cease to exist. It is important to note that redundancy has nothing to do with an employee's performance, conduct or abilities. It is also important to note that under the definition of redundancy, the employee's position may not be taken by a new employee, because the position must no longer exist.

Redundancy occurs for a number of reasons. Often, business cycles improve or technology intervenes, making a certain job unnecessary; at other times business experiences a downturn, also making a position dispensable or too costly for a business to survive. Whatever the legitimate reason for redundancy, an employer is required by law to give plenty of written notice to the affected employee, so this person can arrange alternative employment. The law also requires employers to clearly state reasons for making employees redundant.

Businesses employing over 15 employees are required to pay a specified number of weeks of severance (redundancy) pay. Calculation of severance pay takes into consideration such things as the number of continuous years of work service and entitlements, like annual leave, that are outstanding. A week of severance pay does not typically include such things as overtime rates of pay, shift allowances or penalty rates. Severance pay allows redundant employees a fair way to support themselves financially through what can be a difficult time, especially if the employee does not wish to leave the company, but has no choice. It also allows employers to feel that they haven't treated a redundant employee unfairly.

To illustrate:

• if you have worked less than one year you receive no severance pay
• if you have worked for three continuous years you are entitled to seven weeks' severance pay
• if you have worked for ten years continuously, you are entitled to 12 weeks' severance pay.

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Many Awards, Enterprise Agreements, individual agreements and contracts provide generous pay and entitlements to redundant employees. In general, apprentices, trainees, casual employees and sub-contractors are not entitled to redundancy pay and entitlements.

Retraining

On occasion, severance pay and redundancy entitlements may not be required when a transmission of business has occurred, such as where a business has changed its operations, such that most employees can continue to be employed in a new capacity after the changes. Retraining is the acquisition of new skills by an employee. These skills may enhance skills that they already have, or they may be different skills that the employee is willing to learn to stay employed. The benefits of retraining staff for a business is that they can keep staff that they know and trust and who are familiar with the business' operations. See image 2

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