May 2024 – Rosemary Saad & Helen Freidman

Part 2

In Part One of our three article series we looked at the ways an employee’s contract of employment can be brought to an end and the circumstances which may render such termination lawful or unlawful.

In this article we will review the requirements associated with terminating an employment contract on the basis of redundancy:

Redundancy occurs when a particular job is no longer required due to factors such as technological changes, decreased demand, business closure, relocation, or restructuring.

Employees who meet certain criteria, including having at least one year of continuous service, may be entitled to redundancy or severance payments. However, the employees that are not eligible for redundancy pay include:

  1. employees with less than 12 months of continuous service;
  2. employees with fixed-term contracts, specific tasks, or seasonal employment;
  3. employees terminated for serious misconduct;
  4. most casual employees;
  5. trainees during the training period; and
  6. apprentices.

What if I have to close my business down because of bankruptcy or insolvency?

When an employer faces bankruptcy or insolvency, employees inevitably find themselves at risk of job loss, often without receiving their entitled compensation. The dissolution of a company typically marks the end of employment for its workforce. According to legislation, employees have a right to receive:

  • Unpaid wages and superannuation;
  • Unpaid leave, encompassing annual and long-service leave; and
  • Redundancy pay.

Each payment category must be settled in full before moving on to the next. In other words, all wages and superannuation must be completely paid before any unpaid leave compensation is disbursed, and so forth.

However, the proceeds from asset liquidation must first cover liquidation costs and fees, followed by satisfying priority creditors. In many instances, this allocation leaves minimal or no funds remaining for fulfilling employee entitlements.

In such circumstances, the Fair Entitlements Guarantee assists eligible employees by providing coverage for unpaid wages, annual leave, long-service leave, and redundancy pay.

For further advice on redundancy or any other employment-related matter please call Harris Freidman Lawyers on 02 9231 2466.