Dick Smith Closure: Employee Redundancies Explained

With the recent announcement that major chains Masters Home Improvement  and Dick Smith Electronics will be closing their doors nationwide, Victoria Bell and Ben Smith outline what considerations employees who are being made redundant should turn their mind to.

Redundancies occur when an employer determines that an employee’s positional role is no longer required.  This may happen when the business changes its operations in a major way, or in the case of Masters and Dick Smith, when a business becomes insolvent, bankrupt or otherwise closes down.

The Fair Work Act sets  out the minimum severance package to which a worker is entitled.

Casual employees and employees of less than one year service are not entitled to any redundancy pay. Part-time employees will receive redundancy pay on a pro rata basis.

Employees who have provided more than one year service are entitled to the following severance packages:

Employers are also required to give employees sufficient notice of their redundancy. The relevant notice periods are set out in the table below:Outstanding entitlements, such as annual leave and long service leave, also need to be paid out at the time of redundancy.

Employees over 45 years of age, of at least two years’ service, also receive an extra weeks notice.If insufficient notice is given by the employer, the remaining notice period must be paid out on top of the redundancy pay discussed above.

Employees who have received notice of a redundancy can leave the job during the notice period, however they will not be paid till the end of the notice period. These employees still receive the redundancy pay and other entitlements described above, however they are not paid for the un-worked hours remaining in the notice period.

Employees who are covered by specific State awards, Enterprise Agreements or individual contracts may be entitled to additional allowances than those provided in the Act. For example, a common feature of modern awards and agreements is the entitlement to one paid day off per week in the notice period to look for  new employment. As such, it is important to consult a lawyer to ensure you are getting the most out of your redundancy.

In addition to the above, when an employee is made redundant they will often be approached by their employer to finalise any outstanding workers compensation claim they may have. They will be offered a once off lump sum “redemption” payment. It is imperative that any employee offered a redemption payment obtain legal advice as the ramifications of accepting such a payment are significant.

For further information or assistance contact your nearest TGB office.