The Advertiser: Offered a Redundancy Package?

TGB’s Belal Moraby writes about your legal entitlements and the consequences of accepting a redundancy offer. 

This article was also published in The Advertiser.

In the current financial climate a growing number of Australians are having to consider redundancy packages from work.  

Redundancy occurs when an employer no longer requires the job done by the employee to be done by anyone and makes that job redundant. 

There can be numerous reasons why this might happen.  For example, the business restructures and the position is no longer required, or due to a downturn in business the employer needs to reduce staff numbers.  

Such a payment may support a person’s lifestyle into retirement or it may help grow their wealth.  But for many people it is just money to live on till the next job. 

It pays to be aware of your minimum legal entitlements as well as understanding the practical consequences of taking a redundancy payment. 

As part of the Fair Work Act 2009 the National Employment Standards (NES) are 10 legislated minimum standards which apply to all employees covered by the national workplace relations system.  Redundancy pay forms part of the NES. 

The minimum amount of redundancy pay payable by an employer is as follows: 

Period of continuous service            Redundancy pay period

At least 1 year but less than 2 years:  4 weeks

2 – 3 years:                                           6 weeks

3 – 4 years:                                           7 weeks

4 – 5 years:                                           8 weeks

5 – 6 years:                                           10 weeks

6 – 7 years:                                           11 weeks

7 – 8 years:                                           13 weeks

8 – 9 years:                                           14 weeks

9 – 10 years:                                         16 weeks

Over 10 years:                                     12 weeks*

* note reduction from 16 to 12 weeks

In some cases, particularly where there is a large-scale redundancy, an employer may offer more than the amounts listed above.   

Terms contained in awards, enterprise bargaining agreements and employment contracts cannot exclude or provide for an entitlement less than what is provided in the NES. 

In addition to any entitlement to redundancy pay an employee is entitled to notice of termination or payment in lieu of notice and any unused accrued statutory entitlements such as annual leave etc. 

Where employees are owed entitlements after losing their job because their employer went bankrupt or into liquidation they may be able to obtain financial help through the General Employee Entitlements and Redundancy Scheme (“GEERS”) see: http://deewr.gov.au/eligibility-geers

Redundancy payments which meet the genuine redundancy conditions are tax free up to a limit based on an employee’s years of service.  This component of the payment is not assessable for tax purposes.  Any amount over the tax free limit is taxed as an employment termination payment (ETP).   You should seek advice from a financial expert regarding taxation rates.  ETP’s cannot be rolled over into super. 

After receiving a redundancy payment there may be a waiting period lasting the length of time the redundancy covers before one can claim income support payments from Centrelink. 

This information is broad, so if you are considering redundancy it is important to seek legal advice specific to your circumstances. 

Contact Belal at TGB’s Adelaide or Salisbury offices, or register online here.