Making an Employee Redundant: A Practical Guide for Business Owners

As a business owner, one of the toughest decisions you’ll ever have to make is laying off an employee. Whether it’s due to economic downturns, restructuring, or changes in business strategy, making an employee redundant can feel like a cold and heart-wrenching decision. It’s not just about cutting costs or reorganising; it’s also about managing the emotional and legal impacts on the employee and your business.

Redundancy doesn’t have to be a nightmare. If you understand the process and approach it with empathy and professionalism, it can be a smooth and even positive experience for all involved.

Understanding Redundancy: It's Not Just About Cutting Costs

Redundancy happens when a business no longer needs a particular job to be done by anyone. In practice, this can occur if your company restructures, slows down, introduces new technology, or closes part of the business.

For example, introducing new accounting software might mean the old bookkeeping role is no longer needed, or a downturn in sales might force you to trim back on roles. In each case, the job is eliminated, not just the person.

Under the Fair Work Act and National Employment Standards (NES), a redundancy is only genuine if the role itself truly ceases to exist. That means you cannot simply replace one person with another in the same job.

In legal terms, a “genuine redundancy” requires three conditions:

• the business no longer needs the job done due to operational changes;

• any required consultation has been carried out; and

• it would not have been reasonable to reassign the employee to another role within the business.

  
  

If these conditions are not met, for example, if an employee feels they were dismissed to avoid paying them or to get rid of 'a difficult worker' and replace them with someone else, you risk a legal claim.

Key Obligations When Making an Employee Redundant

Redundancy is governed by the Fair Work Act , which requires businesses to follow specific legal steps to ensure compliance. Regardless of business size, you should treat employees fairly, document your process, and give the required notice.

You must follow a fair and transparent process, including:

• Check the role is truly gone. 

  Confirm that no one will continue in that position. You cannot claim redundancy if you plan to replace the person or distribute all their tasks to others without eliminating the role.

• Consult affected employees early. 

  If a modern award or enterprise agreement covers your staff, it likely includes consultation rules for major changes. In any case, it’s best practice to sit down with the employee as soon as possible.

  Explain the business changes, how the role is affected, and listen to their feedback. A fair consultation might include notifying employees about the proposed change, explaining the reasons and timing, discussing ways to minimise impact, and considering their ideas.

  
  

• Consider redeployment. 

  Before confirming a redundancy, think carefully about whether the employee can be placed in another suitable job in your business. A redundancy isn’t genuine if it would have been reasonable to reassign the employee elsewhere in the business.

  For example, if you have a vacant role that the person is qualified for, you should offer it. You may even consider whether they can move to a less senior or differently paid position – the law allows offering a lower-paying job if it’s still reasonable.

  Document any searches for alternative roles to show you tried.

  
  

• Provide notice and final pay. 

  Once you proceed, give written notice of termination (or payment in lieu of notice). Prepare a final pay including all owed wages, accrued leave, and any agreed redundancy payment.

  If the employee is entitled to redundancy pay, calculate it based on the statutory table. (For eligible workers, this ranges from 4 weeks’ pay after 1–2 years’ service up to 16 weeks for 9–10 years, with a special reduction to 12 weeks for 10+ years of service).

  
  

• Who doesn't get redundancy pay?

  Small businesses with fewer than 15 employees generally do not have to pay redundancy pay. However, this exemption does not remove the need for giving notice or following a fair process.

  Also, certain employees do not get redundancy pay by: those with under 12 months’ service, employees on fixed-term contracts or seasonal work, those dismissed for serious misconduct, most casuals, and apprentices or trainees serving their agreement.

The Emotional Impact: Treating Employees with Respect

Redundancy isn’t just a business decision; it deeply affects people. How you handle it will leave a lasting impression on both the individual and your team.

While often viewed negatively, redundancy can also open doors for growth for the business and the employee. When approached with empathy, honesty, and respect, it doesn’t have to be devastating. In fact, it can help someone move forward with dignity and support.

• Give Notice Early: 

  Whenever possible, give the employee as much notice as possible before you make the redundancy announcement. This allows them time to process the situation and make plans for their next steps.

• Be Transparent: 

  Don’t sugar-coat the situation. Be clear about the reasons for the redundancy and how it impacts the business. Honesty can go a long way in maintaining goodwill, even in difficult situations.

• Offer Support: 

  One of the best things you can do for an employee facing redundancy is offer them assistance in finding a new role. This could include offering career coaching, resume writing services, or outplacement support. It’s not just about cutting them loose and wishing them the best; it’s about showing them you care.

• Maintain Dignity and Respect:

  Finally, make sure the process is respectful. Don’t make the announcement in front of others; avoid public humiliation. Treat them as a valued member of the team until the very end.

By showing your employees that you’re looking out for them, you’ll not only reduce the emotional toll of redundancy, but you’ll also maintain the loyalty of your remaining staff.

Moving Forward as a Business

Once the redundancy process is complete, it’s essential to focus on rebuilding morale and trust within your remaining team. Redundancy can shake a businesses foundation, and it’s important to move forward with a renewed sense of purpose.

• Keep communication open: Be upfront with your team about why the redundancy happened and what it means for the business. Honest conversations build trust and prevent rumours.

• Look ahead: Use this time to realign your business strategy. Show your team the redundancy was part of a bigger plan, not just a cost-cutting move.

• Support your team: Invest in training and development to re-engage and upskill your remaining staff.

If you feel unsure at any point, get in touch. I work with small and medium businesses to make HR easier, safer, and less stressful. 

Book a free discovery call today. Let’s make managing staff the least of your worries. 

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Need help? Contact us today - sandra@hrconsultingtas.com.au or 0408 408 225  

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