The pressure to remain ‘efficient’ and responsive leads many businesses to review their operating process, technologies and structures.  Upgrading machinery, software or adopting the latest process improvements can gain businesses the much needed efficiency in operation, but what does a business need to consider when those process and technological improvements mean that it no longer needs a particular role?  What are the steps required when a position becomes redundant or unrequired in a business?  This weeks HR Highlight explores a case study of restructure and examines the requirements for redundancy and redeployment.

Consultation

When a business is undergoing changes that result, or are likely to result in changes to employees roles or a restructure of the roles within the business there is a requirement to consult with staff about the action the business is considering and to allow for comment from the staff to be considered prior to making any final decision about the structure or the particular impact on roles and staff.  This consultation is required under the law.

Ideally this consultation should be taken early, in person and documented.  However, it is often the case that small changes lead to bigger issues.  For example the adoption of a new accounting software, while a small business decision, can often quickly, highlight that due to the automation within the new software, staff are being underutilised and the same outcomes can be achieved with fewer positions.  In this case a formal structural or business review may not have been initiated, but the implementation of the new software has triggered an observation that then triggers a mini review.  In cases such as these it is important to respond quickly, when it becomes apparent that recent technological or procedural changes are giving rise to a need to reassess roles and tasks, the employees should be consulted.

Decision Making

While consultation is a requirement the business has the right to make decisions, on business grounds, about how the business will operate.  

Decisions should be made exclusively on the basis of the business needs and not on any erroneous or personal grounds.  Where a business is considering redundancy for a larger number of roles there is a requirement to inform Fair Work.

When is a role Redundant

A role is redundant when the business no longer requires that role to be done by anyone.  The tasks of the role can continue to be required either in full or in part.  This dichotomy of a role no longer being required but the tasks of the role being still required gives rise to confusion at times.  It is not appropriate to make a role redundant and then create a new role with the same tasks, status, location etc and hire for that role…that would not be a case of genuine redundancy.  However, if the role is made redundant and some of the tasks of the role are no longer required to be done at all due to process or technological improvements, and all of the other tasks of the role are now done by other roles, then the redundancy is genuine.

In our accounting example – if the implementation of a new software system has meant that the inventory management is no automated to a large degree, it may become apparent that the Accounts Assistant: Inventory, role is being underutilised, being left with no data entry tasks and having only reporting and filing tasks.  The business may make the decision that as the new system has created other efficiencies the Accounts Assistant: General can now undertake the inventory reporting tasks as well as the minimal filing tasks, making the role of Accounts Assistant: Inventory no longer required, or redundant.  The role is not required, but some of the tasks are still required to be done.

Redeployment Options

After consulting with staff, if the business then makes a decision that will impact on the employment of a staff member there are several obligations.  The business must first explore all possible redeployment options and collate a list of appropriate redeployment options.  A list of all available positions in the new structure should be made and each should be considered for “appropriateness”. 

A redeployment of the same or similar salary, position, status, hours, location, skills etc would be considered to be appropriate.  A redeployment that has significant differences may be offered and accepted at the request of the employee. 

Redundancy Meeting

The business must then have a meeting with the employee (called with notice) to discuss the businesses decision regarding the current role and the next steps.

At this meeting, if there are appropriate redeployment options, they must be offered to the employee. 

It is important to note when discussing the redeployment, it is important to discuss openly with the employee the options that were considered, and why they were considered appropriate or inappropriate for redeployment, as the employee’s own comments and circumstances must be considered.  Businesses are reminded that a redeployment that has significant differences may be offered and accepted at the request of the employee.  For example, the employee may be a full-time administrator and the new structure may only have casual task focused roles.  Based on the employee’s life stage they may be ready to work fewer hours and may be interested in taking one of the casual positions.

If the employee agrees to an appropriate redeployment, then the employee transitions to that role and there is no other requirements.  It is advised that this transition and its reasons be documented in writing.

If they reject the appropriate redeployment, then they are taken to have resigned (no redundancy payment applies).  If the employee declines an appropriate redeployment then they have elected to withdraw their labour and resign.  Before accepting such a stance from the employee it is important that the business clearly explain that by rejecting an appropriate redeployment the employee is NOT entitled to redundancy payments, as this may significantly impact the employee’s decision.

If there are no appropriate redeployment options then a redundancy payment will apply.  The redundancy payment and notice is based on the employee’s age and length of service.  At the meeting, the business should be ready to answer questions as to the nature of any redundancy and notice payment that will apply to each particular employee.  It is also advisable to have on hand information as to the tax treatment of these payments.

Lastly, at the meeting it should be communicated if the employee is expected to work out the notice period or will be paid in lieu.  If the employee is to work out the notice period, it is important to confirm and communicate the job search entitlement and notification procedures.

Next Steps

After the meeting the business should document the meeting in a letter outlining all of the important items;  that there was a business need for restructure, that there was consultation on the restructure, that there was a decision to make the role redundant, that the tasks of the role are not needed anymore or are being done by other roles, that there was a meeting to discuss this, that at the meeting appropriate redeployment options were discussed, and the details of the outcome – either transition to new role, or redundancy payment, notice etc.

Here to Help

ACAPMA members are reminded that ACAPMA Employment Professionals are available to assist members on employment@acapma.com.au.

HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by calling 1300 160 270 and speaking to one of ACAPMA Employment Professionals its free for members. Click here to apply for ACAPMA membership.