In the constantly changing compliance environment it is important, even in established, sophisticated businesses, to take some time out occasionally to review the business systems and approaches to ensure that they reflect best practice and are appropriate for the business size, style and operation. It is staggering how quickly a business can outgrow a process that used to work for them, or how quickly a small change that is missed can lead to large issues later on. This Employment 101 Series is all about going Back to Basics – ensuring that the simple systems and requirements are understood and operational, so that we can build on them and focus on the growth of the business.
The pressure to remain ‘efficient’ and responsive to changing customer needs and business realities, 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 instalment explores a restructure and examines the requirements for redundancy and redeployment.
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 and cannot be just a token gesture.
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.
The aim of consultation in the change and review process is to provide employees with information that their role may be effected by the current review, and to seek the employees comment on the review. This comment can be vital in exploring and selecting options that become apparent as part of the review. The employees are on the front line and may conceivably have insights that the business does not have, and may also be able to provide information that would be pertinent to any future decision on which option to implement change is adopted. If an employee, as part of the consultation process, indicates a willingness to consider a voluntary redundancy, this information may be useful if redundancies become a part of the review recommendations and next steps.
Employees must be aware that a review is underway that may impact them and their roles, and must have their comments, thoughts and concerns heard BEFORE an outcome of the review is finalised.
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 from above – if the implementation of a new software system has meant that the inventory management is now 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.
In another example the entire role may no longer be required. Consider the role of customer service representative in a large business that has multiple offices. It may be recommended by a review, that due to incremental improvements made over time, the customer service role at office X is no longer required, that the calls that customer service representative would usually have taken can now be undertaken as overflow by a customer service representative in office Y. In this case the entirety of the role of customer service representative at office X is no longer required to be done by anyone at that office.
Either type of redundancy is only considered genuine if there is a substantial change to the role as it was undertaken.
A role is not genuinely redundant if the redundancy is based around an employee, and not the business needs – redundancy can not replace appropriate performance management. If an employee is underperforming then that performance should be actively managed, rather than a redundancy explored.
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”. If the business has multiple locations the available roles in those other locations should also be considered and added to the list to offer and discuss with the employee.
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.
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.
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.
More From This Series
Employment Compliance 101:
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Elisha Radwanowski BCom(HRM &IR)
Executive Manager Employment and Compliance