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Employee Redundancy & Restructuring




Businesses struggling through the current recession often consider making employees redundant or restructuring their working conditions. Both involve legal considerations and can cause further problems if not handled correctly.

When can I make an employee redundant?

The general principle is that an employee can be made redundant only if there is no longer any need for that particular job to be done by anybody. Technically, it is the position that becomes redundant, not the employee. Like most employment law issues, the mix of legal sources involved in Federal and State systems can make the matter complex.

What are the consequences?

Most (but not all) employees will have some entitlement to a redundancy payment calculated according to their years of service. Again, the various Federal and State systems can be confusing. Taxation consequences of a redundancy payment, both for employers and employees, also need careful consideration in the light of the ATO’s draft ruling TR 2008/D6.

Can I restructure an employee’s conditions?

We often get calls from employers who want to change their employee’s conditions:- reduce the hours of permanent staff or have them take one day per week of accumulated long service leave. However, a contract of employment is first and foremost a contract and, like any contract, can only be changed if both parties agree. Employers have the right to retrench staff in the case of genuine redundancy, but otherwise, the terms of the contract remain binding.

How can Fleming Muntz help?

Our recent experience in assisting employers has shown again the importance of having and updating written employment contracts. Fleming Muntz’s specialist business lawyers can provide accurate, commercially useful advice on redundancy and restructuring issues for employers, as well as letters of offer, employment contracts and other HR documentation.

Important fine print

This update is for general information only. It is not a complete guide to the area of law. Competent advice should be obtained before taking any action.

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