Many SME business owners will need to consider ‘restructuring’ their operations over the coming months. The roles performed by different employees will necessarily come under the microscope – and some roles will need to go. Restructuring and redundancies can be a challenging thing for SME business owners at the best of times. In this article we set out some key points to reduce the pain.

When is someone redundant?

Someone is ‘redundant’ if the job they do is no longer required. This can occur because of a change in technology or business processes, as a result of a merger, or because of a general downturn in the economy. Importantly, redundancy is not related to an employee’s performance. For more information on when someone is genuinely redundant, read this article.

Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code applies to businesses with fewer than 15 employees. The code provides a checklist you can follow to ensure the redundancy is ‘fair’ and you therefore avoid an ‘unfair dismissal’ claim.

How many employees does your business have?

The threshold question you need to ask yourself is: ‘Am I really a small business employer?’ If not, then you will also need to consider things like redundancy pay.

A small business is a business that has fewer than 15 employees (i.e. up to 14!). When calculating the number of employees in a business, you must take into account:

  • The employees being terminated;
  • Full-time employees;
  • Part-time employees;
  • Casual employees who have been employed on a ‘regular and systematic basis’; and
  • Employees of any associated entities.

The trick here is trying to work out how an employee can both be ‘casual’ and employed on a ‘regular and systematic basis’. In short, if you want to exclude a casual employee you will need to be able to show that their shifts have not been regular and systematic.

Yes, I am a small business employer, do I need to pay redundancy?

If you are a small business employer, you are not required to pay redundancy (this may vary if your industry is covered by a Modern Award). To find out if your industry is covered by a Modern Award, and whether redundancy is payable under the Modern Award, please give us a call on 1300 88 23 86 for a no-obligation and confidential chat.

What do I need to pay my redundant employees?

The redundant employees must be provided with all their minimum entitlements on or before the last day of their employment. These entitlements include their accrued unused leave (annual leave and long service leave), notice period, and any other amounts they may be entitled to under their employment contract, such as bonuses or commissions payable.

What’s the next step?

If you are a small business employer and you are not sure where to start to restructure your business, call us on 1300 88 23 86 for a no-obligation and complimentary chat.