Voluntary Redundancy and Workers Compensation

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Redundancy and Workers Compensation responsibilities and obligations generally proceed along separate tracks. However, they may intersect in complicated ways if a) a worker on Workers Compensation is later made redundant, or b) a worker who is anticipating redundancy claims a workplace injury. In this article, we discuss the complications around this, why voluntary redundancy is an appropriate workaround and how our employment lawyers can help.


Voluntary redundancy and workers compensation

Employers have important obligations to their workers when the employee’s job is abolished or when an employee is unable to continue working because of a workplace injury. In NSW, the Fair Work Act 2009 generally requires notice and redundancy payments in the former situation. Modern employment contracts and awards may also require an employer to follow consultation processes with an employee about the redundancy.

To address the risk of workplace injury, on the other hand, employers are required to maintain appropriate workers compensation insurance, ensure that the workplace is safe and deal with injuries appropriately. 

Redundancy Obligations

Redundancy pay obligations do not apply to small employers who employ fewer than 15 employees, although notice obligations generally do. For employers over that threshold, notice and payment requirements are triggered when an employee’s job is abolished because the task is simply no longer required or as a result of workplace restructure, where tasks are reassigned and fewer workers are necessary. They are not triggered when a worker:

  • is discharged for poor performance or conduct;
  • is offered other employment within the business or is transferred to a new employer;
  • resigns;
  • has been employed for less than a year; or
  • is a casual worker or temporary worker who has completed the assignment.

The amount of notice an employer must give depends on the employee’s length of service. It ranges from one week for less than a year’s employment to four weeks for more than five years of employment. Employees over the age of 45 with at least two years of service must be given an additional week’s notice.

Compulsory redundancy pay is similarly calculated on the basis of length of service and ranges from four additional weeks for employees with between one and two years of service to twelve weeks for those with at least ten years of service. The employee must also be compensated for unpaid wages and any accrued leave entitlements such as annual leave or long service leaves.

Risk of an Unfair Dismissal Claim

The risk for employers is that an employee may claim that the termination is not a genuine redundancy, but an unfair dismissal. The law governing unfair dismissals gives the employee certain rights up to and including reinstatement. Under the Fair Work Act, unfair dismissal proceedings must be begun in Fair Work Australia within 14 days of the last day of employment. For many employers, an offer of voluntary redundancy is the safest method in avoiding action for unfair dismissal or discrimination in a difficult redundancy situation.

Voluntary Redundancy as a Solution

Employers may choose to accomplish a reduction in staff by offering a voluntary redundancy package as a financial incentive to individuals within the relevant job classification. A voluntary redundancy should be implemented carefully to avoid the loss of only the most valuable workers who feel confident in their ability to find new positions elsewhere. One solution is to ask all relevant employees to re-apply for the remaining positions and to offer redundancy packages to those not re-hired, in a so-called “spill-and-fill” strategy.

Workers Compensation Obligations

Employers in NSW (other than those who pay $7500 or less in annual wages, do not employ apprentices or trainees and are not a member of a group for premium purposes) must maintain Workers Compensation insurance. Premiums are calculated on the basis of payroll, business activities and workplace safety experience, among other factors.

When an employee is injured, an employer has an obligation to:

  • attend to the employee as soon as possible, ensuring they receive medical treatment if required;
  • notify the insurer within 48 hours;
  • complete the register of injuries as soon as possible;
  • work with the insurer to develop an injury management plan for the injured worker;
  • implement and monitor a return to work plan for the injured worker; and
  • retain the injured worker for a period of at least six months following the injury.

Once notification of injury form is completed an employer must forward it to the insurer within five days of receipt in order to have the excess waived and submit relevant medical certificates as soon as possible.

Who is Covered by Workers Compensation?

Most, but not all, employees of non-exempt employers are covered for Workers Compensation. The exceptions include volunteers and certain contractors under labour-hire service arrangements. The contractor exceptions are determined on a case-by-case basis. 

If you are uncertain whether a worker is covered, you should seek professional advice, as failure to include a worker can have serious legal consequences. You should also ensure that proper information has been submitted to your insurer so that premium payments are calculated correctly. Undercounting workers or underreporting payroll can have similarly serious consequences.

When Two Worlds Collide

What if you have concluded, on the basis of evidence, that a worker who is out on workers compensation is actually able to return to work, but refuses to do so. Can you terminate his or her employment for reasons of conduct?

What if a worker is unable to work because of a workplace injury and, for unrelated reasons, it becomes necessary to downsize your business? Can you make him redundant or offer a voluntary redundancy package within the six-month period following the injury?

This is genuinely perilous territory for an employer both in terms of potential legal liability and with respect to impact on the insurance premium. Determinations of these issues are very fact-specific, so you should work closely with both your insurance agent and your business lawyer to avoid unintended repercussions and to help you determine if a voluntary redundancy is your best option.

The workers’ compensation lawyers at Owen Hodge Lawyers have ample experience in resolving voluntary redundancy and Workers Compensation issues and would be eager to help you evaluate your options and to choose the best course of action. Call us today at 1800 770 780 or contact us via [email protected] for a consultation.

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