John, a local business owner has contacted CHRME with his situation below.
John runs a medium-sized contracting business.
Like many other businesses in his sector, a change to government policy has affected his turnover and he is desperate to realign his business to avoid incurring losses. It seems the best solution is just to retrench staff until his outgoing balances his incoming. He has noticed another major competitor has just done this, but there seem to be a few legal issues about their redundancies. The competitor reduced its staff very quickly from 750 employees to 500, and closed and merged many departments
Some staff were union members, and, according to the union, the company did not meet its legal obligations, and acted in a cold-hearted manner, with no warning of sackings given to workers. They said by failing to notify and discuss the change with employees (and their representatives) the company was in breach of the award covering its employees. They have threatened to take the matter to the Fair Work Commission if the business fails to meet its obligations to employees.
Given John’s declining business situation he doesn’t know what to do. He wants to get rid of workers quickly but doesn’t want to be involved in on-going legal issues that can be very time consuming and expensive.
What should John do?
Under notice of termination from July 2009 most Australian workplace are covered by the Fair Work Act 2009 and John has to give advance notice to all workers (other than casuals). According to the Act, workers must be given notice of termination based on their period of continuous service, with an additional week’s notice required to be given to a worker who is over 45 years of age and who has completed at least two years of service.
This does not apply to casuals so John has some room to make “quick decisions” with his casual staff.
In addition, John needs to balance the advantage of reduced costs through less salaried staff against the disadvantage of potentially losing important skills for the future of the company. Much depends on how critical his overall business situation is. Is it in a survival mode, or it is more a problem that can be corrected naturally through attrition and he can replace his salaried staff with contractors and build up his flexibility for rapid change in the future?
John’s options are limited if his staff are permanent employees. He can retrench staff to reduce his workforce but must pay out their outstanding salaries, wages and pro-rata holiday and long service leave. If he chooses to make these positions redundant, he must pay out staff who have been with him longer than 12 months according to a scale specified under a legal obligation as well as any outstanding wages and holidays.
If John’s staff are casual, he is under no legal obligation to keep them considering the business environment he is in.
Either way John needs to be compassionate and caring to these staff, and in the manner in which he deals with his staffing problems.
John needs to take care to follow his substantial legal obligations. Reading the Fair Work Act would be a start, but contracting a redundancy specialist might easily avoid legal action and result in savings in the long run. It would also ensure that everyone is treated fairly, so John can sleep at night.
John should think about next time: if he operates in a cyclical industry or one that is affected by government policies it’s wise to have a mix of staffing arrangements. Some casuals, some contractors and a core of skilled and motivated permanents is the best mix: John needs a more detailed focus on risk, and a HR manager with clear directions. Or, if that kind of thing isn’t John’s strength, he needs a CEO who can look after such matters.
If John has done everything he can to keep his best employees he should think practically about who to terminate: It is more expensive to terminate some workers than others. In addition, he might be able to negotiate voluntary redundancies with workers who were thinking of leaving anyway.
First, John has to ensure it is a genuine redundancy otherwise his employees would be able to claim for unfair dismissal.
A genuine redundancy is when:
- The person’s job doesn’t need to be done by anyone
- The employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.
John has to restructure his company in a way that is legal for him to retrench his employees. There are many legal issues that could be involved with redundancy; hence it’s best for John to consult professionals to assist him with this situation.