HR Policies and Procedures

Staff Redundancy : General Information

    
 Policies and Procedures: Table of Contents
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 Part B 
 Conditions & Benefits of Employment
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   41 
  Change, Redundancy & Separation
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   41.4 
   Staff Redundancy: General Information

B - 41.4 Staff Redundancy: General Information

It is required that any Head of School or supervisor anticipating a reduction in staff numbers seek further information and assistance (including information on consultation and the management of change) from staff in Human Resources as listed below, prior to taking action.

Further information is available from:

Bob Farrelly
Director, Human Resources
Email: rfarrelly@admin.uwa.edu.au
Telephone: 6488 3223

Jenny Robertson
Manager, Employee Relations & Management Services
Email:jrobertson@admin.uwa.edu.au
Telephone: 6488 3031

David Rogers
Senior Employee Relations Officer
Email:drogers@admin.uwa.edu.au
Telephone: 6488 3003

Mary MacPherson
Senior Employee Relations Officer
Email:mmacpherson@admin.uwa.edu.au
Telephone: 6488 2155

Kerry Evans
Senior Employee Relations Officer
Email:kevans@admin.uwa.edu.au
Telephone: 6488 3008

 

Managing Redundancy

When the position held by a member of staff, on a tenurable/tenured, on-going or fixed term contract, ceases to exist or becomes surplus to requirements, the job is declared redundant. This results in a range of alternative career options for affected staff (see Part B – 41.6) and requires a review and assessment of existing structures and responsibilities within the affected area.

The University of Western Australia is committed to ensuring that all staff without a position as a result of redundancy and, therefore, facing career change, will be provided with assistance to re-establish themselves.

The immediate day-to-day management for individual cases is the direct responsibility of the relevant head of school or supervisor.

It is the responsibility of affected staff, to take advantage of the range of support mechanisms available to help them evaluate the options they may have.

In general this requires that they:

  • identify their skills and career preferences;
  • gather information about available options; and
  • develop and implement an action plan to effect the preferred option.

Fixed Term Contract Positions

Where the redundant position is a fixed term contract there are three possible options. The incumbent can work out the remainder of the contract period, be paid out the balance of the salary owed for the period of the contract or, in some circumstances, be moved to another position at the same level. In most cases the employee can be required to clear any leave owing during the period of the contract.

Ongoing Positions

There are four options available to ongoing staff whose positions have been declared redundant.

  • Redeployment (to another position of equivalent classification within the University including fixed term work assignments)
  • Retraining (undertaken within or external to the University)
  • Reduction of time (conversion to a fractional appointment)
  • Release
    • Resignation (following a successful search for employment outside the University
    • Leave Without Pay or Secondment
    • Retirement (with or without an honorary appointment in the case of academic staff); retired staff may be considered for casual employment following a break in service
    • Separation (Voluntary)
    • Redundancy (Involuntary)

 

Genuine (Bona-fide) Redundancies & Other Termination Payments: a Taxation Point of View

For an employee to receive the tax concessions associated with a redundancy, the redundancy must comply with the Australian Taxation Office (ATO) rules regarding genuine (bona-fide) redundancies. If a payment is made to an employee under the guise of a redundancy with the tax concessions applied and subsequently is assessed as not complying with the ATO's rules regarding genuine (bona-fide) redundancies, the University and/or the employee may be penalised.

When is a redundancy genuine (bona-fide)?

According to the ATO, a redundancy is genuine when an employer dismisses an employee because the job they were doing is made redundant.

A bona-fide redundancy occurs when:

  • the employer has made a definite decision that the job of the employee will cease to exist
  • the decision is not due to the ordinary and customary turnover of labour
  • the decision led to the termination of the employee's employment
  • the termination is not on account of any personal act or default of the employee, or caused by any consideration peculiar to the employee, or is for personal or disciplinary reasons.

A bona-fide redundancy does not occur when:

  • the dismissed employee has reached normal retirement age (if the employee was going to retire or resign anyway the redundancy would not be genuine (bona-fide) from a taxation point of view)
  • the employee was not dismissed but left voluntarily (if the employee was going to retire or resign anyway the redundancy would not be genuine (bona-fide) from a taxation point of view)
  • another employee of similar age or skills replaced the employee soon after the employee was dismissed for disciplinary reasons (-if it is believed that the aim of the redundancy was to get rid of the employee as opposed to terminating the job the redundancy will not be genuine (bona-fide) tax-wise)
  • the employee was dismissed for inefficiency

Can an employer make a lump sum payment to an employee on termination of employment if it is not a genuine (bona-fide) redundancy?

An employer may make a payment to an employee on termination of employment even if it is not a genuine (bona-fide) redundancy. The only difference to a genuine (bona-fide) redundancy is the application of tax.

A bona-fide redundancy is tax free up to the limit calculated by a set formula. Amounts that exceed the tax free component are paid as Eligible Termination Payments (ETPs). Certain other payments made on termination of employment are also considered to be ETPs. Such payments available to the university are as follows:

  • unused rostered days off (RDOs)
  • payment in lieu of notice
  • a gratuity or 'golden handshake'
  • compensation for loss of job
  • compensation for wrongful dismissal

Traps for the unwary

  • Because a termination of employment has been called a redundancy does not make it a genuine (bona-fide) redundancy for tax purposes. A redundancy will not be genuine if the employee is not dismissed and if it does not satisfy all of points at a. above or does satisfy any of points at b. above.
  • A dismissal is still made if an employer seeks expressions of interest from employees before deciding which employee to dismiss. A dismissal still occurs if an employee is offered a choice between a redundancy and redeployment and opts for the redundancy.
  • Payments for annual leave, long service leave or leave loading are not ETPs.
  • Payment for work done or leave taken before the termination of the employee but paid after the termination is normal taxable income.
  • Ex gratia payments made to problem employees as enticement to leave can be perceived by continuing employees as rewards for non-performance.
  • Property transferred to an employee on termination is not a fringe benefit but an eligible termination payment. Human Resources must be notified of any property transferred to an employee as a result of termination in addition to the normal notifications required when an asset is sold, traded in or transferred.

 

References

Eligible Termination Payments – A guide for employers on redundancy of an employee.

Eligible Termination Payments – A practical guide for employers in meeting your obligations to employees who stop working for you.

Eligible Termination Payments – An employee's guide to lump sum payments from your employer.