As the economy remains soft and redundancies/retrenchments seem to be the order of the day, particularly in the mining and its service industries, it is topical to reflect on aspects of redundancy from the perspective of the employer.
Employer
A redundancy occurs when the employer determines a position is superfluous and does not need to be filled; this may arise, for example, because of:
- new technology
- declining sales
- restructure, merger or takeover
As an employer you may be subject to the Fair Work Act, which covers employees including:
- all people employed by companies (Pty Ltd or Ltd)
- all people employed in VIC, NT and the ACT
- all people employed by the Commonwealth or a Commonwealth authority
- waterside employees, maritime employees or flight crew officers employed in connection with interstate or overseas trade or commerce
- all people employed by sole traders, partnerships, other unincorporated entities and non-trading corporations in NSW, QLD, SA and TAS.
Should the Fair Work Act apply to you as an employer you will not, however, be required to make redundancy payments in the following circumstances:
- the employee has less than 12 months of continuous service
- the employee is employed in a small business of less than 15 employees
- the employee was terminated because of serious misconduct
- the employee is casual
- the employee is an apprentice
- an industry-specific redundancy regime already applies
The Fair Work Act prescribes payments to be made in the case of redundancies, but genuine redundancy payments to employees are concessionally taxed (tax-free) in the hands of the employee, to the following extent:
Financial Year |
Flat Amount |
Amount for each year of completed service |
2013/2014 |
$9,246 |
$4,624 |
2012/2013 |
$8,806 |
$4,404 |
The redundancy payee must be under 65 years of age at the time of the arm’s length payment and there should be no re-employment of the redundant employee; nor should a “redundancy” payment be in relation to the termination of a fixed period engagement.
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