For employers and employees alike, it’s the norm to equate the awkward concept of redundancy with a cheque of reasonably generous proportions.

On the surface at least, it seems fair that staff should receive some level of payout to assist them through a possibly uncertain period of unemployment until another job opportunity arises.

But for employers, there are exceptions. And quite a few of them. Not all redundancies require a pay-out. General exceptions to a redundancy pay-out apply to employees who:

  • Have given less than 12 months continuous service.
  • Are terminated in serious misconduct
  • Employees hired for:
    • a stated period of time
    • an identified task or project
    • a particular season
  • Are employed on a casual basis
  • Are apprentices
  • Work for some types of small businesses (15 or less employees, including systemic and regular casual staff).
  • In certain circumstances, accepted mitigating factors might reduce Fair Work Australia’s standard formula, which is based on continuous years of service. Employers can apply for a discount in situations when they can demonstrate they’ve found alternative work for the affected employee or cannot afford to pay the full amount.

There is also another exception, although it is not so cut and dried. Workplace lawyers refer to it as, ‘Ordinary and Customary Turnover of Labour’. It can apply to any position, in any industry, regardless of length of service.

But exactly when does it apply?

Determining whether a redundancy is the result of ‘ordinary and customary turnover’ is crucial for an employer. Ironically, the key to making this call comes at the beginning of the employment period, rather than the end.

This exception has been generally applied to persons employed on the basis of a specific contract. For example, let’s say a cleaning company secures the waste disposal and management rights for a major stadium. It would be necessary for that company to hire a number of additional full-time staff to meet the terms of that contract.

It’s what the employer tells each employee upon engagement that could well determine whether they are entitled to a pay-out in the event of being made redundant. If the employer clearly communicates that the job is being offered on the basis of the stadium contract, then the employer would have a strong argument to resist a pay-out in the event of having to make that same role redundant should the contract not be renewed or cease for other reasons. If the employer fails to communicate this information, the employee might be entitled to believe their role would survive the stadium contract, and therefore be eligible for a pay-out should it be made redundant.

For employers whose work – and headcount – is dependent on large contracts, communication is key. Failure to adequately convey the employer’s situation can cost companies thousands of dollars should redundancies be necessary.

Our workplace law experts can ensure your business gets it right with every hire, thereby protecting you from expensive and unnecessary payouts in the long run.

If you require advice about workplace law, please contact Dominic Tonkin from our Employment Law team.