Why employers should look at alternatives to redundancy

'Letting go of a worker may not actually be the most cost-effective thing to do'

Why employers should look at alternatives to redundancy

COVID-19 has forced businesses across Australia to close their doors, putting employers in the difficult position of what to do with workers.

Indeed, hundreds of thousands of workers across travel, hospitality and retail sectors are facing months of uncertainty, with COVID-19 expected to further spread before the curve is flattened and business can resume as normal.

While employers will often assume that mass redundancies are their only course of action, other options are available and may actually be more cost-effective.

Employsure’s Managing Director Ed Mallett, said that letting go of a worker may not actually be the most cost-effective thing to do.

“If you’ve got employees with long-tenure, they may potentially receive redundancy payments of up to 16 weeks, which is a huge sum of money when you’re cash-strapped,” said Mallett.

“There are provisions in the Fair Work Act where you can apply to reduce or extinguish redundancy payments because you can’t afford them, but it is a tricky process.

“You need to be very careful and not be under the impression that redundancy is a quick and cheap option. It should be a last resort, and only done when it is thoroughly planned.”

As far as other options employers could consider first before redundancy, Mallett said there are several avenues that they could take.

“Re-negotiating the hours employees work during the downturn is one option, often reducing the staff bill 20 to 40%,” he said.

“An example of this is agreeing to a four, or even three-day work week. Leave without pay can also be negotiated.

Mallett added that reduced pay is another alternative that can be mutually agreed to, as long as it is above the award rate and minimum wage.

“While letting casual staff go can be an easy option, it should be approached with caution. In certain cases, someone who has worked for a business regularly and systematically may not be a casual staff member in the eyes of the law,” said Mallett.

“Employers will be making difficult decisions over the coming months, and we’re not yet seeing the true raft of redundancy coming into play, which would cause longer term rises in unemployment.

“As the Prime Minister has said, every job is essential. The longer we can protect them, the better.”

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