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Confused about Redundancy?

There are many ways to leave a job.

One can just resign (notice periods generally apply) and move on to other employment or not. This is termination at the initiative of the employee.

One can be sacked for a range of performance or conduct reasons. This is termination at the initiative of the employer. This may or may not be considered “unfair” and hence is challengeable.

Just because a notice period is specified in an agreement it doesn’t mean that you can be sacked for no good reason by simply giving the required notice.

In the middle ground it may be that a negotiated separation is agreed generally for a payment enshrined in a deed. This is often called a “golden handshake”.

At the moment, it is redundancy that is at the fore of many employees’ minds as softening enrolments and dislocations due to the Year 7 shift to secondary sites kicks in. Redundancy occurs when employment is  terminated by the employer because the work being performed is no longer required or due to insolvency. Redundancy payments and conditions are covered by two types of law: Industrial and Taxation. We at the IEU can offer advice on the Industrial components, but members will need to seek advice from a taxation professional for taxation advice.

Industrially, the Enterprise Agreement is the primary document for enshrining the process and financial arrangements. There are perhaps three types of redundancy, each with important differences.

Forced redundancies are, as the name implies, where an employee is involuntarily terminated due to redundancy. There is no prohibition on the employee later accepting employment with the same or a related employer.

Voluntary redundancies occur when an employee offers to be considered for redundancy if it is considered necessary by the employer. There may be conditions attached by the employer for such arrangements. At the moment in the Catholic sector 4 weeks’ extra pay is offered but there is a 2 year exclusion from employment with the same employer (although not with a different Catholic employer)

Partial redundancy occurs where only a part of a job is redundant or a lower job is accepted instead. There is a partial compensation in these situations. We have preserved in the current agreement the ability of an employee made partially redundant to convert this to a full redundancy.

Taxation considerations vary depending on individual circumstances.

Normally employees under 65 will find that the tax treatment of a forced “genuine redundancy” results paying little or no tax on the redundancy payment component. Over 65s are concessionally  taxed on redundancy payments.

However as much as a  “non-genuine” redundancy may still receive a redundancy payment, it will not necessarily receive a zero tax treatment. One of the tests  for “genuineness” of a redundancy is the cessation of all work with the employer, so expect a partial redundancy to be taxed. Similarly if re-employment with the same employer is arranged before the redundancy takes effect, one could expect the ATO to consider that a sham and not genuine.

Industrially an employer can pay whatever they like over the agreement minima and negotiate whatever conditions they like for the extra component, but just because an employer categorises a payment as a genuine redundancy, it doesn’t mean the ATO will reach the same conclusion. People need taxation and industrial advice. The IEU only does industrial.