Socially responsible restructuring
Retrenchment should be a last resort for employers with all options being explored before reducing their workforce.
If retrenchment cannot be avoided, the Good Practice in Socially Responsible Restructuring guide has been developed for employers who may be considering restructuring.
The guide outlines lessons learnt from the collaboration between the government and car companies in the closure of Australia's automotive manufacturing industry. The guide highlights how socially responsible restructuring can transform a stressful experience into a positive career transition for workers. Employers who engaged in responsible restructuring reported increased productivity, reduced absenteeism, higher worker morale and brand loyalty throughout the retrenchment process.
Retrenchment Rapid Response Framework
The Retrenchment Rapid Response Framework is how the Government supports retrenched workers to make sure they can find a new job as soon as possible, while also helping employers meet their obligations and provide their workers the support they need. The diagram below outlines the Retrenchment Rapid Response Framework.
Before you prepare a letter of termination for any of your employees, there are a number of steps that you should consider in relation to redundancies.
If at any time you need more information or assistance, call the Fair Work Infoline on 13 13 94 or visit the Fair Work website.
Suggested steps for preparing a letter of termination
Step 1: Communicate changes to the employees affected
Regular communication with employees is important during periods when a business is undergoing major workplace change. Most modern awards and enterprise agreements require employers to consult with their employees regarding changes, including changes to production, organisation, structure or technology.
An employer should:
- inform employees about changes within the business that may affect their working arrangements
- provide employees with an opportunity to ask questions, and
- consider all options and alternatives to redundancies, such as redeployment, job sharing and reduced overtime.
For further information on this topic, see the Best Practice Guide: Consultation & cooperation in the workplace.
Step 2: Find out about notice periods and redundancy entitlements
Determine what the minimum notice of termination and redundancy pay entitlements are for affected employees. Notice of termination and redundancy entitlements are contained in the National Employment Standards, however awards and enterprise agreements often include additional redundancy entitlements for employees. If there is an applicable industrial instrument, contract of employment or workplace policy that provides different redundancy amounts than the National Employment Standards, you need to provide the employee with whichever is more generous.
The employee can work the notice period or the employer can pay the employee in lieu of that notice.
If you decide that you no longer want an employee’s job to continue, except where you have made this decision because of becoming insolvent or bankrupt or due to the ordinary or customary turnover of labour, then the job (not the employee) becomes redundant and you can end the employment relationship.
Redundancy does not occur because of the performance or conduct of the employee.
For more information on redundancy and notice periods, visit the Fair Work website or contact the Fair Work Infoline on 13 13 94.
Step 3: Inform Centrelink
If you decide to terminate the employment of 15 or more employees and it is for reasons of an economic, technological, structural or similar nature (or if the reasons include any of these things) you must provide Centrelink with written notice of the dismissals. More information, including details on how to provide written notice to Centrelink can be found on the Department of Human Services website.
Step 4: Create your letter of termination of employment
If an employee’s position becomes redundant you need to give the employee written notice of the termination of their employment. The letter of termination should specify:
- the reason for the termination of the employee’s employment
- the notice period and whether the employee will be paid in lieu of notice
- the date of the employee’s last day of work
- details of the employee’s redundancy pay entitlements, and
- any other entitlements to be paid (like annual leave and long service leave).
The Termination of employment letter template has been colour coded to assist you to complete it accurately. You simply need to replace the red text with what applies to your employee and situation. Some of the sections are optional because they might not apply to your employee and can simply be deleted. Explanatory information is shown in blue italics to assist you and should be deleted once you have finished the letter.
Step 5: Meet with the employee to provide notice of termination
Meet with the employee to give them the letter, explain the reasons the position has been made redundant and provide them with the opportunity to ask questions. Carefully explain the information in the letter and ensure the employee understands.
The written notice can also be delivered or posted to the employee’s last known address.
You should keep a copy of the letter for your records.
Important: An employee may choose to submit a complaint or claim against you (e.g. unfair dismissal, discrimination) even if you follow these steps.
Step 6: Examples for best practice
For examples of Best Practice see the Good Practice Guide in Socially Responsible Restructuring guide or contact us at email@example.com.