COVID-19: Why redundancies should be your last resort

redundancy alternatives

Employers often assume mass redundancies are their only course of action, but redundancy alternatives are available and may actually be more cost-effective.

COVID-19 has forced businesses across Australia to close their doors, leaving employers deciding what to do with staff. 

Hundreds of thousands of workers in a number of industries, including travel, hospitality and retail, face months of uncertainty. COVID-19 will spread further before the curve flattens and business resumes as normal.

In this period, it’s crucial to look ahead and consider options that will benefit the business and protect jobs, according to Employsure, Australia’s leading workplace relations company.

Employsure has launched its six-month Advice and Support Package, an at-cost service giving employers unlimited access to its 24/7 Employer Advice Line, legal protection and peace of mind. Find out more.

Hidden costs

“Letting go of a worker may not actually be the most cost-effective thing to do,” says Employsure’s managing director Ed Mallett.

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

“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’s 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.”

What are the alternatives?

On alternatives employers should consider before redundancy, Mallett says there are several avenues they could take.

“Re-negotiating the hours employees work during the downturn is one option. This often reduces the staff bill 20 to 40 per cent,” he says.

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

“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.

“Employers will be making difficult decisions over the coming months. 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.

Employsure

Australia has one of the most difficult workplace relations systems in the world. Employsure is here to help employers navigate the complexity. Employsure is the largest provider of employment relations and work health and safety services in Australia — servicing more than 24,000 clients nationally. More than 300 advisers and consultants provide independent advice to business owners on their workplace relations and health and safety obligations. Every day Employsure gives business owners the confidence that their workplaces are safe, fair and compliant.

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