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Employers often struggle managing employees who fail to reach their performance benchmarks or have poor relationships with their colleagues.  Rather than performance managing under-performers, employers opt for the easy option of making them redundant.  In many cases this approach means employers are paying more than they need to in separation payments and are exposed to an unfair dismissal claim if the real issue is performance, not redundancy.

What is a Genuine Redundancy?

A redundancy occurs when the employer no longer requires an employee’s job to be done by anyone. Redundancies can occur due to a range of factors, including a down turn in business, relocating overseas or a takeover of the business.

If a redundancy is genuine, the employer is protected from an unfair dismissal claim.  A genuine redundancy requires the employer to follow any employee consultation requirements under the applicable award or enterprise agreement.  This can involve:

  • discussing the changes to the business with employees who may be affected;
  • allowing the employee an opportunity to respond and considering their feedback; and
  • offering suitable alternative employment within the business or an associated business.

What is not a Genuine Redundancy?

Most importantly, there is no genuine redundancy where an employee is made “redundant” and a new employee is hired to fill the same role or duties. We find that this usually happens where the employee is underperforming, and the employer believes that a redundancy is the only way to legally get rid of the employee.

Incorrectly making an employee redundant not only creates a risk on an unfair dismissal claim but results in the employer handing out redundancy pay for no reason.


Can I Dismiss an Employee for Failure to Perform?

Yes! If an employee is underperforming, you may legally dismiss them provided you do so in a way that is not harsh, unjust or unreasonable.   Essentially, you need to ensure any dismissal is:

  1. for a genuine reason;
  2. done with procedural fairness.

If the dismissal is for underperformance, the first element will generally be satisfied.   Employers should focus on ensuring that the employee has adequate notice of the performance issues and opportunity to meet the required standards.  The key steps are:

  • Provide the employee with a verbal and written explanation of the level of performance that is expected;
  • Conduct performance reviews with the employee to discuss the underperformance and allow the employee an opportunity to ask questions;
  • Provide written summaries of what was discussed at the performance reviews;
  • Provide the employee with a timetable of what must be done to improve and the dates by which the improvements must be made;
  • Provide the employee with formal written warnings;
  • If termination is necessary, ensure that the reason for the dismissal is explained (i.e. poor performance) and that the employee is given a written letter of termination.

If an employee is dismissed for underperformance, there is no obligation to offer a redundancy package. Keep in mind, that the employer must still pay the employee their outstanding entitlements, such as wages, annual leave, long service leave, superannuation and any notice payment.

At the end of the day, poor performance should not be tolerated.  It puts additional strain on other employees and leads to a negative culture.  While the law does impose obligations of fairness and reasonableness on employers, it does not stop them from managing and if necessary dismissing underperforming employees.

If you need assistance understanding your Redundancy Pay, please contact an Employment Solicitor of the Taurus Legal Management team on (03) 9481 2000.

Posted by Taurus Legal Management