The information provided below is general in nature and should not be relied upon legal advice. You should call 03 5445 1000 and speak to a lawyer at OFRM about your particular circumstances.

Letting employees go when the well is dry

Letting employees go when the well is dry

It’s a common situation — you have gone through an incredibly busy summer and had your workers on overtime and in some cases working weekends but suddenly, due to rain delays, economic downturn or a new competitor your work load has decreased significantly and you can no longer sustain all of your employees and someone has to go. How do you dismiss your employees fairly?

An employee may be full-time, part-time, casual, or on probation. Whichever the category of employee there are important conditions to be met if dismissing them even when your business is suffering hardship.

A business with fewer than 15 employees is defined as a small business. Small business employers owe important responsibilities to employees under the Small Business Fair Dismissal Code.

The first step in ending the employment of your workers is consultation regarding the business' situation and providing significant notice that their position is no longer available. The notice period you need to give your employee is based on their period of continuous service with your business.

Dismissing an employee in an unreasonable or unjust manner, even if your business is suffering hardship can result in an unfair dismissal claim. However, employees are not eligible to make an unfair dismissal claim unless they have been working for a small business for at least 12 months. In businesses of 15 employees or more this is reduced to 6 months.

In the case of a business downturn where there is simply no work left, the employee cannot bring an unfair dismissal claim, provided it is a genuine redundancy situation. In this circumstance you are required to pay employees in accordance with the redundancy provisions of the Fair Work Act. You cannot "put employees off" without paying adequate notice or redundancy pay.

There are different rules for different classifications of workers and employees are not entitled to redundancy until they have been with an employer for more than 12 months, and some employees are not entitled to redundancy payments at all.

Of course, if the work load has reduced your income has also reduced and you may not have the funds to pay out your workers. This does not mean that you can simply choose not to pay them, but you can seek assistance and reduction in payment by application to Fair Work prior to redundancy or termination occurring.

It is important to pay employees correctly to avoid investigation and potential fines from Fair Work. If you get it wrong there will be negative publicity if your business is taken to Court that could put further pressure on your business. It is always better to get it right the first time for yourself and your employees.