THE AUSTRALIAN Industrial Relations Commission (AIRC) recently increased redundancy pay entitlements for employees covered by Federal Awards after handing down its ruling in the ACTU redundancy test case.
THE AUSTRALIAN Industrial Relations Commission (AIRC) recently increased redundancy pay entitlements for employees covered by Federal Awards after handing down its ruling in the ACTU redundancy test case.
The ruling effectively doubles the maximum rate of severance pay to 16 weeks after nine years service, while employees older than 45 receive an extra 25 per cent loading (see table on page 10).
The AIRC also removed the exemption for small businesses, which will see redundancy pay entitlements for permanent employees increasing from the current maximum of eight weeks after four years service up to sixteen weeks after nine years service.
The maximum entitlement for employees with 10 or more years of service falls to 12 weeks, reflecting the fact that they receive payments in lieu of long service leave under Federal conditions after this time.
However the AIRC rejected a number of the ACTU’s other claims, including a bid to extend severance pay to casual workers with more than one year’s continuous service, the removal of the existing ‘normal retirement date’ limitation on severance pay and a $300 employee allowance for counselling and outplacement services.
Employer groups reacted angrily to the decision, claiming the imposition of higher redundancy obligations on companies is fundamentally flawed and will be found to be counterproductive.
The Australian Industry Group (Ai Group) said small business in particular would be hit hard by the AIRC’s decision, even though the commission has capped severance pay at eight weeks for small businesses.
There are approximately 1 million businesses in Australia with less than 15 employees, who employ around 3 million Australians or more than 40 per cent of the private sector.
“The increase in severance pay to a maximum of 16 weeks for larger businesses will also be counterproductive,” said Heather Ridout, chief executive of the Ai Group.
“The decision will result in an average cost increase of several thousand dollars for each redundant employee.”
The Australian Chamber of Commerce and Industry (ACCI) was even more vocal in its condemnation, labelling the decision a “massive kick in the guts for Australian employers”.
“Employers and small businesses will be penalised for doing what commercial common sense demands – restructuring their businesses to keep them efficient and competitive,” said Peter Hendy, chief executive of the ACCI.
“Today is a bleak day for the small business sector and the thousands of Australians who rely on it for their jobs.”
The ACCI estimated the decision will add an additional $259 million per year to the cost of employee redundancies, of which $190 million will be borne by the nation’s small businesses.
“This decision and these costs will have a profound adverse effect on employment and in particular the small business sector,” Hendy said.
“Sadly, the perceived gains that the union movement has proclaimed from this decision will be illusory.”
However, the ACTU welcomed the commission’s decision as a “good result for all working people”.
“No-one wants to see anyone lose their job. But when workers are retrenched they deserve to be paid decent and fair compensation for the loss of income and uncertainty that this can cause,” said ACTU secretary Greg Combet.
“The ACTU particularly welcomes the extension of severance pay to small business employees. This provides an important new safety net for people working in small businesses.”
Combet expressed disappointment at the commission’s decision not to extend severance entitlements to long-term casuals, but was pleased that it recommended that employers consult with their employees.
“Redundancy payments are only part of the picture. Working people have lives and families and the ACTU believes employers have a responsibility to inform and consult with their workforce and with unions about issues that affect people’s jobs,” he said.
The commission’s decision will take effect at the end of April, and Victorian employers will also be subject to the ruling with the introduction of common rule awards later this year.
