Termination and redundancy under the building award

Key facts

• The Award provides an industry specific redundancy scheme, which applies to all businesses and is different from the redundancy obligation under the National Employment Standards (NES). If the Award applies to you, you must apply the industry specific scheme.
• Get your facts right before you do anything! Terminating or making an employee redundant is a complex task that requires careful consideration.
• When terminating an employee or making an employee redundant, you must comply with a range of obligations both under the Award and the NES.

Termination

What notice of termination must I give my employee?

The NES establishes a minimum termination notice period which all employers must comply with

Under the NES, you need to provide at least the following notice period (or pay the employee in lieu):

What notice of termination must my employee give me?

An employee must give you notice of their resignation, with a notice period in accordance with the table above. There is no requirement for an employee to give additional notice based on their age. 

If an employee does not provide the required notice period, you may be able to withhold an amount no more than one week’s wages from their final pay.

Exception for daily hire employees

A daily hire employee is only required to provide one day’s notice of termination (or one day’s pay will be paid or forfeited).

Job search entitlement

Where you have given your employee notice of termination, you must give your employee up to one day’s time off without loss of pay to look for another job. The time off is to be taken at a time convenient to both you and the employee.

Redundancy

What is redundancy pay and when do I need to pay it?

The Award contains an industry specific redundancy scheme, which is unique to the building and construction industry. This applies instead of any redundancy obligations under the NES.

Under clause 41 of the Award, redundancy is defined as “a situation where an employee ceases to be employed by an employer to whom this award applies, other than for reasons of misconduct or refusal of duty”.

This definition of redundancy has a far wider reach than its ordinary meaning. The industry specific redundancy scheme can include any situation where an employee is no longer employed by the employer. This may include a situation where:

• the employer no longer requires the employee due to lack of work or restructuring or
• the employer is letting the employee go due to performance issues or
• the employee resigns after at least 12 months of service.

When is redundancy pay not payable?

An employee will not be eligible for a redundancy payment if:

• they are terminated due to misconduct or refusal of duty or
• they have been engaged for less than 12 months and the employee resigned.

Do I have to pay redundancy if my employee works for less than 12 months?

Noting the above eligibility criteria, an employee engaged for less than 12 months may still be entitled to a redundancy payment equal to 1.75 hours per week of service. 

Can time served as an apprentice count when working out redundancy pay?

Yes. Apprentice employees will accumulate credit towards the payment of a redundancy benefit.  However, the redundancy benefit is only payable if the employee completes the apprenticeship and remains employed for a further 12 months.  

Can time served as a casual count when working out redundancy pay?

No – any period of service as a casual should not be counted when working out redundancy pay.

How much do I have to pay?

The amount of redundancy pay will depend on your employee’s length of service.

What if I have been making payments into a redundancy pay scheme?

You may offset these payments against the redundancy pay entitlement. 

Where an employee receives a benefit from a redundancy pay scheme, you only need to pay the difference between the redundancy pay (calculated in accordance with the above table) and the benefit received. 

If the benefit received from the redundancy pay scheme is greater than the Award entitlement, you will not have to pay anything.

The employee will generally be entitled to the greater of the fund benefit or the Award benefit but not both. Even if the employee does not receive a benefit from a redundancy pay scheme (when compared to the Award), any payments that you have made into the scheme can be offset from the Award entitlement.

I am a small business employer with less than 15 employees - do I need to pay redundancy?

Yes, under the Award there is no exception for small business employers.

What if I am terminating an employee for performance related issues (that are not misconduct or refusal of duty)?

You must still provide the applicable notice and redundancy pay. You also need to ensure that you adopt a just and reasonable process; otherwise, you may risk an unfair dismissal claim.

It is recommended that guidance is sought before taking steps to terminate an employee.

What if I am terminating an apprentice?

Under the Award, whilst the employee is still an apprentice, they will not receive a redundancy pay. 

Notice of termination will apply based on the apprentice’s length of service. 

Before you take steps to end the employment of an apprentice, you need to consider the training contract you have in place and the commitment you have made under the apprenticeship. 

Training contracts usually include a probationary period. The employer or apprentice may end the contract without the other’s approval during the probationary period. After the probationary period has expired, the contract may only be ended with the consent of each party, or the approval of the relevant State Government department that regulates apprenticeships.  

Before taking any steps regarding terminating an apprentice, contact should be made with the relevant government body in your State, or your Australian Apprentice Network Provider (the organisation that signed up the apprentice). This is to ensure the training contract can be ended, and if so, that its properly ended.