Dealing with redundancy

By John Simpson

If any staff have to be made redundant in your pharmacy, then make sure you fully understand the legality of this.

Restructuring or downsizing in the current market could be just what your pharmacy business needs – most pharmacies that go through a restructuring process do so in order to save money.

If the idea of saving money through restructuring sounds good, then before you start the process, you will need to be aware of some laws surrounding your employees. When restructuring involves redundancy, for example, you will need to ensure that you comply with the Fair Work Act and the National Employment Standards.


Redundancy occurs when an employer does not need an employee’s job to be done by anyone. If this is the case, then you may terminate an employee due to the redundancy of his or her position, in which event he or she may be entitled to a redundancy payment in regard to the employee’s length of service in addition to the required period of notice or pay in lieu.

In addition, an employer must review their employee’s award or registered agreement and comply with any requirements set forth therein to consult with the employees about the redundancy. When an employee’s dismissal is due to a genuine redundancy, the employee is unable to make an unfair dismissal claim.

Employee entitlement

Under the Fair Work Act, the employee will be entitled to notice or pay in lieu of one to four weeks, depending on the length of service, plus one additional week if the employee is over the age of 45.

Under the Fair Work Act and the National Employment Standards, the employee may also be entitled to redundancy pay of four to 12 weeks’ pay based on length of service.

If the Pharmacy Industry Award is applicable to the employee (as it will be to most employees) and you decide to move the employee to a lower-paid position by reason of redundancy, the same period of notice must be given as the employee would have been entitled to if the employment had been terminated.

In addition, under the Pharmacy Industry Award, you are still required to provide the employee with redundancy payment even if the employee terminates their employment during the redundancy notice period.

You will find that your employee will most likely attempt to find a new job during the notice period. You will be required to provide some paid leave to the employee for this purpose during the notice period if the employee is employed under the Pharmacy Industry Award.

You should note, however, that unless the employee has an entitlement to redundancy under his or her contract of employment or a prior award, generally only service since the introduction of the Fair Work Act on July 1, 2010 is taken into account for calculation of redundancy pay.

If it’s not genuine redundancy ….

You should be mindful that redundancy is a question of fact. Termination is not due to genuine redundancy if the operational requirements of your pharmacy business have not changed and the pharmacy still needs, the employee’s job to be done by someone else, unless the employees duties are absorbed into somebody else’s role.

Generally speaking, a dismissal is not a genuine redundancy if the employer:

  • Still needs the employee’s job to be done by someone.
  • Has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement.
  • Could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

What constitutes a genuine redundancy was recently again considered by the Fair Work Commission in a recent case.

Brown and Ors versus Clermont Open Cut (subhead)

In this case, a large group of employees at a mine were made redundant due to the global downturn in the demand for coal.

Six employees claimed their dismissals were unfair and sought reinstatement to their original positions for the reason that they could have been reasonably redeployed elsewhere within the business. In particular, the employees argued that redeployment opportunities could have come about through the replacement of existing labour for hire positions within the business.

The Fair Work Commission found in favour of the mining operator because the labour hire workers ensured a certain degree of operational flexibility that would not have been unavailable otherwise through the use of the employees.

Further, the Fair Work Commission noted that it was reluctant to criticise the legitimate business models of companies, and that requiring a business to alter a business model for which it had provided justification for would not be appropriate.

Despite the outcome of this case in favour of the employer, the Fair Work Commission’s ruling could have been different if labour for hire workers were not engaged to perform the employee’s duties prior to the redundancies, but, rather, were engaged after the employees have been made redundant.

What you need to do

Redundancy can turn into a complex project in its own right. Therefore, it is important that you obtain legal advice before making an employee redundant.

Initial legal advice will be much more cost-effective than having to defend a claim for unfair dismissal.