Redundancy in a Small Construction Business

What it is

A builder finishes a project, the work dries up and a carpenter has to go. The builder reads that a business with fewer than 15 employees does not pay redundancy, pays nothing and moves on.

That is wrong, and it is the most expensive mistake in this area. MA000020 runs its own redundancy scheme that displaces the National Employment Standards for on-site employees, and the small business exemption goes with them. A labourer of 11 months is owed about 82 hours of pay.

What makes a redundancy genuine

Section 389 of the Fair Work Act sets the test. A dismissal is a genuine redundancy when the employer no longer requires the person''s job to be performed by anyone because of changes in the operational requirements of the enterprise, and the employer has complied with any award or enterprise agreement obligation to consult about the redundancy. It is not genuine if it would have been reasonable in all the circumstances to redeploy the person within the employer''s enterprise or an associated entity.

Genuine redundancy is a jurisdictional objection: prove it and the Commission cannot hear an unfair dismissal claim. The job has to go, not the person: replacing a chippie with a cheaper one three weeks later is a dismissal with a story attached.

Consultation is not optional

This is the limb builders skip, and skipping it is fatal on its own. Clause 37 of MA000020 requires that once you make a definite decision on major changes likely to have significant effects on employees, you notify all affected employees and their representatives, discuss the changes, their likely effect and measures to avoid or reduce adverse effects, and start those discussions as soon as practicable, in writing.

A redundancy can be commercially unavoidable and still unfair, purely because you announced it on Friday instead of discussing it first. Section 389(1)(b) folds award consultation into the definition. Consultation is not agreement: it is telling people early and listening first.

The small business exemption, and why it misses you

Under the NES, employees of most small business employers do not get redundancy pay. Small business employer means fewer than 15 employees at the time notice is given. The count is wider than builders assume: all employees count, casuals count if engaged on a regular and systematic basis, associated entities are taken to be one entity, and the employee being dismissed is counted.

Then comes the catch. Clause 41.1 of MA000020 states that the award redundancy clause is an industry specific redundancy scheme as defined in section 12 of the Act, and that in accordance with section 123(4)(b) the provisions of Subdivision B, Redundancy pay, of Division 11 of the NES do not apply to employers and employees covered by the award.

The exemption lives inside that Subdivision. Switch it off and the exemption goes too. The Fair Work Ombudsman says it plainly for this industry: the award redundancy rules also apply to small business employers and their employees. An on-site builder with three employees pays redundancy.

What the award actually pays

Clause 41.2 defines redundancy as an employee ceasing to be employed, other than for reasons of misconduct or refusal of duty. It is broad enough to reach a resignation.

Continuous service	Redundancy pay
Under 1 year	1.75 hours per completed week of service
1 to 2 years	2.4 weeks, plus 1.75 hours per week over 1 year, capped at 4.8 weeks
2 to 3 years	4.8 weeks, plus 1.6 hours per week over 2 years, capped at 7 weeks
3 to 4 years	7 weeks, plus 0.73 hours per week over 3 years, capped at 8 weeks
4 years or more	8 weeks

A week''s pay is the ordinary hourly rate at termination multiplied by 38. The under 12 months entitlement applies only where the redundancy is occasioned otherwise than by the employee. Apprentices get no redundancy when their employment ends during or at the end of the apprenticeship.

Trust funds, redeployment and reducing the payment

BERT, ACIRT and MERT are redundancy trusts: you contribute per employee per week and the fund pays the benefit when employment ends. Clause 41.4 lets you offset a redundancy pay entitlement in whole or in part by those contributions, so you pay only the difference between the clause 41.3 amount and the benefit attributable to your contributions.

A redundancy trust is not a portable long service leave scheme. BERT and QLeave are separate funds doing separate jobs, and paying one does not discharge the other. Contributing also does not cap your exposure: if the fund benefit falls short of the award figure, you top up the difference.

Redeployment is an obligation, not a courtesy: if an associated entity has a role the person could fill, consider it and record what you looked at. You can also apply to the Fair Work Commission to reduce the amount if you found other acceptable employment, or cannot afford it. The Commission decides, not you.