Executive redundancy can occur as a result of business restructuring, economic, market and technological changes, or when the employer becomes insolvent or bankrupt. This type of termination of employment is not related to poor performance or misconduct.
If you have been made redundant and you’re a senior or executive employee, you are entitled to a certain amount of redundancy pay. Keep reading to learn more about executive redundancy entitlements or speak to an experienced employment lawyer at Owen Hodge.
Senior & executive redundancy payments
Are senior employers or managers entitled to redundancy pay?
Yes, under the National Employment Standards (NES) of the Fair Work Act 2009, all employees of businesses with more than 15 employees are entitled to redundancy pay if the employment is terminated:
- Because of the insolvency or bankruptcy of the employer; or
- At the employer’s initiative because the job is no longer required.
It is also important to note that the NES applies to all employees covered by the national workplace relations system, regardless of any award agreement or employment contract.
While the NES provides a starting point for redundancy pay, most senior or executive employees may wish to negotiate for higher benefits than the minimum.
Executive redundancy provisions in employment contracts
For some senior or executive employees, there may also be redundancy provisions in their employment contracts. These will set out the terms and conditions of the redundancy payment and the termination notice period.
If there aren’t any explicit terms of executive redundancy pay in the contract, the employee’s legal entitlements may be limited to the NES. This is why we highly recommend speaking to an executive employment lawyer before signing any contracts to ensure you are satisfied with the terms and conditions.
Learn more: executive employment agreements
Can executives claim unfair dismissal?
If a senior or executive employee’s termination of employment was not a genuine redundancy, they may have a case for unfair dismissal. In saying that, there is also an unfair dismissal threshold. This threshold restricts senior executives earning high salaries and pay packages from claiming unfair dismissal. For those who have a salary of $158,500 (as of July 2021), an unfair dismissal does not fall within the jurisdiction of the Fair Work Compensation Act.
This is why we recommend speaking to an unfair dismissal lawyer to determine whether you are eligible to take legal action, and if you are, what you can do.
Learn more: difference between unfair dismissal and wrongful dismissal
Speak to experienced employment lawyers about your executive redundancy
If you wish to negotiate your executive redundancy entitlements or determine if you have a case for unfair dismissal, talk to our team at Owen Hodge Lawyers.
We can walk you through your rights and help you determine if you are facing an unfair dismissal or redundancy. Our employment and redundancy lawyers can also answer any questions you have about director redundancy in Australia, redundancy employment law and executive severance payments.
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Frequently asked questions
The two types of redundancy are:
- Voluntary redundancy: this occurs when an employee volunteers/agrees to be made redundant.
- Compulsory redundancy: this occurs when your employer has made a decision that your job no longer exists and your employment is to be terminated.
No, this would not be considered a genuine redundancy. If your role still exists, your termination of employment would be considered an unfair dismissal.
If you have been made redundant or suspect that you are facing a redundancy, it is important to get expert legal advice. Depending on your individual circumstances you may have rights to challenge the employer’s decision to declare your position redundant or, in some special cases, you may have a right to refuse the position that is available to you.
If the director is classed as an employee, then they can be made redundant like any other employee. It is important that when making a director redundant, the process must be the same as if you are making any other employee redundant, as the conditions laid out in the Fair Work act apply uniformly to everyone including the most senior executives.