Man at work wearing a hardhat.

Retrenching workers can be difficult and expensive. We take you through some myths and facts about retrenchment and other options. We also list organisations and agencies who can give you support and assistance.

Questions to help you think through retrenchment

Redundancy or retrenchment?

First, make sure you are using the right term. Redundancy and retrenchment are words that are sometimes confused.

A redundancy occurs when a specific job is no longer required. In this situation, that worker may be moved to another position. If this is not possible, the worker may be retrenched.

What will happen when the position is gone?

If you retrench workers you lose valuable skills and knowledge you may need again if business improves. It may be difficult to replace those workers. Some positions and duties can also be essential to cash flow, safety or compliance.

Is retrenchment the only option?

There are alternatives to retrenchment that might be better for your business and cost less.

You might consider:

  • retraining
  • reducing overtime
  • encouraging people to take built-up leave
  • changing full-time positions to part-time or casual work
  • rewriting job descriptions
  • redesigning jobs
  • temporary shutdowns and cutting costs in other areas
  • transfers.

You may need to prove to third parties that retrenchment was the last resort. Make sure you have financial and other records you can use. For example, cash flow projections before and after a retrenchment, or other financial statements to support your decision.

Is your business needing wider change?

Retrenching your workers may not address wider issues in your business. These issues might be a changing market or the need for technological development. You might consider training and upskilling your workers to improve your business. The federal and state governments may be able to provide financial help.

Can the position be changed?

Could the position be turned into a part-time or casual position? Changing the hours or contract of a worker means a redundancy, not retrenchment. Make sure you find out if any entitlements must be paid. Some workers might not be able to survive on a part-time wage.

Have you worked out the severance pay and other entitlements?

Make sure you are clear on what you need to pay a retrenched worker. Casual positions and workers who have worked with the business for less than 12 months are not generally entitled to severance pay. However, they may still be paid other entitlements and must be treated fairly to avoid unfair and unlawful dismissal claims.

Have you consulted with workers and unions?

Early consultation with workers and unions can help make the changes easier for everyone. You may also get some great ideas on how to reduce the impacts of retrenchment. The sooner you do this, the better.

Do you know the legally required notice period?

The award, contract or Fair Work Act 2009 will list the legally required minimum notice period for your workers. This may also be stated in the worker’s letter of offer or contract.

Does the retrenchment need to be compulsory?

You can offer your workers the option to resign. This is known as voluntary redundancy and it is an easier process for everyone.

How should I choose who to retrench?

The Victorian Equal Opportunity and Human Rights Commission has an employer’s guide to avoiding discrimination.

You will need to be able to show how you chose the worker, and that you explored other options. This is in case the worker makes a claim for unfair or unlawful dismissal or discrimination.

What can I do to reduce the stress for my retrenched workers?

Keeping people up to date reduces the sense of uncertainty, fear and therefore stress.

Organise information seminars (offered by a third party); offer time off work to look for work; investigate retraining opportunities; offer financial planning and specialist support – ‘outplacement consultants’.

Prepare redundancy materials through a Human Resource (HR) Transition Plan.

Organise a farewell event to show gratitude and appreciation for workers who are leaving.

Have you checked to see if you need to provide additional assistance?

Check the worker’s awards, agreements or contract as you may be legally obligated to provide other assistance. There are free services you can refer employees to, such as MoneySmart.

If you have an apprentice, talk to your contact at Australian Apprenticeships or your Group Training Organisation to transfer the apprentice to another organisation.

What if you are bankrupt?

You may be bankrupt and cannot pay your worker entitlements. In this case, advise your workers to contact the Fair Entitlements Guarantee (FEG) on 1300 135 040. FEG helps when a business cannot pay its workers their redundancy payments.

Have you done your best to avoid unfair dismissal or unlawful dismissal?

Make sure you explore other options. Keep notes of your research and discussions with employees. Use a fair and consistent selection process and be generous if you can. Open and clear communication and respect can make this stressful time easier.

Who to contact for help

The following organisations and agencies can provide you with support and information when you are considering retrenchment.

Help with your business issues

Discuss your business issues with a business mentor or industry group.

Business Victoria
Ph: 13 22 15
Business Victoria connects Victorian small businesses to services, information and support.

Victorian Chamber of Commerce and Industry
Ph: (03) 8662 5333
The Victorian Chamber of Commerce and Industry supports businesses through a range of services across workplace relations, health, safety and environment, training and apprenticeships, career development and exporting services.

Australian Industry Group
Ph: 1300 55 66 77
The Australian Industry Group is a membership group that offers extensive business services.

Help with retrenchment processes, rights and responsibilities

Make sure you are following all necessary processes and understand your rights and responsibilities when retrenching workers.

Services Australia - Centrelink
Ph: 13 11 58
Centrelink provides help with completing paperwork, such as Separation Certificates and Employer Contact Certificates, as well as referrals to other government agencies.

Australian Tax Office (ATO)
Ph: 13 72 26
The ATO holds tax seminars and webinars to provide a basic understanding of business tax issues and obligations. The ATO has also developed services and programs to support and assist you in running your business.

Fair Work Ombudsman
Ph: 13 13 94
The Fair Work Ombudsman is an independent body that helps employers and workers understand their rights and responsibilities at work by promoting harmonious, productive and cooperative workplace relations and ensuring compliance with Australian workplace laws.

Australian Securities and Investments Commission (ASIC)
The Australian Securities and Investments Commission offers financial information about insolvency and winding up solvent companies, as well as voluntary deregistration.