Fair Work backs redundancy pay cuts amid coronavirus

Fair Work has backed an employer's decision to slash redundancy pay. Source: Getty

The Fair Work Commission has backed a Melbourne employer’s decision to slash redundancy pay due to financial strain caused by the coronavirus, but refused another employer’s attempt to do the same just days later.

On April 9, Commissioner Sarah McKinnon ruled Mason Architectural Joinery was eligible to cut an employee’s redundancy package by seven weeks, as it could not afford to pay.

“I have discretion to reduce the amount of redundancy pay (including to nil) under the Act if I consider it appropriate to do so,” Commissioner McKinnon said.

“I am satisfied that Mason Joinery is under significant financial strain and that it cannot afford to pay Mr Grant’s full entitlement to redundancy pay.”

• Also read: Fair work introduces ‘Pandemic leave’ to save millions of jobs

The ruling is the first to allow cuts to redundancy pay during the coronavirus pandemic, and was made after the government’s plan to introduce a $1,500 per fortnight wage subsidy.

This decision contrasts with another case on the same day, where Deputy President Richard Clancy dismissed another Melbourne employer, Worthington Industries’, case to reduce a redundancy package for three employees.

In that instance, the deputy president directed Worthington Industries to see whether it was eligible for the JobKeeper Payment.

“I acknowledge the challenges and very difficult decisions faced by Worthington Industries,” Deputy President Clancy said.

“Worthington Industries is now subject to a changed and changing operating environment, its sales are declining and its prospects in the near term are uncertain.

“However... I am not satisfied Worthington Industries comes within the circumstances...of the Act and I decline to exercise the discretionary power... to reduce the amount of redundancy pay.”

How much is a standard redundancy package?

The amount of redundancy an employee is entitled to is dependent on their service with the employer, according to Fair Work.

It also doesn’t need to be paid in some circumstances, for example if you’ve been with your employer for less than 12 months or your contract was terminated due to serious misconduct.

Generally, it depends on the industry you’re in and your contract terms. If you’re unsure about what you’d be entitled to, you can check your award rates on the Fair Work site.

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