Redundancy payouts

Its happens to all of us. If you haven't yet had the experience of being laid off (or retrenched), chances are that the current economy will serve it up to you shortly. In the last week I've had two phone calls from friends in a post-redundancy panic asking: what should I be getting paid? Here's the advice I gave them.

*Please note, this advice is for staff employees, who sign a common law contract when they first start, have no EBA, and often are not under an award.

1. Annual leave paid out

Whenever you leave a job, whether you resign, are sacked, are made redundant or for any other reason; your employer must pay out all of the annual leave that you have accrued and not yet taken, at your current rate of pay.

2. Notice period paid out

Your contract of employment sets out how much notice your employer has to give before terminating you, or how much notice you must give if you resign. In a redundancy, you are entitled to either:

(a) work out your notice period - they tell you now but you don't actually finish up until the end of the period

or, more commonly,

(b) payment in lieu of notice - you leave today, but they pay you as if you worked out the period

Also, if you're over 45 years old and you have been with your company for more than 2 years, you get an additional week's notice (or notice in lieu) on top of this.

3. Possible severance payment

Employers have no obligation to make a severance payment to you, so an entitlement to any severance payment will come down to what was in your original contract, or the company policy. Big companies tend to make severance payments, whilst smaller companies tend not to. These are where the big money comes from. Policies tend to relate to the number of years you have worked with the company (service period). Some companies have a straight calculation eg. 3 weeks pay for every year, while other companies have more complex formulas eg. must have worked 12 months to get severance, 2 weeks pay for each of the 3 years after that and 3 weeks pay for any additional years.

4. Additional entitlements

• You may be entitled to Long Service Leave, or pro-rata Long Service Leave, depending on which state you live in. 
  
• You may be entitled to additional benefits if they are in your contract of employment.

5. Tax-free amounts

Large redundancy pay outs also incur a tax break (called an Eligible Termination Payout - ETP) on the first few thousand dollars. The Australian Taxation Office can provide information on this. It has changed several times recently, and can be complex, which is why I am not going to outline it here.

How to ensure you get what you're entitled to

If you're not sure whether your employer has paid you the correct amount, you should ring your payroll person, or the person who gave you the bad news, and ask for a break-down. When you call, don't act angry or forceful. Simply tell the person that you were made redundant but you're not sure what you're entitled to and you were wondering if they could help.

If you feel worried about doing this, don't be. I often have people ring me with these questions. In my experience, even the nastiest managers are feeling guilty for making your life crap at this stage, and will be sympathetic and likely to help you.