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Redundancy not an alternative to Performance Management


Employers are urged to reconsider any plans that they may have to use redundancy as an alternative way to “get rid” of an underperforming employee.

A sole director learnt the hard way that redundancy is not a quick fix solution after he retrenched an employee without following due process as a result of being unhappy with his performance.

In this case, a 57-year-old worker received an email from his employer after some 12 month employment which had the subject line “RE: warning”. The email itself detailed that the business was not making any money and that there may need to be a reduction in staff. The employer stated that

“at present I am not seeing any value you are adding to the company. You cost me a total of $130,000 per year out of my pocket. There are so many tasks that you have been given the opportunity to carry out effectively including internal sales, stock control, scheduling, HR, etc. and I am getting feedback from everywhere (and most importantly the customers) that you are not performing to their expectation. Steel purchasing is one exception however this only takes max 2 days out of the month for someone to do.

…I am giving you an opportunity to turn this around, but I cannot take too long as I must reduce total labour cost very soon.

… Don’t think product costing and steel purchasing are a full time position. Up until you joined, I did both these tasks and it took up 5% of my total work time and I am happy to take them back as they are extremely simple tasks for me to carry out.

The employee responded two days later, stating:

 “Firstly, I have been doing things as necessary to keep the wheels turning but have not communicated that to you.

I want you to know that I am on your side and will work closely with yourself and Ivo to align my efforts with whatever is required to make the business succeed...

…I’m adaptable, not perfect, always learning and endeavour to be dependable, trustworthy and honest. This can be demonstrated in part by my zero lost time, the additional 900 plus hours I have put in outside normal hours and the generation of records that are transparent to you. There is no way I would be putting in that extra time if it wasn’t constructive.

The manager did not respond to this email and no further discussions were held with the employee about the need to reduce staffing.

Approximately two and a half months later, the employer approached the employee about the business being overstocked and said words to the effect of “Because of f#$%ing you, I have to go and find millions of dollars. It’s your fault. What have you got to say? If you don’t admit it and say how sorry you are, I’m going to fire you right now!”

The employee apologised, to which the employer responded with words to the effect of “You come in and work through the Christmas break in your own time and fix it”.

The employee raised that he had not taken any time off work since he started with the company to which the employer said “Well you think about it because I’m going to think about firing you if you don’t”.

The employee subsequently did not work through the Christmas break.

In January, the employer telephoned the employee about a customer order that had been entered in late. During this call, the employer told him that he was an “f%$#ing muddle head” and hung up on him.

The following day, the site manager informed the employee that his employment was terminated with effect that afternoon. The employee was told that the director had it in for him and just wanted to get rid of him.

The next day, the employee received a separation certificate, which stated the reason for the separation as being “Shortage of work”.

The Fair Work Commission found that redundancy was not genuine because:

  • The employer could not supply any reasonable evidence of there being a downturn in work at the time of the dismissal.
  • Verbal conversations that the director had held with the employee indicated that the real reason for the termination was due to the employee’s work performance.
  • The director had no further discussion with the employee about the “need to cut back staff” after the employee responded to his email.
  • The director employed another permanent employee on a full-time basis shortly before the employee was made redundant which called into doubt the validity of the employer’s contention that there was a downturn in business prior to the dismissal.

The employee’s dismissal was determined to be harsh, unjust and unreasonable and the employer was ordered to pay $20,000 in compensation.

For further information relating to redundancy or performance management please contact HR Advice Online at [email protected] or 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

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