When it comes to redundancies, even the best-prepared employers can find themselves faced with the confronting question: "Can you offer me more than the minimum?"
It's a question that can come with much internal discussion and concern, so we outline below what to do when a departing employee requests more than has been offered.
In this fictional example, an employee has been with your company for five years. They are well-liked, have performed consistently and up until recently, had no reason to believe their job was at risk.
But the business has changed and is undergoing a restructure and this employee's role has been deemed genuinely redundant. It's been deemed the work is no longer required and no suitable redeployment options exist.
All correct processes and legislation have been adhered to, namely:
- consultation under the relevant award
- written notification
- paid notice in lieu
- accrued leave entitlements paid
- redundancy pay in accordance with the Fair Work Act.
Everything is compliant and respectful and before it's finalised the employee broaches the question about additional pay. As an organisation, you are not legally required to pay more than the minimum entitlements under the Fair Work Act, an enterprise agreement or any applicable contract — even if the employee asks. Unless there's been a flaw in the process or you're seeking to settle potential legal risk, you're under no obligation to say yes.
Why might an employer choose to pay more?
While it's not required, there are reasons employers choose to offer more — known as an ex-gratia payment — often in exchange for a Deed of Release, which protects against future claims.
Here are some circumstances where an employer may choose to offer more:
- the process, while lawful, could be challenged (e.g. selection criteria weren't well-documented)
- you want to avoid time-consuming disputes at the Fair Work Commission
- the employee has sought representation and is threatening legal action
- you value your reputation and want to preserve goodwill.
But it's important to know this is a commercial decision — not a legal necessity.
Returning to our fictional example, this employee has been paid their entitlement in full, no legal risks have been raised and the business is tightening costs. There is no indication that the departing employee intends to challenge the decision.
You are not obligated to make an ex-gratia. Your response should cover:
- we've ensured that all your entitlements under the Fair Work Act have been calculated and paid in full
- unfortunately, we are unable to offer any additional compensation beyond your legal entitlement.
Key takeaways for employers facing compensation questions
- Know your obligations: Understand notice periods, entitlements and relevant redundancy compensation.
- Stick to the process: Consultation and communication are important, but you don't have to negotiate if you have followed proper procedures.
- Ex-gratia is optional: Choosing to offer an ex-gratia payment should be strategic and you can acknowledge loyalty without compromising commercial boundaries.
- Get advice if you're unsure: A short legal consultation can save you from a long dispute.
How Gallagher can help
For advice on managing redundancies or any other HR issues reach out to Gallagher. Our On-Demand HR services can help you navigate any people issues with professionalism and integrity, safeguarding their reputation and minimising potential disputes.
