Don’t Get Caught Out: Redundancy Obligations Under the Australian Building and Construction Award (BCA) Pay System
As a builder or contractor, keeping on top of your legal obligations can be tough. Running a business means balancing project deadlines, workforce management, and compliance with complex regulations. One area that can easily trip up employers in the building and construction industry is redundancy.
If you’re not across your redundancy obligations, you risk significant financial penalties and damage to your business. Here’s what you need to know to avoid getting caught out.
What is Redundancy in Construction?
Redundancy occurs when a worker’s role is no longer required due to a business restructure or reduced workload. The Award, however, has a broader definition of redundancy, as it also covers employees who terminate their own employment.
Common Misconceptions
One of the biggest misconceptions in the industry is that redundancy entitlements only apply after a worker has been with you for a certain amount of time. In many industries, employees need to be with an employer for at least 12 months before they’re entitled to redundancy payments.
This is not the case under the BCA pay system. In construction, there is no minimum length of service for redundancy payments to apply. Whether a worker has been with you for three weeks or three years, they may be entitled to a redundancy payout if their role becomes redundant. Under the Award, redundancy pay is graduated and based on years of service. It’s also capped at eight weeks pay for four or more years of service.
What Are Your Obligations?
As an employer, you have a few key obligations under the BCA pay system when making a role redundant:
- Pay Redundancy Entitlements: You need to provide redundancy pay based on the worker’s classification and the length of their service. Unlike other industries, workers may be entitled to this payment even if they haven’t been with you for long.
- Provide Notice: You’re required to give your workers notice of the redundancy or pay them in lieu of notice. This is an important step that ensures workers are treated fairly and given time to prepare for the end of their employment.
- Consultation Requirements: Before making anyone redundant, you must consult with the affected workers. You should explain why their role is no longer needed and discuss whether there are any alternatives, such as redeployment to another project.
What Happens if You Don’t Comply?
Failing to meet these obligations can land you in hot water. Here are some of the consequences if you don’t pay redundancy entitlements properly:
- Financial Penalties: Non-compliance with redundancy laws can result in significant fines for your business. The Fair Work Ombudsman can impose penalties of up to $16,500 per breach for individuals and $82,500 for companies. Each worker who misses out on redundancy pay can be counted as a separate breach, so the financial hit can quickly add up
- Back Payments: In addition to fines, if you fail to provide redundancy pay, you may be ordered to pay your workers what they’re owed—often with interest. This can become a major financial burden, especially if the issue affects several employees over multiple projects.
- Legal Costs: Workers can take legal action if they don’t receive the entitlements they’re due. Defending claims in court or through the Fair Work Commission can be time-consuming and expensive. Even if you eventually pay what’s owed, the legal costs can quickly spiral.
- Damage to Reputation: A failure to meet redundancy obligations can hurt your business’s reputation. Word travels fast in the industry, and being known as a builder who doesn’t pay entitlements can make it harder to attract and retain skilled workers. It could also damage your relationships with clients who expect you to comply with industry standards.
How to Avoid Redundancy Pitfalls
To avoid getting caught out, make sure you follow these steps:
- Understand the BCA Pay System: Take the time to understand how the BCA pay system works. The rules around redundancy are different from other industries, so it’s important to be clear about your obligations. You can find detailed information through the Fair Work Ombudsman or by consulting an employment lawyer or industry advisor.
- Budget for Redundancy: Redundancy payments can be a significant cost, especially if you have several employees finishing up at the same time. Plan ahead and budget for these payments, so you’re not caught off guard when projects end.
- Consult Early: As soon as you know that a role is likely to become redundant, start consulting with the affected workers. Explain the situation clearly and explore whether there are any alternatives to redundancy.
- Keep Records: Proper record-keeping is essential. Make sure you document any conversations with workers about redundancy, as well as the payments you’ve made. This can protect you if a dispute arises later.
Final Thoughts
Redundancy is a common occurrence in the building and construction industry, but it’s not something you can ignore. Failing to meet your obligations can result in heavy penalties, back payments, and long-term damage to your business. By understanding the BCA pay system and following the correct processes, you can avoid these risks and ensure that your workers are treated fairly.
If you’re unsure about your redundancy obligations, it’s always best to seek advice. The Fair Work Ombudsman or an experienced employment advisor can help you navigate the rules and avoid costly mistakes.
