How do I calculate my redundancy entitlement if the company I work for has changed?

How do I calculate my redundancy entitlement if the company I work for has changed?

If the business you work for has at some point changed hands, been transferred, or been sold, you may be wondering what redundancy entitlement you have. The Fair Work Act 2009 (Cth) provides that in some circumstances when there is a transfer of business your new employer has to recognise your service with your old employer in calculating your entitlements, which includes your redundancy entitlements.

Continuous service

If there was a ‘transfer of business’, then section 22(5) of the Fair Work Act 2009 (Cth) provides that your new employer will have to recognise your prior service with your old employer. This means you can count your employment with the old employer towards your continuous service when calculating your entitlements.

Transfer of business

For there to have been a ‘transfer of business’ the following elements need to be satisfied, under section 311 of the Fair Work Act 2009 (Cth):

  • Your employment with your old employer must have been terminated;
  • You must have been employed by your new employer within 3 months after the termination of employment with your old employer;
  • The work you perform for your new employer must be substantially the same as the work you performed for your old employer; and 
  • There must be a connection between your old employer and new employer.

The first two factors are straightforward factual matters, but the other two factors are a bit more difficult to understand. We have broken it down below:

Work performed is ‘substantially the same’

Work being ‘substantially the same’ essentially means that the duties in your role remain the same, or essentially the same. For example, where an employee has to undertake training for the new role at the new employer because of increased responsibilities and requirements, the roles are likely to not be substantially the same.  

For work to be considered ‘substantially the same’ your duties need to remain the same, or essentially the same. For example, where an employee has to undertake training for the new role at the new employer because of increased responsibilities and requirements, the roles are likely to not be substantially the same.  

The connection between the old employer and the new employer

There must also be a connection between the employers. This will exist if:

  • They are associated entities; or
  • The business assets of your old employer are sold or transferred to the new employer; or 
  • Your old employer outsources its work to your new employer; or
  • Your new employer stops outsourcing work for your old employer. 

Redundancy entitlement

When looking at redundancy entitlements specifically, your old and new employers must either be ‘associated entities’ or a ‘transfer of business’ must have taken place. Otherwise, your length of service may not count for the purposes of calculating your redundancy payment:

  • ‘Associated entity’ is defined in section 50AAA of the Corporations Act 2001 (Cth). Examples of associated entities are related bodies corporate or instances where one entity controls the other. If your old and new employers are associated entities, then your service with your old employer would likely count towards your length of service with your new employer.
  • ‘Transfer of business’ refers to when non-associated entities fulfil the requirements of section 311 of the Fair Work Act 2009 (Cth), which has been detailed above.

If the two businesses are not associated entities, and the new employer refuses to recognise your service with the old employer under section 122(1) of the Fair Work Act 2009 (Cth), then your period of service with your old employee will not be counted towards any redundancy entitlement.

To calculate the exact amount of redundancy you are eligible for, you can refer to the table found in section 119(2) of the Fair Work Act 2009 (Cth), as well as any relevant Modern Award or Enterprise Agreement your employment may be subject to.

Conclusion

Essentially, if the business you work for has changed, your full length of service for both employers will be recognised in calculating your redundancy entitlements if your old and new employers are associated entities or if there has been a transfer of business between non-associated entities and your new employer has not refused to recognise the previous service.

However, there are always exceptions to the rule. If you are unsure about your position, you should seek legal advice.

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