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Severance Pay Revised |
In Victoria, the Australian Industrial Relations Commission has issued an extra decision to its March redundancy decision. |
Severance Pay Scale |
It was brought to the Commission's attention that each State has varying long service leave provisions. As a result of these differences it was argued that the rate of severance pay should also be modified. The solution to this problem would be to have varying scales based on the legislative requirements on employers in different states. |
It was proposed that the severance pay scale of March 2004 would only apply to Victoria and Western Australia and would be amended for all the other states based on the legislative differences in long service leave entitlements. This would result in a number of different scales based on the state of employment. |
The Industrial Relations Commission conceded that the differences in the legislation between States in regard to long service leave entitlements may lead to unfair and unduly oppressive results if each employer in every state was to conform to the same scale. |
Alongside this however the Industrial Relations Commission considered the impact a number of different scales would have. On the balance the Commission found that one scale was best to eliminate confusion and argument. If a state is not happy with the scale then they may apply to the Commission to have the scale altered |
The Industrial Relations Commission found that the differences in long service leave legislation between states was only one of a number of factors that had to be taken into account when deciding on the level of severance pay. As a result of this the general scale was still effective in producing the minimum amount of severance pay required. The commission did concede that variation in certain circumstances would be necessary however they found that any variation should be in line with their March decision reasoning. |
This has important implications for employers as it allows for variation of the minimum federal award level of severance pay. Variations may be achieved through applications by each state and would have to incorporate differences in long service leave entitlements as one of a number of factors in order to persuade the commission to alter the scale. |
Impact on Small Business |
One of the important aspects of the March decision was to make small business owners liable for severance pay. This issue was revisited in this decision because it was unclear whether the obligations of small business employers would be retrospective or prospective. In other words it was unclear from what date the new scale would apply. |
This is an important consideration for small business owners because the financial impact of having to pay retrospective severance pay for current employees might result in small business owners becoming bankrupt because they are unable to meet their financial responsibilities. It is arguable that if small business owners were aware they would have to pay a substantial amount in severance pay when doing their financial forecasts, they might not have taken that many amount of employees on board. |
The Industrial Relations Commission accepted that to make severance pay retrospective would lead to a substantial financial strain on small business employers. The Commission also pointed out that small businesses are still able waive their obligations under the new federal award for severance pay if they can show they financially cannot meet these obligations. |
For the full decision go to: |
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http://www.airc.gov.au/fullbench/PR062004.htm
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Peter McNamara |
peter.mcnamara@cmlawyers.com.au
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