In the final article of our ‘5 ways in 5 days’ series, we are looking at options to control labour costs which don’t involve implementing redundancies. This article addresses:
- offering retirement; and
- offering resignation.
Compulsory retirement is unlawful in all Australian States and Territories. This includes where an employer persuades an employee to retire. However, it is possible to offer retirement to employees. Retirement may be an attractive option for certain employees, especially as retiring when above ‘preservation age’ allows them to access their superannuation. It is also possible for an organisation to implement a retirement policy which makes certain benefits available to employees who are at an age where the future operations of the business make it important to have a succession plan in place.
This approach requires some careful consideration and planning by an employer:
- there can be significant costs involved if employees are in a defined-benefit superannuation scheme with early retirement benefits;
- generally, employees approaching retirement age have built up significant skills and qualifications, as well as corporate knowledge. It may be appropriate to develop a program for transferring their skills and knowledge to other employees; and
- advice should be obtained to ensure that any arrangements put in place do not fall foul of discrimination laws (especially those relating to age).
If an employee resigns voluntarily, then, generally speaking the employer is not obliged to make any payments to them (such as severance payments). It is open to an employer to approach an employee and propose that the employee resign. The employer may offer to make an ex gratia payment to the employee in exchange for their resignation. These are known as ‘shadow redundancies’, and may enable the employer to avoid the need to go through a consultation process and make severance payments.
There are, of course, some risks with this approach:
- if the proposal is put to the employees with the alternative of redundancy (so effectively the employee has no real choice about whether to resign) the employer would very likely need to comply with its obligations in relation to termination for redundancy (including, for example, consultation and severance payments). In adopting this alternative, it is critical to ensure that employees understand that they are not obliged to resign.
- employers should also ensure that implementing this alternative is done in a way which does not fall foul of discrimination laws. The approach to employees must not be discriminatory (for example, offering the option only to men or only to persons of a certain racial background).