What the budget means for public sector employment and managing the risks

The budget has an important focus on cuts to the Australian Public Service (APS) as part of the economic/political strategy of achieving a budget surplus.

Significant public sector cuts in the budget

The budget forecasts that the APS will be reduced from around 182,000 public servants to around 178,000 public servants – a reduction of over 4,000 jobs.

The Canberra Times has estimated that the total job cuts will increase to more than 17,000 over the three-year forward estimates period. The reductions will come from across government, including the Department of Defence, the ATO, Department of Education, Employment and Workplace Relations, CSIRO, Department of Parliamentary Services and the Australian Bureau of Statistics. It is reported by unions that about 30 government agencies have already announced staff cuts.

The cuts to public servant numbers follow the announcement on 29 November 2011 by the Minister for Finance and Deregulation of a one-off increased efficiency dividend as part of the Mid Year Economic Forecast and Outlook An efficiency dividend is essentially a cut to an agency’s operating budget. The efficiency dividend increased from 1.5 per cent to 4 per cent in the 2012-2013 year. The Minister stated that the “Government’s strong expectation is that agencies will continue to meet the efficiency dividend without resorting to forced redundancies, or reduced services to regional Australia”.

Tips for managing legal risks

The impact of the budget on public servant numbers will mean that there will be significant workplace change in the APS. How well an organisation manages change will largely depend on its engagement with employees and union representatives and compliance with legal obligations.

Some of the key industrial and legal considerations for planning and implementing change in the APS will include:

  • compliance with enterprise agreement requirements, including in relation to consultation and redundancy and redeployment procedures
  • ensuring that if there are redundancies, they are genuine redundancies for the purposes of the Fair Work Act’s unfair dismissal provisions
  • minimising the risk that selection processes for those employees affected by change give rise to adverse action or discrimination claims


Compliance with enterprise agreement provisions is critical as a failure to do so may result in a dispute at Fair Work Australia under the agreement’s dispute resolution clause, or a claim for breach under section 50 of the Fair Work Act, which is a civil remedy provision dealt with by the courts.

APS agencies must take steps to ensure that they meet the genuine redundancy provisions under the Fair Work Act to avoid being subject to its unfair dismissal provisions, which require that a termination of employment is not harsh, unjust or unreasonable.

To reduce risks of adverse action and discrimination claims during a change process, it is important that agencies have clearly articulated – and legitimate - reasons for making changes that impact on employees.

Additional considerations

Some of the other risks that APS agencies should consider as they undertake organisational change include:

  • an increase in workplace bullying and stress complaints that can arise if employees feel under pressure in their roles as a result of change and uncertainty
  • an increase in workers’ compensation claims.

APS agencies should also consider whether casual and contract employees impacted by change may have entitlements that do not form part of written terms and conditions, such as long service leave and notice of termination rights, if the person is likely to be considered at law to be an on-going employee. For example, a casual employee who has been engaged on a regular and systematic basis with a reasonable expectation of continuing employment by the department or agency is likely to have unfair dismissal and notice of termination rights.

Consultation and engagement

Any process dealing with workplace change should incorporate a transparent and considered consultation process that engages employees and the relevant unions as soon as possible.

Consultation that includes one-on-one discussion about the possible impacts of change on employees, as well as an opportunity to receive feedback from impacted employees, can make a significant difference to how successfully a change process is implemented and whether claims or grievances will eventuate.