Redundancy and the Objective Test: What “acceptable” really means in alternative employment
The Fair Work Commission (FWC) recently dismissed an employer’s application under section 120 of the Fair Work Act 2009 (Fair Work Act), which allows employers to seek a reduction in redundancy pay if they have obtained “other acceptable employment” for the employee. This decision reinforces the importance of clarity and fairness in restructuring. The case involved The Support People Pty Ltd (The Support People), a disability support provider that restructured its operations and outsourced their payroll and Human Resources (HR) functions.
Background of the case
Ms Poulton, employed as a Compliance and Risk Officer, worked part-time; four days per week with three days from home and one day in the Ballarat office. After being notified that her role might be made redundant, she was offered an alternative position with the same title but reduced to two days per week, both in-office, and with narrowed responsibilities.
The Support People also mentioned an HR Officer role and directed Ms Poulton to its Employment Hero portal, claiming it contained details of available positions. Ms Poulton was told to review the portal and advise if any role “stood out” so they could “discuss further.” However, by that time, her access to the portal had been revoked, leaving her without the necessary information. This lack of clarity and active facilitation became a critical issue in the FWC’s assessment.
Ultimately, the FWC found that while the employer had taken steps to offer alternative employment, the proposed role was not objectively acceptable due to significant reductions in pay, increased travel requirements, and diminished professional status. The application to reduce redundancy pay was dismissed and Ms Poulton retained her full seven weeks’ entitlement.
Key Lessons for Employers
1. The Importance of objective acceptability
Under the Fair Work Act, suitable alternative employment must be objectively acceptable, not just offered in good faith. The FWC applies an objective test, looking at whether the new role is reasonably comparable to the original in terms of factors, including but not limited to duties, status, remuneration and working conditions. In this case, halving the employee’s pay, reducing hours, and increasing office attendance were decisive factors against acceptability. Employers who fail this test cannot reduce redundancy pay and may face additional risks such as unfair dismissal claims and full liability for statutory entitlements.
2. Active steps, not mere facilitation
The law requires employers to obtain suitable alternative employment, which means taking deliberate steps to secure the role for the employee. A genuine offer involves clear details about duties, hours, pay, conditions and ensuring the role is available for acceptance. In this case, directing the employee to a portal after revoking access highlighted why mere facilitation falls short. Employers must act intentionally and document these efforts to meet the legal threshold.
3. Transparency and procedural fairness
Clarity and communication are critical throughout the redundancy process. Vague offers, missing position descriptions and revoked access to job information undermine compliance and trust. Employers should provide written documentation for any alternative role and maintain open channels for questions and feedback. Procedural fairness is not just best practice, but a safeguard against disputes and reputational damage.
4. Plan for compliance and risk
Redundancy decisions carry significant legal and financial consequences. Poor planning such as offering roles with drastic pay cuts or failing to consult properly can lead to penalties, litigation and reputational harm. Employers should approach restructuring strategically, review obligations under awards and agreements, assess the comparability of alternative roles and document every step. A proactive approach reduces risk and demonstrates good faith compliance.
Key takeaways
The Support People Pty Ltd v Poulton underscores the value of clarity and fairness when managing redundancy.
The Fair Work Commission’s decision reinforces that objective comparability and transparent communication are key to lawful restructuring. By embedding these principles into planning and execution, employers can navigate legal requirements confidently while supporting both organisational goals, mitigating risks to the employer and supporting employee wellbeing, by delivering a fair and clear process.
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