Redundancy and other matters

Redundancy, redeployment and retrenchment

The Government understands that in some instances departments and agencies will be required to restructure workplaces, introduce new technology or change existing work practices and that these changes could affect employees, potentially resulting in redundancies. In order to minimise the effects of these changes, departments and agencies are required to explore and pursue all possible means to secure continuation of employment of affected employees, including but not limited to, redeployment and retraining. Involuntary redundancies are to be used only as the last resort.

Departments and agencies may have existing workplace arrangements relating to redundancy and associated matters that are to be consistent with Victorian Government Policy.


Departments and agencies should be aware that the Government is currently considering legislative amendments to give effect to its commitment to formalise and ensure the enforceability of agreed and approved public sector redundancy provisions. In the meantime, the following policy continues to apply.

The redundancy, redeployment and retrenchment policy seeks to assist in a fair and equitable manner those employees in the public sector who have been declared surplus as their roles are no longer required. This policy provides advice on two areas:

  • a policy statement of rights and principles relating to redundancy, redeployment and retrenchment
  • implementation guidelines for the policy, including separation package details.

Application – employers

The provisions in this policy apply to the redundancy/termination process in Victorian public sector agencies.

The term ‘Victorian public sector agency’ means:

  • all departments and public sector bodies under the PA Act
  • public sector bodies under other Victorian legislation
  • public health services, schools and standalone TAFE Institutes

Universities, including the four dual-sector universities (RMIT, Swinburne University, Victoria University and Federation University Australia), are not subject to the Government’s industrial relations policies or wages policy.

Application – employees

This policy applies to employees in the above applicable public sector bodies, other than:

  • executives
  • casual and temporary employees and fixed term contract employees

Casual and temporary employees are not generally entitled to redeployment and retrenchment benefits if their employment is terminated. Similarly, fixed term contract employees who have completed their term of employment are generally not entitled to redeployment or retrenchment benefits. However, specific consideration may need to be given to individual cases involving long term casual employees or employees who have been employed on successive fixed term contracts. Further advice should be sought if the casual or fixed term nature of an employee’s employment is unclear.

Consultation obligations

Consultation is required where departments and agencies are proposing to restructure the workplace, introduce new technology or change existing work practices which affect employees. Departments and agencies will need to consider their consultation obligations contained in their enterprise agreements as to what may trigger an obligation to consult may differ.

Employers are required to notify the employees and their unions of the proposed changes including the various management-initiated outcomes that may ensue. The likely effects on the employees’ responsibilities and working conditions are to be advised. If the changes are likely to result in surplus roles, the employer must ensure that employees are aware that they could be redeployed, and should redeployment be unsuccessful, that their employment will end in retrenchment.

More generally, employers are to regularly consult with affected employees and their unions and give prompt consideration to matters raised in order to ensure that change initiatives are implemented with the involvement of all relevant parties in a spirit of consultation.

Consistent with obligations associated with implementation of change provisions contained within enterprise agreements, employers have a responsibility to consult with employees and to treat them fairly and reasonably and to apply objective and non-discriminatory criteria consistently. Employers must ensure policies and employment processes are in place to protect these rights, and all managers and employees are aware of these processes and rights.

Priority on redeployment

Once an employee’s role is no longer required and the employee has been declared surplus to requirements a redeployment process will commence which may result in the employee being redeployed to a new position. Employees who are not redeployed may be eligible for a separation package.

Redeployment is a preferred outcome having regard to an employee’s training, knowledge and background. The employee must be advised in writing of the actual date their employment role is declared surplus to needs, details of the redeployment process, and their rights and obligations. During the redeployment process the employee will continue to remain employed and will be entitled to receive salary maintenance.

For departments and agencies covered by the Victorian Public Service Enterprise Agreement 2016 (the VPS Agreement), the Victorian Public Service redeployment principles are set out in Schedule A. The Government’s Victorian Public Service redeployment policy is in Attachment 4.

For agencies not covered by the VPS Agreement the entitlement to redeployment is limited to employment opportunities within the particular agency concerned. In addition, these agencies must have regard to their obligations under relevant enterprise agreements and awards.

No preference is to be given to any category of employee over another, such as non-union members over union members, in relation to retention, termination or consultation. The criteria for determining which roles are to be declared surplus is to be disclosed during consultation with employees and their union and/or other representatives.

Support to affected employees

Employers are to ensure that employees affected by organisational change are provided with support and assistance to consider and pursue the options available to them. The assistance may include, but is not limited to:

  • counselling and support services
  • retraining
  • career planning
  • preparation of job applications
  • interview coaching
  • time off to attend job interviews
  • provision of independent financial advice for employees eligible to receive a separation package

The separation packages

Two separation packages have been endorsed by Government:

  • Voluntary Departure Package (VDP)
  • Targeted Separation Package (TSP)

VDPs may be offered in circumstances where larger scale structural change or employee reductions are required. In accepting a VDP, employees retire or resign from their employment and accept conditions relating to future re employment with the Victorian public sector.

The TSP is a compulsory retrenchment package and action of last resort.

Both separation packages are Government benchmark standards and are not to be exceeded. Departments and agencies should also familiarise themselves with the genuine redundancy considerations in the Termination of Employment policy statement.

Departments and agencies must comply with Australian Taxation Office (ATO) requirements in regard to the application of separation packages and with the genuine redundancy considerations in the Termination of Employment policy statement, as well as relevant Commonwealth industrial and taxation legislation.

Departments and agencies must provide notice of termination or payment in lieu of notice in addition to the relevant package. Departments and agencies must provide the notice in accordance with their relevant industrial instrument and also comply with section 117 of the FW Act that deals with notice of termination requirements (whichever is the most beneficial to the employee).

Continuous service for both the VDP and TSP refers to Victorian public sector agency employment only. Employment with the Commonwealth, other States or local government is not included.

Continuous service includes all periods of service in any approved public sector agency, provided there are no breaks between or within each period other than breaks caused by approved leave and provided that no special separation payments have been made with respect to any of these periods.

The calculation of each week’s pay is affected by part-time or former part-time work.

Voluntary Departure Package – key features

The VDP comprises the following three elements:

  • 4 weeks’ pay, irrespective of the employee’s length of service; plus
  • a lump sum voluntary departure incentive of up to $10,000 (for a full-time employee); plus
  • 2 weeks’ pay per each completed year of continuous service up to a maximum of 15 years.

A 3-year restriction on re employment in the Victorian public sector applies. Recipients of a VDP are required to agree not to seek or accept re employment with, or fee for service from, a public sector employer, including public sector employment through a labour hire agency, for a minimum of three calendar years from the date of their separation. However, in extraordinary circumstances, an agency head may approve earlier re employment, but there must be no undertakings made to this effect prior to an employee’s departure as a VDP recipient.

The VDP is an early retirement scheme for taxation purposes attracting significant taxation concessions. Employers must obtain prior approval from the Australian Taxation Office (ATO) before conducting a VDP program. In considering requests from an employer, the ATO will examine a number of criteria relating to the design and operation of the program including:

  • the reason for the program
  • the identifiable employee groups (i.e. groups must be identified on the basis of objective criteria such as location, division or branch of the organisation, classification or job category or classification) from which employees will be invited to participate in the program
  • any groups within this broader group specifically excluded from participating in the program
  • the criteria on which offers of packages will be made, including criteria on which requests can be rejected (e.g. key personnel, minimum operating staffing requirements)
  • the number of packages the employer will make available

Employees are not compelled to accept offers and may withdraw an expression of interest at any time prior to accepting an offer.

Employers are not bound to accept any employee’s expression of interest in a VDP or to offer any particular employee a VDP.

Departments and agencies should consider the employee groups that will be invited to participate in the program and the design of criteria on which offers will be made having regard to their operational requirements and availability of funding.

‘Redundant employees’ are not an acceptable group to which a VDP program may be restricted. However, VDPs may be offered to an identifiable group, which includes employees whose roles are declared surplus to needs.

Departments and agencies considering operating a VDP program are advised to contact the ATO first to ascertain specific ATO requirements and approval criteria.

Government policy is that:

  • in general, employees must be being paid and in ongoing employment (roles) to be eligible for a VDP
  • in general, employees on unpaid leave and WorkCover recipients are ineligible. However, if it is consistent with the goals and timeframe of the VDP program to do so and appropriate to their circumstances, such employees may be offered the option to return early to the active workforce in time to apply for a VDP. The CBU can advise further in relation to a particular VDP program
  • employees on probation or trial, in fixed term (including executives) or casual roles, as well as essential services staff are ineligible for a VDP

Targeted Separation Package – key features

The TSP is a bona fide redundancy scheme for taxation purposes. No prior approval is required from the ATO as long as it can be established that the separation was a bona fide redundancy.

TSPs should only be used in circumstances of bona fide redundancy. Bona fide redundancies will arise where facilities or functional areas are closing, the organisation is being wound up, or where employees’ skills are no longer required in the public sector.

TSPs are not voluntary. They are compulsory retrenchment packages applied by an employer in circumstances where the work is not required to be performed by the employer and where there is no opportunity for continued employment of the employee.

Decisions on which particular roles are declared excess or surplus must be made on objective non-discriminatory criteria that are consistently applied. This is a key test in unfair dismissal claims. Employers should familiarise themselves with the requirements of the respective enterprise agreement and applicable legislation.

Departments and agencies must exhaust redeployment opportunities before applying a TSP. The TSP comprises:

  • 4 weeks’ of pay, irrespective of the employee’s length of service; plus
  • 1 additional week pay if the employee is over 45 years of age and has completed at least 2 years of continuous service; plus
  • 2 weeks’ pay per each completed year of continuous service up to a maximum of 10 years

Termination of employment

Public sector employees are entitled to due process and procedural fairness prior to termination.

Departments and agencies must ensure they do not terminate an employee’s employment unless there is valid reason connected with the employee’s capacity or conduct or the termination is based on the operational requirements of the department or agency; for example structural change leading to redundancy.

Departments and agencies must ensure that due process and procedural fairness are applied to ensure that any termination is not unlawful or harsh, unjust or unreasonable. These principles must also be applied to any actions that could lead to termination.

As a result of the Victorian referral of industrial relations matters to the Commonwealth, the termination of employment provisions of the FW Act apply to Victorian public sector employees.

The provisions of the FW Act, relevant employment agreements and federal awards must be followed.

Requirements of the FW Act

The FW Act and its accompanying regulations provide that an employee may apply to the FWC for relief in relation to a termination of employment on the ground that the termination was harsh, unjust or unreasonable – unless the employee:

  • was a non-award or non-agreement employee who was paid an annual salary that exceeds a prescribed amount in accordance with the regulations;
  • had not served the minimum employment period of 6 months employment in respect of large employers and 12 months employment in respect of small employers;
  • was a trainee to whom a training arrangement applied;
  • was a casual employee not employed on a regular and systematic basis;
  • was engaged under a contract of employment for a specified period of time, specified task or season (where this was not entered into specifically to avoid the provisions of the FW Act); or
  • is exempted by any other additional exclusion as provided in the regulations.

An employee’s employment must not be terminated unless he or she has been given the period of notice or pay in lieu as set out below or he or she is guilty of serious misconduct such that it would be unreasonable to continue employment during the notice period.

The required minimum period of notice as provided in the NES is:

Employee's period of continuous service with the employer  Period of notice
Not more than 1 year At least 1 week
More than 1 year but not more than 3 years At least 2 weeks
More than 3 years but not more than 5 years At least 3 weeks
More than 5 years At least 4 weeks

The minimum period of notice is increased by one week if the employee is over 45 years of age and has completed at least 2 years’ continuous service with the employer. Enterprise agreements may provide periods of notice in excess of the NES.

In determining whether a termination was harsh, unjust or unreasonable, the FWC will have regard to whether there was a valid reason for the termination connected with the employee’s capacity or conduct or based on the operational requirements of the enterprise.

Departments and agencies which are subject to federal awards or agreements must also comply with any specific additional provisions in those awards or agreements.

Genuine redundancy

Exclusion of matters pertaining to redundancy in enterprise agreements is not intended to prevent a federal tribunal or court considering in a particular case whether a purported retrenchment was genuine. Departments and agencies should seek advice from the CBU in relation to this matter if they are in doubt.

An employee is not unfairly dismissed if the FWC is satisfied that the dismissal was a case of genuine redundancy.

Section 389 of the FW Act provides that an employee’s dismissal is a genuine redundancy if the employer no longer required the employee’s job to be performed by anyone because of changes in the operational requirements of the enterprise and the employer has complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy.

An employee’s dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity.

If the FWC is satisfied that the termination is a genuine redundancy it is precluded from continuing to hear the matter further.

Departments and agencies should also familiarise themselves with the constitutional limitations that also apply to the public sector.

These limitations do not prevent departments and agencies engaging in a consultation process with employees and their unions when a decision has been made to restructure the workplace or introduce new technologies or change existing work practices which affect employees.

Employee entitlements on transfer

The PA Act provides for transfers between the public service and public sector entities on conditions that are no less favourable overall.

The PA Act also stipulates public sector values and employment principles that Victorian public sector departments and agencies that are bound by the PA Act are required to apply. Those agencies not bound by the PA Act are expected to benchmark against the principles under the PA Act.

In such instances the principles outlined below will apply. The principles require that employment processes ensure that employees are treated fairly and reasonably, that equal employment opportunity is provided and that employees have an avenue of redress against unfair or unreasonable treatment.

Interaction with the FW Act

This policy is subject to the application of the transfer of business provisions of the FW Act.

Key principles – transfer of functions to a private provider

Any departures from this operating framework and principles will require the prior endorsement of Government. Contact the portfolio department to discuss any proposals in the first instance.

Employees affected by a transfer of function to the private sector are expected to actively participate
in the agreed change processes with the new provider to attain employment. This may include, for example, attending meetings and providing a resume.

Principle (1) – consultation on change

Public sector employers must consult with their employees about a proposed change that involves a transfer from public to private sector employment, or the implementation of process mechanisms relating to the transfer.

In accordance with this policy, departments and agencies are required to notify employees and their representatives of the proposed change. Departments and agencies must consider their consultation obligations in enterprise agreement as the trigger for consultation to commence may differ. Public sector employers, generally, are also required to consult regularly with affected employees and their representatives, including unions, and give prompt consideration to matters raised in order to ensure that change initiatives are implemented with the involvement of all relevant parties.

Departments and agencies also must adhere to their consultative obligations concerning the implementation of change as contained in enterprise agreements, awards or as formalised in departmental or agency internal policy.

Principle (2) – employment offers

Where a project involves the private sector taking over certain services or functions currently performed by employees in the public sector, the Government requires that the new provider will make offers of employment to all or most of the pre-existing employees involved wherever practicable. Prior to selecting a new provider, departments and agencies must ensure that any potential provider is aware of their obligations specified in this policy. It is expected that in the overwhelming majority of cases offers of employment would be made by the new provider.

The objectives of these requirements are:

  • to ensure that a new employer will do everything practicable to attract and employ existing public sector employees
  • to minimise the number of public sector employees who could potentially become redundant as a consequence of the particular project.

Such offers of employment will precede normal recruitment processes and will allow for reasonable adjustment, including re-training, where employees selected may not meet all the new job requirements.

Principle (3) – employees who accept an offer of employment

Where an employee accepts a final employment offer with the new provider, the employee will be employed on terms and conditions which, in overall terms, will result in no net disadvantage and are no less favourable than those applying before accepting the employment offer. Departments and agencies are encouraged to consult with the new provider on the terms of their employment offer.

This is also subject to the application of the transfer of business provisions in the FW Act or any agreement reached between the employees and the new provider.

Employees who are members of accumulation superannuation schemes are able to either elect to remain as members of their existing schemes or roll-over their accumulated benefit to a complying fund made available by the new provider.

For members of defined benefit funds, the issue of superannuation portability is more complex. This would be decided on a case by case basis with guidance from DTF having regard to the principle of no net disadvantage to employees or any increased exposure of the State due to continued membership of the fund. In addition, employees should seek independent professional advice and carefully consider their personal circumstances.

Principle (4) – continuity of service for leave purposes

If the new provider makes an employment offer to employees and it is accepted, the public sector service of the employees will be regarded as being continuous for leave purposes and employees will retain all service benefits associated with continuous service.

Furthermore, subject to the specific partnership arrangements agreed with the new provider and applicable legislation, employees may have the option of either:

  • being paid out for any unused accrued annual leave and long service leave; or
  • maintaining those leave balances with the new provider

Consistent with Principle (3) above, it is expected that the maintenance of existing terms and conditions will be accompanied by a commitment by the new provider (again in accordance with contractual terms) to recognise previous public sector service for the purposes of transferring accumulated entitlements, such as sick leave, annual leave and long service leave.

In circumstances where continuity of employment applies and unused leave is transferred, it would be expected that the new provider agrees to recognise public sector service in the determination of any subsequent retrenchment payments.

Principle (5) – employees not offered jobs or rejecting job offer

Where final job offer to an employee by the new provider is not made prior to the date the employee has been declared surplus, or the employee has rejected a job offer from the new provider, the employing department or agency can commence redundancy, redeployment or retrenchment action in accordance with the Redundancy, Redeployment and Retrenchment Policy contained in this publication and any applicable award or enterprise agreement. Redeployment process will commence from the date an employee is declared surplus.

An employee will only be entitled to receive a targeted separation package if the circumstances in Principle 6 are met.

Principle (6) – employees electing to remain in the public sector

Employees affected by a transfer of function to the private sector are encouraged to genuinely and actively participate in any employment process initiated by the existing or prospective employer. Employees are also encouraged to consider any offer they receive.

Where employees either choose not to apply for a suitable position or they reject or fail to accept a suitable offer of employment with the new provider, a redeployment process within the public sector will begin. This is in accordance with the Government’s separation policy principles and would be delivered under public sector redeployment processes. Note that outside of the VPS redeployment process is limited to employment opportunities within a particular agency.

However, if an employee fails to actively participate in employment processes or fails to accept a suitable offer of employment with the new provider, the employee may be ineligible for a redundancy package.

Reviewed 17 December 2019

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