Managing an underperforming employee is one of the most challenging situations many employers face. When performance concerns continue, redundancy can sometimes appear to be the simpler or lower-risk option, particularly where performance issues have never been formally addressed or there are concerns about unfair dismissal claims. 

However, if the role is still needed and the real issue is performance, using redundancy instead can expose your business to greater legal risk. 

A genuine redundancy is about the role no longer being required, not about wanting a different person in the role. 

What Makes a Redundancy Genuine? 

Under the Fair Work Act, a dismissal may be considered a genuine redundancy where a business no longer requires a role to be performed because of operational changes. 

Operational changes are genuine business changes that mean a role is no longer required, not simply that the business wants a different employee performing it. 

This might occur due to: 

• Reduced trading hours or customer demand; 

• Financial pressures requiring labour cost reductions; 

• Business restructures; 

• Automation or technology changes; or 

• A decision for duties to be absorbed by an owner or another position. 

The key question is: Does the business still require someone to perform this role? 

If the answer is yes, the issue is unlikely to be a genuine redundancy. 

Genuine Redundancy or Performance Issue? 

Performance Issues Require a Different Approach 

If the business still needs someone to perform the job, but the employee is struggling to meet expectations, the issue is generally one of performance, not redundancy. 

Poor performance, conduct concerns, reliability issues or an inability to meet expectations are generally matters that should be managed through a performance management process. 

While some employers worry that performance management can be time-consuming or lead to complaints, avoiding the process altogether can create greater problems if a dismissal is later challenged. 

A reasonable performance management process should: 

• Clearly identify the concerns; 

• Communicate expectations; 

• Provide support or training where appropriate; 

• Give the employee an opportunity to respond; and 

• Allow a reasonable opportunity for improvement. 

Importantly, employers are entitled to undertake lawful and reasonable management action, including providing feedback, setting expectations and addressing underperformance. 

Why the Wrong Decision Can Be Costly 

When a redundancy is challenged, the Fair Work Commission will look beyond the label used by the employer and examine what actually occurred. 

Common warning signs include: 

• Recruiting for the same or a similar role shortly after termination; 

• Continuing to require substantially the same role to be performed; 

• limited evidence of any genuine operational change; 

• Evidence that performance concerns existed before the redundancy decision; or 

• A lack of consultation or documented operational change. 
• If the Commission determines the redundancy was not genuine, the matter may proceed as an unfair dismissal claim. 

If a redundancy is found not to be genuine, the matter may proceed as an unfair dismissal claim. 

Consultation and Redeployment Still Matter 

Even where a redundancy is legitimate, employers must comply with consultation obligations under the applicable Award or Enterprise Agreement. 

Employers must also consider whether redeployment within the business may be a reasonable alternative. 

Failing to meet these requirements can undermine an otherwise genuine redundancy. 

Real-world Example 

Scenario: A store manager is consistently underperforming. The business wants to replace them with someone more capable, but the role itself is still needed. 

Answer: This is likely a performance management issue, not a genuine redundancy. If the business hires someone else to perform substantially the same role, the redundancy may be challenged. 

Before Proceeding, Ask Yourself 

Before deciding to make a role redundant, ask yourself: 

✔ Does the business genuinely no longer require this role? 

✔ Has the business undergone an operational change that means the role is no longer needed? 

✔ Or is the real issue the employee’s capability, conduct or performance? 

If the work still needs to be performed and the concern relates to capability, conduct or attendance, a fair and documented performance management process is generally the safer and more defensible approach. 

Unsure Which Pathway Applies? 

Every workplace situation is different. If you’re unsure whether a matter involves a genuine redundancy or should be managed through a performance management process, contact MGA’s Employment Advisory team before taking action. Seeking advice early can help minimise legal risk and ensure the correct process is followed. 

Contact us on 1800 888 479 or make an online enquiry.