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Xero – Gold Partner

Employer Obligations – What is best for your business?

By | April 21, 2020

The COVID-19 pandemic presents a unique and difficult challenge to Australian employers. As businesses are being forced to shut down due to government regulations, employers are confused as to what they can or can’t do with their employees.

Business Advisor, Kristen Buik explains in more detail the employer’s options to stand down or terminate their employees.

 

So, what does stand down mean in employment?

A stand-down is a temporary alternative to redundancy, and the basic message to your team is, “we can’t keep the doors open due to circumstances, but we will re-open and when we do, we want you back”.

Standing your employees down is a bit like hitting the pause button:

  • Employees won’t need to come to work and perform their duties, and
  • Employers won’t need to pay their employees

However, the employees will remain employed for the period of the stand down and this period will count as service for the purpose of accruing entitlements such as annual leave.

FORCED SHUT DOWN

If the Government or Department of Health orders you to fully shut down, and your employees can’t reasonably work elsewhere, you may be in a position to stand them down without pay.

VOLUNTARY SHUT DOWN

If you are experiencing a downturn in business and you temporarily shut down at your own will, you should pay the employees for that period.

As an alternative to temporarily closing down your business, you should consider:

  • Coming to an agreement with your employees to utilise their paid accrued leave entitlements (for example, annual leave, or long service leave)
  • Discussing with your employees whether they would be open to reducing their hours temporarily

The key here is consultation and coming to an agreement with your team.

PERMANENT SHUT DOWN

Redundancy might be necessary if all other avenues have been explored and there are no redeployment opportunities for your team.

This will be a serious consideration if you have been experiencing a downturn in business due to the coronavirus and you:

  • Cannot sustain paying all your employees
  • Only have enough work for some but not all employees
  • Have temporarily shut down but now you do not believe that your business will recover any time soon, or
  • Are permanently ceasing operations

Ultimately based on what we have seen over the past two weeks, we think the preferred approach is to first try and agree on a position with your employees that will work for both of you. This agreement should be recorded in writing.

The outcome is probably going to be the same but in this time of extreme uncertainty for employers and employees, maintaining open communication with your team will go a long way in lessening the anguish.

For more information or if you have any questions about your personal situation, contact our office on (08) 8172 1444 or email our friendly team today!

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