2 min read

When do intragroup employment transfers trigger redundancy or leave payouts?

By Charles Power

Does your company belong to a larger corporate group? If so, what happens when employees transfer between these companies? It’s really important to make sure that you are doing all the right things.

For certain reasons, you may wish employees in one company within your corporate group to transfer their employment to another company in that group. Or an employee may wish to make that transfer to work in a different business.

Does that trigger redundancy or leave payouts?

If the employee wishes to resign from his or her employment from the old group employer to take up the new role with another group employer, the circumstances would not be a redundancy situation. However if the transfer was the result of the employee’s original role being declared redundant and the transfer to the new group employer was offered as part of a redeployment process, it would be a redundancy situation.

In the case of redeployment of an employee from a redundant position (as opposed to voluntary transfers), the entitlement to claim redundancy pay from the old group employer would depend on the provision that governed that entitlement.

If redundancy entitlements were those provided in section 119 of the Fair Work Act 2009 (Cth) (FW Act), the old group employer would not be obliged to make redundancy payments if the redundant employee rejected an offer to transfer employment to the new group employer on terms substantially similar to, and (on an overall basis) no less favourable than, the terms that applied to the employment with the old group employer.

The exemption would also require that the new group employer recognise the employee’s service with the old group employer for the purposes of calculating service-based entitlements. Given that the old and new group employers are associated entities, the new group employer would be required by the FW Act to recognise prior service with the old group employer anyway.

This means that the old group employer could not pay out unused annual leave upon termination of employment. However, it might be able to cash out annual leave immediately before the transfer, subject to FW Act rules. If that occurs lawfully, then because the transferring employee has already had the benefit of annual leave calculated by reference to a period of service with the old group employer, the new group employer does not need to count that service when calculating the employee’s entitlement.

NOTE: The independent review panel commissioned to review the FW Act recommended late 2012 that when employees, on their own initiative, seek to transfer to a related entity of their current employer, they should only be subject to the terms and conditions of employment provided by the new employer. This recommendation followed submissions from Qantas that the transfer of business provisions in the FW Act meant that Jetstar employees voluntarily applying for a position in a related entity in the Qantas Group with better terms and conditions were restricted in taking up the opportunity because Qantas was required to recognise prior service with Jetstar.

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