In Short
- You can make employees redundant if their roles are replaced by AI or automation, but strict procedures must be followed.
- Redundancy must be genuine, and you must provide written notice and redundancy payments and explore redeployment options.
- Small businesses with fewer than 15 employees are not required to make redundancy payments.
Tips for Businesses
When replacing roles with AI, ensure you comply with
redundancy rules, including proper notice and payments. Document
the reasons for redundancy to avoid unfair dismissal claims.
Consider redeploying staff or offering retraining programs to
support employees during the transition. Consult legal experts to
ensure compliance with all requirements.
With the rapid advancement of artificial intelligence (AI) and automation technologies, many companies are exploring how these innovations can streamline operations and increase efficiency. A common question is whether you can remove staff whose roles have been made redundant due to AI implementation.
The short answer is yes; you can potentially make existing employee positions redundant and terminate those employment contracts if the work is genuinely being replaced by AI or other automated systems. However, there are strict rules around the redundancy process that must be carefully followed. This article outlines the restrictions on removing employees and how to ensure efficiency within your organisation.
What is Redundancy
A redundancy situation exists when you, as the employer, no longer require the employee's job to be performed by anyone due to changes in operational requirements. For example, this could be caused by modernisation or labour-saving technology like AI.
If the role is being restructured so that the duties are redistributed among other workers, it may still constitute a genuine redundancy if the original role itself is still no longer required or no longer exists.
What Are My Redundancy Obligations?
When terminating an employee's position due to redundancy caused by operational changes like AI implementation, you must comply with a number of rules and obligations:
- Provide the affected employee(s) with written notice of the redundancy as per the period outlined in their award or employment contract.
- Make relevant redundancy payments to qualifying staff based on their length of service. For example, this could be 12 weeks of pay for a worker who has been at your business for 9 years or more.
- Explore redeployment opportunities for redundant staff into other available roles that they are qualified for.
- Consult with affected employees and their representatives as required.
It is important to note that if you are a small business employer, you are not required to make redundancy payments. You are deemed a small business if you employ fewer than 15 people across all associated entities. This includes:
- permanent full-time and part-time employees; and
- regular and systematic casual employees.
You must demonstrate a genuine operational reason for removing the roles, such as the tasks genuinely being automated by AI capabilities. Terminations cannot be a retrenchment exercise merely aimed at cutting costs. Additionally, the redundancy process must be fair and not discriminatory. Employees cannot be selected based on personal traits like age, gender or disability status.
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Consequences of Unfair Dismissal
If you do not follow the proper redundancy process, employees can make an unfair dismissal claim seeking remedies such as compensation or reinstatement. The Fair Work Commission determines whether a redundancy was a "genuine case of redundancy" based on the evidence provided.
Whether a redundancy dismissal was "harsh, unjust or unreasonable" depends on whether you:
- failed to adequately consult with affected staff;
- selected employees based on discriminatory criteria rather than objective job requirements; or
- did not explore redeployment options.
You should carefully document the operational reasons behind their decision to make roles redundant due to the implementation of AI systems. Consulting legal experts before undertaking redundancies is highly advisable to ensure compliance with workplace laws.
Managing the Transition
Beyond the legal requirements, there are also employee relations considerations when replacing human workers with AI. Effective change management and clear communication are key to preserving morale and reputation.
You should provide worker transition support like:
- outplacement counselling;
- retraining programs;
- robust severance packages; and
- employment assistance.
This can help departing staff adjust while reassuring remaining employees about their future prospects.
There may also be commercial advantages to redeploying capable staff internally before replacing roles with AI. Retaining experienced personnel allows companies to leverage their organisational knowledge as new AI systems are embedded.
Unions and workers' advocates also pay close attention to AI's workplace impact. It is wise to consult worker representatives early when developing AI adoption strategies that could impact roles.
Key Takeaways
Employers in Australia can make employees' roles redundant if the work is genuinely being replaced by AI or automation technologies. However, you must follow strict redundancy rules around notice, payments and consultation to avoid unfair dismissal claims. Documenting the operational reasons for AI implementation replacing roles is crucial to demonstrate a genuine redundancy case. Additionally, consulting worker representatives and exploring human-centred AI design principles and mechanisms like an "AI adjustment tax" may help manage workforce disruption from automation.
Beyond legal obligations, you should consider change management strategies such as:
- redeployment;
- retraining; and
- transition support for impacted staff.
Frequently Asked Questions
What steps do I need to take for a fair redundancy process?
You must provide written notice, make redundancy payments to eligible employees and explore redeployment options where possible. It is also crucial to ensure that the redundancy is genuine and not based on discriminatory factors such as age, gender or disability.
Do I have to pay redundancy if I am a small business?
No, if you employ fewer than 15 people across all entities, you are not required to make redundancy payments. This includes both full-time and part-time employees, as well as regular casuals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
