Restructures and changing terms in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Restructures and changing terms of employment are lawful in Australia when handled correctly — but the process matters as much as the outcome. Get it wrong and you risk unfair dismissal claims, breach of contract disputes, or orders to reinstate an employee.
What counts as a restructure
A restructure covers any significant change to how your business operates: eliminating roles, merging teams, changing reporting lines, outsourcing functions, or relocating work. It can also mean changing the terms of an existing role — reducing hours, altering duties, or changing pay arrangements.
Not every restructure triggers a redundancy. If you eliminate a role but the same work continues under a different title, a tribunal may find the redundancy was not genuine. The Fair Work Act requires that the job itself no longer exists, and that redeployment within the business or an associated entity was not reasonably available.
Changing an employee's terms
This is where employers often underestimate the legal exposure. Employment terms — whether written into a contract, set by an award, or implied by long practice — cannot generally be changed without the employee's agreement.
The practical approach is:
1. Identify the source of the term. Is it in the contract, an enterprise agreement, a Modern Award, or just custom and practice? Terms in an award or enterprise agreement cannot be varied by agreement between you and the employee alone — they require the formal variation process under those instruments.
2. Consult before you decide. Genuine consultation means sharing your proposal, explaining the business reason, and giving the employee a real opportunity to respond before the decision is final. It is not a notification exercise. Most Modern Awards and enterprise agreements include an explicit consultation clause with mandatory steps.
3. Get agreement in writing. If the employee agrees to new terms, document it clearly. A variation letter or updated contract signed by both parties is straightforward evidence if the arrangement is later disputed.
4. Do not simply impose the change. Unilaterally cutting someone's pay or hours without consent is likely a breach of contract. In serious cases, an employee may treat the conduct as a repudiation of the contract and resign — then bring an unfair dismissal or adverse action claim on the basis of constructive dismissal.
Redundancy: the genuine requirement and entitlements
When a role is made genuinely redundant, the employee is entitled to redundancy pay under the National Employment Standards. The scale runs from four weeks' pay for one to two years of service, increasing incrementally with years of service. Small business employers (fewer than 15 employees) are exempt from the NES redundancy-pay scale, though notice obligations still apply.
The obligation to consider redeployment is real, not a formality. Employers with related entities — subsidiaries, holding companies, franchises — must look across the group for suitable alternative roles and genuinely offer them if available. Failing to do this is one of the most common reasons a redundancy is found not to be genuine.
Keeping payroll compliant through the change
Structural changes create payroll complexity. When roles change mid-year, you need to ensure:
- Termination payments are correctly calculated and taxed. Genuine redundancy payments up to the tax-free limit attract concessional tax treatment; payments above the limit are taxed differently. Your payroll system or adviser should identify each component separately.
- Final pays include all accrued entitlements. Unused annual leave (four weeks per year of service under the NES), long service leave (state-governed — rules vary), and any other accruals must be paid out on termination.
- STP reporting is timely. Each pay event, including a termination payment, must be reported through Single Touch Payroll at or before the pay date. Finalisation of the employee's income statement is required by 14 July. If you're running payroll across multiple entities or jurisdictions, how Mellow runs payroll across six countries on one platform may be relevant context.
Keeping records and managing risk
Thorough documentation is your best protection. Keep records of the business rationale for the restructure, every consultation meeting (dates, attendees, what was discussed), any redeployment opportunities that were considered, and the written outcome.
If an employee raises concerns, respond promptly and in good faith. Many disputes that end in tribunal proceedings started as a misunderstanding that went unanswered for too long.
Finally, this area of law moves and specific circumstances matter enormously. The general principles here are a starting point — if a restructure involves multiple employees, changes to enterprise agreement terms, or any complexity around genuine redundancy, taking specific legal advice before you act is time well spent.
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