Claims for severance payments (cont.)

1. Express Contractual Term

   The contract of employment may itself contain an explicit provision for a severance payment on redundancy. Although this was unusual in the past, it is now becoming more common. Alternatively, there may be an express provision incorporating an award/certified agreement that includes an obligation on the employer to make a severance payment.

2. Company Policy and Procedures Manual

   In addition, a severance entitlement may be found in the company's policy and procedures manual.

   If either your contract of employment or the company manual provides for severance, careful attention will need to be paid to the wording of these clauses. It is not uncommon for a clause to provide that, before a severance entitlement is payable, there must be no other position in the company that you are capable of performing.

   At the time of negotiating your contract of employment, this is one of the many issues that need to be examined. It may, for example, be possible to insist on a tightening up of this definition so that it becomes easier to qualify for a severance payment.

3. Industrial Instrument

   For those executives who are lower in the hierarchy and who have supervisory (as opposed to managerial) responsibilities, it may be possible to base a claim on either an award or a collective employment agreement known as a "certified agreement". To succeed in this argument, you need to be able to demonstrate that your employer is a party to the award/agreement and your position description effectively falls within the relevant award classification. Most executives are not covered by any relevant industrial instrument.

   If you do have a right to receive a severance payment, are you also entitled to receive notice?

   As noted above, notice and severance are intended to compensate you for two different categories of loss. It follows that, if you have a contractual entitlement to severance pay, this is enforceable as a contractual debt and you are entitled to receive notice in addition to this payment.

   On the other hand, a company may make you an ex gratia severance payment i.e. where they have no legal obligation to do so but are simply making the payment as a goodwill gesture. In these circumstances, the ex gratia severance payment would be deducted from your common law reasonable notice claim

Redundancy