Retraining before retrenchment in age of automation

Bosses wanting to retrench workers due to automation should be formally required to retrain them, under proposed changes to federal redundancy laws.

Medium and large employers wanting to retrench workers due to automation should be formally required to retrain them, under proposed changes to federal redundancy laws designed to shift their focus from financial compensation to facilitating re-employment.

A new report by progressive think tank the McKell Institute finds 2-3 per cent of the workforce is retrenched annually, with just 14 per cent working in a job long enough to get the maximum redundancy payout of 16 weeks’ pay, excluding those covered by more generous provisions in enterprise agreements.

It estimates 78 per cent of retrenched workers had been with their employer for less than five years, and 30 per cent for less than two years.

Fifty four per cent of workers retrenched between 2014 and 2021 did not find work within three months of their dismissal, becoming unemployed or leaving the workforce entirely.

With workers being confronted by technological change and increased job security, the report says overdue changes to the redundancy framework can mitigate against the worst impacts of automation-induced labour market disruption while still enabling productivity enhancing innovation.

It calls for the definition of redundancy to be changed to distinguish between an ‘economic dismissal’ and an ‘automation-induced’ dismissal, with extra obligations put on employers to ensure workers cut due to automation are offered a credible path to re-employment.

For a redundancy to be deemed ‘genuine’ – which ensures an employer will avoid an unfair dismissal action – a firm would have to demonstrate it has worked to redeploy a redundant worker elsewhere in the firm. This is currently challenging to enforce, however, the report says, given the limited time frames in which redundant workers can protest their dismissal.

If an employee was not suited to available roles within the firm, the employer should be able to demonstrate it has offered to retrain and upskill the worker. If the firm has funded the retraining of the worker, the firm should be able to demonstrate it has made an attempt to rehire the employee.

However, if the business is genuinely unable to identify a role for the worker within the firm, or if the employee themselves opts for redundancy, then the firm can proceed with the redundancy.

The report says the time period in which redundant employees can lodge an unfair dismissal claim should be extended from 21 days to 60 days, while workers made genuinely redundant should be eligible for redundancy after six months’ service.

Shop, Distributive and Allied Employees Association national secretary Gerard Dwyer said the report showed current redundancy arrangements were not fit for purpose, and employer obligations “must be more than the mere signing of a meagre redundancy cheque”.

“At a time of ever more rapid innovation and technological change Australia’s redundancy arrangement must be more accessible to more workers and must have greater emphasis on retraining and redeployment,” he said.

“Workers who lose their jobs are the victims of productivity gains which have meant record profits while wages remain stagnant.”