Know your award – what is the industry specific redundancy scheme?

The building and construction industry has a distinctive framework of workplace entitlements, with employees covered by a range of industry-specific modern awards. One of the most commonly applied awards is the Building and Construction General On-Site Award 2020 [MA000020] (the Award).

For employers operating in this sector, it is critical to understand the employee entitlements, minimum wage rates, and compliance obligations imposed by the applicable award. A failure to comply with award obligations can expose an employer to significant financial penalties, underpayment claims, and reputational damage.

One of the most significant—and often controversial—provisions of the Award is the Industry Specific Redundancy Scheme contained in clause 41.

What does the Award say?

Clause 41.2 of the Award defines redundancy as:

‘a situation where an employee ceases to be employed by an employer to whom this award applies, other than for reasons of misconduct or refusal of duty’

This definition is notably broad. Unlike the conventional understanding of redundancy—where a role is no longer required to be performed—this clause captures any circumstance in which employment is ceased.

In other words, the obligation to pay redundancy under the Award is not confined to situations where a position is made redundant. The entitlement is triggered whenever employment ends, unless a specific exception applies.

This industry-specific definition differs significantly from the general redundancy provisions contained in the Fair Work Act 2009 (Cth) and often comes as a surprise to employers unfamiliar with the Award.

Who does the industry specific redundancy scheme apply to?

Because of the broad definition in clause 41, an employer may be required to make a redundancy payment when an employee ceases employment due to:

• resignation,
• termination (other than for misconduct or refusal of duty), or
• genuine redundancy.

There are some exceptions found in the Award, meaning an employer will not be required to pay redundancy in the following circumstances:

• the employee is terminated for reasons of misconduct;
• the employee is terminated for reasons of refusal of duty; or
• the employee is engaged as an apprentice.

Similar industry-specific redundancy provisions also apply under the Plumbing and Fire Sprinklers Award 2020 [MA000036].

What Happens If I Do Not Pay?

Failure to pay amounts owed under the Award may constitute an underpayment. In serious cases—particularly where conduct is deliberate—such non-compliance may amount to wage theft, which is a criminal offence under section 327A of the Fair Work Act 2009 (Cth).

If convicted of wage theft, the penalties are severe:

For a body corporate:

• A fine equal to the greater of $8,250,000 or three times the amount of the underpayment.

For an individual:

• Imprisonment for up to 10 years; or
• A fine equal to the greater of $1,650,000 or three times the amount of the underpayment.

The Industry Specific Redundancy Scheme under the Award is broader than many employers expect and operates differently from the general redundancy framework under the Fair Work Act. Given the significant financial and legal risks associated with non-compliance, employers in the construction industry should proactively review their employment practices, termination processes, and payroll systems to ensure full compliance with clause 41. Seeking guidance before ending employment arrangements can help avoid costly mistakes and ensure obligations are met.

For questions about your obligations under an award, contact the Workplace Relations Team:

📞 (02) 6175 5900
📧 workplace@mba.org.au