Building & Construction Employer Redundancy Obligations
If you employ workers in the building and construction industry, your redundancy obligations are different and often more demanding than those that apply to general employers. Here’s what you need to know.
Why Construction is Different
If you’re working or employing people in the building industry, the Building and Construction Award has its own industry-specific redundancy scheme that applies instead of the National Employment Standards (NES).
This means the Building and Construction Award has different rules about:
- when a redundancy happens
- who the redundancy rules apply to
- how much redundancy pay need to be paid.
Workers in the building and construction industry are typically covered by industry-specific awards or enterprise agreements, such as the Building and Construction General On-site Award. These instruments often require employers to make contributions to an approved redundancy fund — most commonly CoINVEST (in Victoria) or REDGroup (in other states) rather than paying redundancy directly to the employee when their role ends.
How Redundancy Funds Work
Instead of setting aside redundancy entitlements yourself, eligible employers make regular contributions to a redundancy fund on behalf of each eligible worker. The fund then pays out redundancy entitlements directly to the worker when they become eligible — typically when they are let go due to lack of work.
Contribution rates and eligibility rules vary depending on the fund and the applicable award, so it’s important to check which scheme applies to your workers.
Who Is Covered?
Coverage generally applies to trade and general labourers working on construction sites, including carpenters, concreters, plumbers, painters, and other on-site workers. Office-based or managerial staff are typically excluded, but it’s worth checking the specific rules for your workforce.
Common Mistakes Employers Make
Many construction employers — particularly smaller operators or those new to the industry — fall into common traps, including:
- Failing to register with the relevant redundancy fund at all
- Not making contributions for all eligible workers
- Incorrectly classifying workers as contractors to avoid obligations
- Underpaying contributions due to incorrect wage classifications
These mistakes can result in significant back-payments, penalties, and interest.
What About Genuine Redundancy?
Even where a redundancy fund exists, employers must still meet their obligations under the Fair Work Act when terminating employees, including providing proper notice and ensuring the redundancy is genuine. A genuine redundancy occurs when the job itself no longer exists and the employer has met any redeployment obligations.
What Employers Should Do
- Confirm which redundancy fund applies to your workers and register if you haven’t already
- Ensure contributions are made correctly and on time for all eligible employees
- Review worker classifications regularly — especially if you engage subcontractors
- Keep clear records of all contributions and employment arrangements
The Bottom Line
Redundancy obligations in the building and construction industry are complex and easy to get wrong. Non-compliance can be costly, and the relevant funds and regulators do conduct audits. If you need any advice regarding employee obligations don’t hesitate to contact us at STS Accounting.
