Can you use last in first out for redundancy?

Can you use last in first out for redundancy?

Can you use last in first out for redundancy?

Last in first out is simple, but risky (and irrational) method of selecting employees for redundancy. If used in isolation as the sole method of selection, it is a blunt instrument that can not only mean that an employer could lose important skills from its business, but also lead to age discrimination claims.

What criteria can be used for redundancy?

The following criteria can be used when selecting employees for redundancy:

  • Skills and experience;
  • Attendance and disciplinary records;
  • Standard of work performance; and.
  • Aptitude for work.

What is LIFO retrenchment?

Over the years our courts have commonly accepted the Last-In-First-Out (LIFO) principle as the most objective way of selecting employees for retrenchment. ... This allowed employers to apply LIFO without having to consider or apply bumping.

Can length of service be used in redundancy selection?

It is possible to use a length of service criterion for selecting people for redundancy but only in certain circumstances: A criterion like this needs to be used cautiously because it could indirectly discriminate.

Is last in first out legal?

In most cases, it is not advisable for an employer to use “last in, first out” as the only criterion for selection if there are other factors that can be taken into account. ... It is more commonly used by employers as a “tie breaker” for selecting for redundancy where all other factors are equal.

Why is LIFO not allowed in Australia?

IFRS prohibits LIFO due to potential distortions it may have on a company's profitability and financial statements. For example, LIFO can understate a company's earnings for the purposes of keeping taxable income low.

What is unfair selection for redundancy?

Unfair dismissal occurs when your employer hasn't followed a fair redundancy process. Employers should always speak to you directly about why you've been selected, and look at any alternatives to redundancy. If this hasn't happened, you might have been unfairly dismissed.

What are valid reasons for redundancy?

Situations that can cause redundancy?

  • The need for the worker has diminished or ceased. ...
  • New systems in the workplace. ...
  • The job no longer exists because other workers are doing the work you carried out. ...
  • The workplace has closed or is closing down. ...
  • The business moves. ...
  • The business is transferred to another employer.

Is LIFO illegal?

IFRS prohibits LIFO due to potential distortions it may have on a company's profitability and financial statements. For example, LIFO can understate a company's earnings for the purposes of keeping taxable income low. It can also result in inventory valuations that are outdated and obsolete.

What are the advantages of LIFO?

The biggest benefit of LIFO is a tax advantage. During times of inflation, LIFO results in a higher cost of goods sold and a lower balance of remaining inventory. A higher cost of goods sold means lower net income, which results in a smaller tax liability.

How are employees selected for redundancy and LIFO?

  • Whether used on its own or alongside other criteria, the only thing relevant for LIFO is an employee’s length of service. Employees with the least amount of service time are selected for redundancy first (or scored the highest), whilst those with a longer service time, effectively those who came into the company first, are selected last.

Is it legal to use last in first out in LIFO?

  • Unfortunately, there is very little case law dealing specifically with the use of ‘last in first out’ as a redundancy selection criterion. However using LIFO as a single selection criterion for redundancy could prove problematic for the organisation.

What does last in first out in redundancy mean?

  • What does Last In First Out mean? LIFO, or Last In First Out, is a method of redundancy selection that involves selecting employees for redundancy on the basis that those with the shortest service should be selected first.

Is it fair to use length of service redundancy criteria?

  • Relying on length of service redundancy selection criteria can theoretically be lawful where fairly applied, although in many cases it can constitute indirect discrimination that requires objective justification in order for the discrimination to be fair.

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