Employee Redundancy Pay Under Section 119 Fair Work Act: Employer Obligations

When your business is navigating change - restructuring, downsizing or adapting to new technology - managing redundancies lawfully is essential. Getting it right protects your team, reduces legal risk and helps you move forward with confidence.

In Australia, redundancy pay entitlements come from section 119 of the Fair Work Act 2009 (Cth). If you’re an employer, understanding when redundancy pay applies, how to calculate it, and what exceptions exist will help you avoid costly missteps.

In this guide, we’ll break down s119 in plain English, explain what a “genuine redundancy” involves, outline your obligations step-by-step, and flag common pitfalls. If you need tailored support with your process or documents, our team can help you with practical options that fit your business.

What Is Section 119 Of The Fair Work Act?

Section 119 of the Fair Work Act sets the minimum redundancy pay for eligible employees when their job is no longer required to be performed by anyone in the business (a genuine redundancy). Redundancy pay is a monetary entitlement intended to soften the impact of job loss where there’s no suitable alternative role available.

Typical scenarios include business closures (in full or part), mergers, automation removing certain functions, or operational restructures that eliminate positions. If you’re removing a role for operational reasons rather than for performance or conduct, s119 is the starting point for redundancy entitlements.

Redundancy pay must be calculated at the employee’s base rate of pay for their ordinary hours of work. This excludes bonuses, overtime and most allowances. Superannuation is generally not payable on redundancy pay (because it’s not ordinary time earnings), but always confirm your position with your payroll adviser or refer to resources such as Do You Pay Superannuation On Termination Payments? for clarity.

Who Gets Redundancy Pay - And How Much?

Not every employee is entitled to redundancy pay. Entitlement depends on service length, employment type and a small number of specific exclusions.

Eligibility Basics

• Employment Type: Full-time and part-time employees are generally covered. Casual employees are not entitled to redundancy pay under s119.
• Minimum Service: The employee must have at least 12 months of continuous service with your business.
• Small Business Exemption: Employers with fewer than 15 employees (headcount method, which can include regular casuals) are exempt from paying redundancy under the National Employment Standards.
• Other Exclusions: Apprentices, trainees, some fixed-term employees (whose contract ends on its stated expiry date), seasonal workers and certain specified categories are excluded.

Continuous service can be affected by unpaid leave or certain breaks in employment. If there’s any uncertainty, it’s a good idea to check your award or agreement obligations and consider getting Redundancy Advice before you act.

Redundancy Pay Scale Under s119

Section 119 provides a sliding scale based on the employee’s period of continuous service:

• At least 1 year but less than 2 years - 4 weeks’ pay
• At least 2 years but less than 3 years - 6 weeks’ pay
• At least 3 years but less than 4 years - 7 weeks’ pay
• At least 4 years but less than 5 years - 8 weeks’ pay
• At least 5 years but less than 6 years - 10 weeks’ pay
• At least 6 years but less than 7 years - 11 weeks’ pay
• At least 7 years but less than 8 years - 13 weeks’ pay
• At least 8 years but less than 9 years - 14 weeks’ pay
• At least 9 years but less than 10 years - 16 weeks’ pay
• At least 10 years - 12 weeks’ pay

Note the reduction at 10 years of service (12 weeks). This reflects how other long-service entitlements interact with redundancy at very long tenure.

Redundancy pay is separate from notice of termination or Payment In Lieu Of Notice. You still need to give the correct notice (or pay it out) in addition to redundancy pay, and you must also finalise any accrued but unused leave.

When Doesn’t Redundancy Pay Apply?

There are important exceptions and carve-outs. However, it’s crucial to apply them carefully - and to understand where an application to the Fair Work Commission (FWC) is required.

Common Exceptions

• Small Business Employer: Fewer than 15 employees at the time of dismissal (using the headcount method) generally means no redundancy pay is owed under s119.
• Service Under 12 Months: Employees with less than a year of continuous service are not entitled to redundancy pay.
• Excluded Categories: Casuals, apprentices, trainees, employees on contracts for a specified period/task that simply expire, and some seasonal workers.
• Ordinary and Customary Turnover of Labour: In limited circumstances (and typically in specific industries), the end of employment may be due to the ordinary and customary turnover of labour. This exception is narrow and often contested - get advice before relying on it.

Alternative Employment And Affordability (s120)

Offering other suitable employment does not automatically remove your obligation to pay redundancy under s119. To reduce (or waive) redundancy pay based on either of the following grounds, you must apply to the Fair Work Commission under section 120:

• Other Acceptable Employment: You obtained or offered acceptable alternative employment for the employee; or
• Inability To Pay: You cannot afford the redundancy payment.

If the FWC is satisfied, it may order that redundancy pay be reduced to a specified amount (including to nil). Without an FWC order, you remain liable for the full s119 amount.

Interaction With Awards And Enterprise Agreements

Some modern awards or enterprise agreements contain redundancy terms (including industry redundancy funds) that sit alongside the NES. These cannot undercut the NES minimums. Make sure you identify any coverage and comply with consultation, redundancy or transfer of business provisions in the applicable Modern Awards or agreements.

What Does A Genuine Redundancy Require?

To rely on redundancy pay under s119 - and to reduce unfair dismissal risks - the redundancy must be “genuine.” In practice, that means you should be able to show the following.

• The Role Is No Longer Required: Due to operational changes, your business no longer needs anyone to perform the specific job.
• Compliance With Consultation Obligations: If a modern award or enterprise agreement applies, you must consult with affected employees as required before making the final decision.
• Reasonable Redeployment Considered: You’ve genuinely explored whether the employee could be redeployed within your business or to an associated entity (including at a different location or on different terms, if reasonable).

If those elements aren’t met, a dismissal may be open to challenge (for example, as an unfair dismissal), even if operational change was the trigger. This is why careful process and records matter.

Employer Checklist: How To Manage Redundancy Lawfully

Managing redundancies is about both people and process. The following steps will help you stay compliant, fair and organised.

1) Plan And Identify Roles

• Define the business case for change and the roles affected - not individuals.
• Confirm small business status (if applicable) using the headcount method at the time of dismissal.
• Review coverage under any award or agreement and map out required consultation steps.

2) Consult With Affected Employees

• Notify employees as early as practicable of the proposed changes and potential redundancies.
• Share reasons, timing and possible impacts. Invite feedback and suggestions.
• Genuinely consider alternatives raised, including job-sharing, retraining or modified duties.

3) Explore Redeployment

• Check for roles across your business and associated entities that could be suitable with reasonable training or adjustment.
• Document the options considered, why they were or weren’t reasonable, and any offers made.
• If moving employees within your group is viable, ensure any transfer complies with relevant rules around Transferring Employees Within Group Companies.

4) Confirm Genuine Redundancy And Finalise Decisions

• Once there are no reasonable redeployment options left and consultation is complete, confirm the redundancy decision and prepare termination documentation.
• If you believe other acceptable employment has been obtained, or you can’t afford the full amount, consider applying to the FWC under s120 before finalising payments.

5) Calculate And Pay Entitlements

• Calculate the s119 redundancy payment based on continuous service and base rate for ordinary hours.
• Add notice of termination (or make a Payment In Lieu Of Notice), plus any accrued but unused leave and any other amounts owed.
• Check payroll treatment, tax and super implications for each component; use internal resources and external advisers where needed.

6) Use Clear, Tailored Documentation

• Ensure each employee has a current, tailored Employment Contract that aligns with your award/enterprise agreement obligations and sets clear termination terms.
• Issue accurate termination letters, statements of service and final payslips.
• Keep a clear paper trail: business case, consultation notes, redeployment assessments and your redundancy calculation working papers. The Redundancy Document Suite can make this process more efficient and consistent.

7) Communicate With Care

• Explain outcomes compassionately and factually, including what’s being paid and when.
• Offer practical support where possible (e.g., references, reasonable time to attend interviews), which can ease the transition and protect your employer brand.

Practical Tips To Reduce Risk

• Confirm award coverage and follow all consultation requirements - even where you believe the small business exemption applies.
• For complex restructures or tight cash flow, obtain timely Redundancy Advice before you commence the process.
• If you’re unsure about exact notice periods for particular staff, refer to Employment Notice Periods In Australia or get specific guidance before issuing letters.
• Use a simple internal checklist for each role - it’s easier to stay consistent across multiple redundancies.
• Consider a periodic Legal Health Check to keep contracts and policies aligned with the latest Fair Work changes.

Key Takeaways

• Section 119 sets minimum redundancy pay based on an employee’s continuous service, paid at the base rate for ordinary hours.
• Eligibility generally covers full-time and part-time staff with at least 12 months’ service; casuals and small business employers (fewer than 15 employees) are typically excluded.
• Offering “other acceptable employment” or claiming inability to pay does not automatically remove liability - you need a Fair Work Commission order under s120 to reduce redundancy pay.
• A genuine redundancy requires that the job is no longer required, proper consultation has occurred under any award/enterprise agreement, and redeployment was not reasonably available.
• Redundancy pay is separate from notice; ensure you give notice or make a Payment In Lieu Of Notice and finalise any accrued leave and other entitlements.
• Use clear, tailored documents (such as an Employment Contract and a Redundancy Document Suite), keep detailed records and consider Redundancy Advice for complex scenarios or eligibility questions.
• Awards and enterprise agreements can add obligations but cannot undercut NES minimums - always check Modern Awards and any agreement coverage.

If you’d like a consultation on handling employee redundancy under s119 of the Fair Work Act for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.