Employment Law Redundancy: Essential Compliance Guide For Employers

Making roles redundant is one of the toughest decisions you’ll make as an employer. Sometimes it’s necessary to keep your business viable or to restructure for growth - but it must be done lawfully and fairly.

In Australia, redundancy is tightly regulated. If you miss a step, you risk unfair dismissal claims, penalties, and damage to your culture and reputation.

This guide breaks down what counts as a genuine redundancy, your core obligations, the consultation process, and a practical, step-by-step approach you can follow. Our aim is to help you handle redundancy with confidence and care.

What Does “Redundancy” Mean Under Australian Employment Law?

Redundancy happens when you no longer need an employee’s job to be done by anyone. It’s about the role - not the person. Common reasons include restructures, cost-cutting, automation, a change in product mix, or a merger.

If the work still needs to be performed (even if you plan to replace the person), that’s not redundancy. In that case, other termination rules apply.

Redundancy rights mainly come from the Fair Work Act 2009 (Cth), the National Employment Standards (NES), modern awards and enterprise agreements, and the employee’s contract and workplace policies. Each can add obligations you need to follow.

A genuine redundancy (as set out in section 389 of the Fair Work Act) removes access to unfair dismissal, provided you’ve met the criteria below. If the process isn’t followed, employees can still challenge the dismissal.

When Is It A Genuine Redundancy?

Your decision is more likely to be considered a genuine redundancy when all three of these elements are satisfied:

• You no longer need the employee’s job to be done by anyone because of changes in your business operations.
• You complied with any consultation obligations in an applicable modern award or enterprise agreement.
• It wasn’t reasonable to redeploy the employee within your business or an associated entity (for example, within your group or related companies).

Two points employers sometimes miss:

• Consultation timing: Where an award or enterprise agreement applies, the duty to consult is triggered when you have made a definite decision to introduce major changes likely to have a significant effect, but before you implement them. You must genuinely consider employee feedback and measures to mitigate impact.
• Redeployment scope: You must look for suitable roles not only in your business but also within any associated entity. Document your search and why any roles weren’t suitable.

If any of these elements are missing - particularly consultation or redeployment - the dismissal may be open to challenge, including on the basis of the factors the Fair Work Commission considers under section 387 of the Fair Work Act.

Your Core Obligations As An Employer

Managing redundancy is more than a single meeting. Here are the key compliance steps most employers need to cover.

1) Consult With Affected Employees

If a modern award or enterprise agreement applies, you must consult. This usually includes:

• Explaining the proposed change and the reasons for it.
• Outlining which roles are likely to be affected and how.
• Inviting employees to provide feedback and suggest alternatives (for example, redeployment, reduced hours, or retraining).
• Genuinely considering feedback and responding before you implement the change.

Check the consultation clause in the relevant instrument - the modern awards that apply in your workplace often set out specific steps and timelines.

2) Provide Correct Notice (Or Pay In Lieu)

Employees are entitled to written notice according to the NES or their contract. Minimum notice depends on length of service and, in some cases, age. In many cases, employees aged 45+ with at least two years’ service are entitled to an extra week of notice.

If you prefer, you can make a payment in lieu of notice. Either way, ensure your letter of termination clearly states the end date and whether the employee will work out their notice or be paid in lieu. For reference, see typical employment notice periods.

3) Pay Redundancy Entitlements

Where eligible, employees receive redundancy pay based on their continuous service with you. Some employers are exempt (for example, small business employers with fewer than 15 employees, as explained below). The NES sets out the redundancy pay scale - you can quickly sense-check figures with a redundancy calculator.

Exceptions and exclusions can apply, including for casual employees, employees with less than 12 months’ service, apprentices, fixed-term employees whose contract ends at the specified time, or employees dismissed for serious misconduct. Always check the instrument and the NES before you decide.

4) Consider Redeployment

You must take reasonable steps to identify suitable roles within your business and any associated entities. Consider duties, skills, location, hours, and pay. If a role is suitable, offer it - even if it’s at a different classification or lower pay (the employee can choose whether to accept).

5) Pay Final Entitlements Promptly

Employees are entitled to all outstanding wages, accrued annual leave, and (depending on the state or territory) long service leave. If you’re paying notice in lieu or redundancy pay, include those amounts too. Keep your calculations transparent - many employers prepare a final pay breakdown and a statement of service. A practical reference on timing and components is calculating final pay.

How To Run A Compliant Redundancy Process (Step-By-Step)

Every business is different, but the flow below will help you stay compliant and fair.

Step 1: Plan And Document The Business Case

Clarify the operational change and why the job is no longer needed. Consider alternatives such as retraining, natural attrition, or reduced hours. Keep your internal paper trail - it shows your decision was made for business reasons.

Step 2: Check All Sources Of Obligation

Review the employee’s contract, any applicable award or enterprise agreement, your workplace policies, and the NES. Confirm consultation steps, notice, redundancy pay eligibility, and any enhanced entitlements or processes.

Step 3: Start Consultation (If Required)

When you’ve made a definite decision to introduce a major change, begin consultation in line with the relevant instrument. Provide written information about the proposed change, meet with affected staff, invite feedback, and genuinely consider responses before implementing the change. Keep minutes and copies of all communications.

Step 4: Explore Redeployment

Search across your business and associated entities for suitable roles. Record what you checked, how you assessed suitability, and the outcome. If a role is available and suitable, make a timely offer.

Step 5: Make The Decision And Issue Notice

If redundancy is still required, issue a written termination letter stating redundancy as the reason, the notice period (or payment in lieu), the last day of employment, and any garden leave arrangements. Keep the tone respectful and clear, and provide a contact point for questions.

Step 6: Calculate And Pay Final Entitlements

Prepare a final pay breakdown: salary/wages, accrued annual leave, long service leave (if applicable), redundancy pay (if applicable), and notice (worked or in lieu). Include details of superannuation contributions where relevant.

Step 7: Provide Exit Documents And Support

Provide a statement of service and, where requested, a letter confirming employment details. Some employers also provide outplacement support or wellbeing resources. Ensure company property is returned and access is removed on the last day. If you’re issuing employment confirmations, check your obligations around certificates of employment.

Special Scenarios And Common Pitfalls

Small Business Employers (Fewer Than 15 Employees)

Small business employers under the NES are generally exempt from paying redundancy pay. The 15-employee headcount typically includes the employee being dismissed and may include employees of associated entities. However, small businesses still need to provide notice (or pay in lieu), pay accrued entitlements, and follow any consultation steps in an applicable award or agreement.

Employees On Parental Leave

You can make a role redundant during unpaid parental leave if the redundancy is genuine and you follow the correct process. That includes consultation (if required), proper notice, and exploring redeployment. There isn’t a blanket legal requirement to prioritise employees on leave ahead of external candidates, but failing to consider suitable available positions or choosing redundancy because of the employee’s parental leave can lead to adverse action or discrimination claims. Apply the same fair process, and document your decisions and redeployment search carefully.

Selection Criteria And “Pooling” Roles

In a restructure, you might reduce the number of similar roles. If so, apply objective, non-discriminatory selection criteria consistently (for example, skills relevant to the future structure, reliable performance data, qualifications). Avoid criteria that could indirectly discriminate, and keep notes to show your methodology was fair.

Interaction With Leave And Sick Leave

Accrued annual leave is paid out on termination. Long service leave depends on your state or territory laws. Personal/carer’s leave (sick leave) isn’t paid out on termination, but if an employee is absent on paid personal leave during notice, you’ll usually still count that time toward the notice period. If you’re navigating overlapping leave and redundancy, it’s wise to review your obligations around redundancy and sick leave.

Consultation Missteps

Two common errors are consulting too late and not engaging with feedback. If an award or agreement applies, start consultation once you’ve made a definite decision to introduce change but before implementation, provide all required information, and genuinely consider any feedback. Skipping this step can mean your redundancy isn’t “genuine”.

Redeployment “In Name Only”

Redeployment must be considered seriously. You should look for roles across your group, assess suitability against the employee’s skills and experience, and offer any reasonable role. Token efforts can be challenged, so keep thorough records of your search.

Redundancy Vs Termination For Other Reasons

If the job still needs doing, redundancy isn’t the right pathway. In those situations, you’ll be dealing with performance, conduct, or capacity issues and the processes that go with them. If you’re weighing up which pathway applies, it can help to clarify the difference between redundancy and termination before you proceed.

The Key Laws And Documents To Have In Place

Laws That Apply

• Fair Work Act 2009 (Cth) & NES: Set minimum standards for notice, redundancy pay (including small business exemptions), and protections around unfair dismissal.
• Modern Awards/Enterprise Agreements: Often include consultation obligations, extra entitlements, and process steps. Always check the applicable instrument.
• Anti-Discrimination Laws: You can’t select employees for redundancy for unlawful reasons (e.g. pregnancy, age, disability, race).
• Workplace Policies and Contracts: These can add procedural requirements or enhanced entitlements, provided they are not less favourable than the NES.

Useful Documents To Prepare

• Business Case/Restructure Plan: Explains the operational change and why roles are no longer required.
• Consultation Pack: Written notice to affected employees, meeting invite, FAQ sheet, and a process timeline aligned with any applicable award or agreement.
• Redeployment Checklist: A record of all roles reviewed across your business and associated entities, suitability assessments, and outcomes.
• Termination Letter (Redundancy): Confirms redundancy as the reason, notice arrangements, last day, and final pay components.
• Final Pay Calculation: A clear breakdown of wages, leave, notice (worked or in lieu), and redundancy pay (if applicable). When in doubt, refer back to the NES scale or a redundancy calculator.
• Statement Of Service: Dates of employment, position(s), and (if requested) a brief summary of duties for the employee’s future applications.

If you have staff covered by awards or agreements, make sure your internal templates line up with the consultation clause in the relevant instrument. Consistency reduces risk and helps managers follow the process confidently.

Key Takeaways

• A redundancy is genuine when the job is no longer required, you’ve met any consultation duties, and redeployment isn’t reasonable - see section 389 for the legal test.
• When an award or agreement applies, start consultation after a definite decision to introduce change but before implementation, and genuinely consider feedback in line with modern award obligations.
• Provide correct notice (or make a lawful payment in lieu), pay eligible redundancy entitlements, and issue a clear final pay breakdown.
• Small business employers (fewer than 15 employees) are generally exempt from redundancy pay, but still need to meet notice, consultation (if applicable), and accrued leave obligations.
• Always explore redeployment across your business and any associated entity, and document your search and decisions.
• A practical, step-by-step process - planning, checking instruments, consulting, redeploying, and closing out properly - lowers the risk of disputes and helps you support your team through change.

If you’d like a consultation on managing employment law redundancy for your Australian business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.