Fair Work Act Redundancy Entitlements: Employer’s Compliance Guide

Managing redundancies is never easy. If your business is restructuring, facing a downturn or closing a function, you’ll want to do right by your team and stay fully compliant with Australian employment law.

Under the Fair Work Act 2009 (Cth), redundancy entitlements sit within the National Employment Standards (NES). As an employer, you need to know when redundancy pay applies, how to calculate it, and what process obligations (like consultation and redeployment) you must follow to ensure any termination is a genuine redundancy.

In this guide, we’ll unpack the rules around Fair Work Act redundancy entitlements in plain English. We’ll cover who is eligible, how to calculate redundancy pay, the consultation and redeployment steps you need to take, and common pitfalls to avoid so you can manage redundancies fairly and lawfully.

What Is Redundancy Under The Fair Work Act?

A redundancy happens when you no longer need a specific job to be done by anyone. This often occurs due to operational changes, new technology, cost-cutting, mergers, or a business closure. It’s about the role disappearing - not an employee’s performance.

To be a genuine redundancy under the Fair Work Act, three things must line up:

• You no longer need the job to be performed by anyone.
• You’ve complied with any consultation obligations in a Modern Award or enterprise agreement.
• It wasn’t reasonable to redeploy the employee within your business or any associated entity.

These elements align with the statutory concept of genuine redundancy (see the factors discussed in section 389 of the Fair Work Act). If you skip any of these steps, you risk an unfair dismissal claim because the termination may not be considered “genuine.”

Who Gets Redundancy Pay (And Who Doesn’t)?

Under the NES, an employee may be entitled to redundancy pay if their job is genuinely redundant and they meet eligibility criteria. However, there are important exceptions and nuances to get right.

Employees Who Are Typically Eligible

Subject to the exclusions below, employees with at least 12 months’ continuous service whose employment ends because their role is genuinely redundant are generally entitled to redundancy pay under the NES, calculated by years of service.

Key Exclusions And Nuances

• Small business employer: If you have fewer than 15 employees at the time of dismissal, NES redundancy pay does not apply. When counting your headcount, include employees of associated entities and casuals who are employed on a regular and systematic basis.
• Less than 12 months’ service: Employees with under 12 months of continuous service are not entitled to NES redundancy pay.
• Specified period, task or season: Employees engaged for a set period, task or season are excluded where the employment ends for that reason.
• Casual employees: Casuals are not entitled to NES redundancy pay.
• Apprentices: Apprentices are excluded from NES redundancy pay.
• Public sector coverage: Some State or Territory public sector employees are not covered by the national system. Where the NES doesn’t apply, redundancy may be governed by other legislation or instruments.

Importantly, redundancy pay only applies where the dismissal is because the job is no longer required. If an employee is dismissed for another reason (for example, serious misconduct), that termination isn’t a redundancy - so NES redundancy pay does not arise.

Always check whether a Modern Award, enterprise agreement or employment contract provides more generous redundancy benefits than the NES. If it does, the higher entitlement prevails.

How To Calculate Redundancy Pay Under The NES

Redundancy pay is based on the employee’s period of continuous service and is paid at their base rate of pay for ordinary hours of work. It does not include bonuses, loadings or overtime, unless a contract or industrial instrument requires otherwise.

NES Redundancy Pay Scale

Continuous Service	Redundancy Pay (Weeks of Base Pay)
At least 1 year but less than 2 years	4 weeks
At least 2 years but less than 3 years	6 weeks
At least 3 years but less than 4 years	7 weeks
At least 4 years but less than 5 years	8 weeks
At least 5 years but less than 6 years	10 weeks
At least 6 years but less than 7 years	11 weeks
At least 7 years but less than 8 years	13 weeks
At least 8 years but less than 9 years	14 weeks
At least 9 years but less than 10 years	16 weeks
10 years and over	12 weeks

Note: The entitlement reduces at 10+ years because separate long service leave arrangements apply.

Practical Calculation Tips

• Use base rate of pay: Calculate redundancy using the ordinary hourly base rate (before tax) for the employee’s usual hours.
• Check instruments: Confirm whether any Award, enterprise agreement or contract provides a higher amount.
• Double-check service: Periods of authorised unpaid leave may not count toward “continuous service” for this purpose, depending on the instrument.

If you want a quick sense-check, you can run the numbers against our redundancy calculator to estimate likely NES payments.

Notice Of Termination Is Separate

Redundancy pay is in addition to notice of termination (or payment in lieu). Make sure you also meet your notice obligations under the NES, any Award or contract. If appropriate, you can provide payment in lieu of notice to bring employment to an earlier end, provided you pay the correct amount.

Can Redundancy Pay Be Reduced?

There’s a narrow pathway for employers to seek a reduction in redundancy pay through the Fair Work Commission (FWC) under a specific power. The FWC may order a reduction only if:

• You obtained other acceptable employment for the employee; or
• Paying redundancy would cause significant financial hardship (inability to pay).

Outside of an FWC order, redundancy pay under the NES cannot be “offset” by giving extra notice or by re-labelling other payments. If this scenario applies, it’s prudent to get targeted redundancy advice before taking any steps.

Consultation, Redeployment And Process Compliance

Compliance is not just about the dollars. Process matters just as much - and the Fair Work Act expects you to follow it carefully.

Consultation With Employees

Most Modern Awards and many enterprise agreements require you to consult with affected employees about major workplace changes, including proposed redundancies. While the specific wording varies, the usual expectations are to:

• Notify employees of the proposed change and the likely impacts on their job.
• Give them relevant information in writing and a reasonable opportunity to respond.
• Genuinely consider any feedback, including suggestions to mitigate adverse effects.

Failure to consult properly can undermine the “genuine redundancy” defence and open the door to unfair dismissal claims (see the factors at section 387 of the Fair Work Act).

Reasonable Redeployment

Before confirming a redundancy, you must consider whether there is any reasonable redeployment opportunity within your business or an associated entity. “Reasonable” will depend on the role, location, pay, seniority, the employee’s skills and their personal circumstances.

Document the roles you assessed, why they were or were not suitable, and any offers made. This record will be important evidence if the redundancy is later challenged as not genuine.

Other Termination Entitlements

On top of redundancy pay and notice, ensure you pay out:

• Accrued but unused annual leave, plus any applicable leave loading.
• Long service leave in line with the relevant State/Territory law and service history.
• Any other contractual entitlements or award obligations.

We have a step-by-step overview for calculating final pay, and you can also factor in issues like redundancy and sick leave where relevant.

Step-By-Step: Managing A Lawful Redundancy

Every workplace is different, but the following practical roadmap will help you meet your obligations and reduce risk.

1) Identify The Business Case And Roles

Start by clearly documenting the operational reason for the change. Identify the roles (not people) that will no longer be required and why. This clarity helps you avoid any suggestion that the dismissal was about performance or conduct.

2) Check Coverage And Eligibility

• Confirm which employees are impacted and whether they’re covered by the NES (and any Award/EA).
• Establish whether you are a small business employer (fewer than 15 employees) to determine NES redundancy pay obligations.
• Review each person’s service length to determine if the 12-month threshold is met.

3) Map Your Consultation Plan

• Identify the Award/EA consultation clause that applies and follow it strictly.
• Prepare written materials outlining the proposed changes, the reasons, and the likely impacts.
• Schedule meetings, invite feedback, and keep detailed notes of discussions.

4) Explore Redeployment

• Audit vacancies and upcoming roles across your business and associated entities.
• Assess suitability, training needs and reasonable adjustments.
• Record your assessment and any redeployment offers made (whether accepted or declined).

5) Calculate Entitlements

• Use the NES table to determine redundancy pay, cross-checking any Award/EA/contract enhancements.
• Confirm notice requirements or plan for payment in lieu of notice where appropriate.
• Calculate payout of annual leave and any long service leave according to local laws.

6) Prepare Clear Documentation

• Consultation records: Meeting invites, minutes, and written responses.
• Termination letter: Reason for redundancy, last day, notice arrangements, and a breakdown of entitlements.
• Supporting schedules: Calculations and payment summaries.
• Optional deed of release: Where appropriate, you may formalise settlement terms; seek advice to ensure it’s fit-for-purpose.

Where you need tailored documents and guidance for your situation, our team can support you with an Employee Termination Documents Suite or specific redundancy advice.

7) Communicate Compassionately

Deliver the news in a private meeting, provide written confirmation, and invite questions. Consider reasonable support such as time off to attend interviews and providing employment separation certificates where required.

8) Make Payments And Keep Records

Pay all amounts owing on or shortly after termination, issue final payslips/records, and maintain a complete file of your decision-making and process. Thorough records are your best protection if a dispute arises later.

Common Pitfalls To Avoid

Redundancy processes can go off track for small, avoidable reasons. Here are the traps we see most often - and how to steer clear of them.

• Skipping consultation: Not consulting in line with an Award/EA can undermine a genuine redundancy and lead to claims. Build consultation into your timeline and document it carefully.
• Mistaking performance issues for redundancy: Don’t relabel a conduct or performance issue as a redundancy to fast-track a termination. That approach invites unfair dismissal risk.
• Overlooking redeployment: Failing to check associated entities or ignoring potential adjustments to similar roles can be fatal to the “genuine redundancy” defence.
• Miscalculating payments: Confirm the base rate, years of continuous service, and any Award/EA/contract enhancements before issuing figures. A quick cross-check with our redundancy calculator can help sanity check your numbers.
• Confusing notice and redundancy: Notice is separate to redundancy pay; both need to be addressed. If using in-lieu arrangements, make sure the notice period and calculations are correct.
• Assuming offsets are allowed: NES redundancy pay can’t be unilaterally offset by extra notice or other payments. Only an FWC order can reduce the entitlement in narrow circumstances.
• Poor documentation: Keep copies of consultation notes, redeployment assessments, calculations and letters. Good records often resolve issues before they escalate.

If you anticipate complexities (for example, multiple Awards, large restructures, or hardship considerations), it’s wise to speak with an employment lawyer early. We can help you plan your approach, tailor documents, and reduce risk from the outset.

Key Takeaways

• Redundancy under the Fair Work Act is about the role no longer being required, not performance. To be genuine, you must consult (where required) and consider reasonable redeployment.
• NES redundancy pay depends on years of continuous service and is paid at the employee’s base rate for ordinary hours. Small business employers (fewer than 15 employees) are exempt from NES redundancy pay.
• Redundancy pay is separate from notice. You still need to give notice or provide payment in lieu, and pay out accrued entitlements as part of the final pay.
• Only the Fair Work Commission can reduce redundancy pay, and only in narrow circumstances (other acceptable employment arranged or inability to pay). Unilateral “offsets” are not permitted.
• Careful process and paperwork matter: consult in line with any Award/EA, explore redeployment, issue clear letters, and keep thorough records to protect your business from disputes.
• If in doubt, get tailored advice - especially where multiple instruments apply or you’re planning a larger restructure.

If you would like a consultation on redundancy compliance and managing employee entitlements under the Fair Work Act, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.