Genuine Redundancy vs. Termination: What Australian Employers Need To Know

Whether you’re restructuring for efficiency or managing performance concerns, ending employment is one of the most sensitive steps you’ll take as an employer in Australia.

Handled well, you reduce legal risk and treat people fairly. Handled poorly, you can face unfair dismissal claims, penalties and reputational harm.

In this guide, we’ll unpack the key differences between a “genuine redundancy” and a termination for other reasons, outline your legal obligations under Australian employment law, and share a practical, step-by-step approach you can follow with confidence.

What Is a Genuine Redundancy in Australia?

A redundancy is about the job, not the person. It happens when the employer no longer needs anyone to do the employee’s role due to changes in the business-such as restructuring, introducing new technology, outsourcing, closing a location or a significant downturn in work.

Under the Fair Work Act, a dismissal is a genuine redundancy if three things are true:

• The employer no longer requires the job to be performed by anyone.
• The employer has complied with any consultation obligations in an applicable modern award or enterprise agreement.
• It was not reasonable to redeploy the employee within the business or an associated entity.

If those elements are met, the dismissal is generally not considered an “unfair dismissal.” That said, other entitlements still apply (such as redundancy pay for eligible employees under the National Employment Standards, unless an exception applies).

To plan budgets and timelines, many employers run numbers early using a redundancy calculator and then confirm figures against the law and any applicable industrial instrument.

How Is Termination Different From Redundancy?

Termination (or dismissal) is about the person’s employment ending for reasons other than the role no longer being needed. Common reasons include performance issues, misconduct, capacity or compatibility problems, or the end of a fixed-term contract.

Key distinctions include:

• Reason for ending: Redundancy is role-based; termination is person-based.
• Consultation and redeployment: These are central to redundancy, but not usually required for other terminations (although procedural fairness still matters).
• Entitlements: Eligible employees get redundancy pay for genuine redundancies; no redundancy pay is owed for other lawful terminations (though notice or payment in lieu still applies).
• Unfair dismissal risk: A genuine redundancy typically prevents an unfair dismissal claim. Other dismissals can be challenged for unfairness, including whether there was a valid reason and a fair process.

Because the stakes are high, it’s critical to classify the situation correctly and follow the right pathway from the outset.

Why the Distinction Matters (Legal Risks, Costs and Entitlements)

Choosing the wrong pathway-or following the right one with the wrong process-can expose your business to claims and unexpected costs. Here are the big reasons the difference matters.

Unfair Dismissal Exposure

If a dismissal is a genuine redundancy, the employee typically can’t bring an unfair dismissal claim. But if the role still exists (or could reasonably be performed by someone else, including the dismissed employee) or you didn’t consult properly, a claim may proceed.

When a dismissal is challenged, the Fair Work Commission looks at factors such as whether there was a valid reason, notice, and a fair process-summarised in section 387 of the Fair Work Act.

Payment Obligations

For genuine redundancies, eligible employees are owed redundancy pay based on their continuous service (unless an exception applies-e.g. small businesses under headcount thresholds, employees with under 12 months’ service, or where the employee unreasonably refuses redeployment).

It’s common to cross-check figures with guidance on how to calculate redundancy payments in Australia and confirm any award or agreement variations.

Notice or Payment In Lieu

Whether you are making a role redundant or terminating for another reason, you must give the correct notice (or pay in lieu). If you’re unsure about timing, eligibility or length, review your obligations around employee notice periods and, if needed, arrange payment in lieu of notice.

Interaction With Leave and Other Entitlements

Accrued but unused annual leave must be paid out on termination. For redundancy, other entitlements (like long service leave) may also be triggered depending on the jurisdiction and tenure. If the change coincides with illness, you’ll also want to consider how redundancy and sick leave interact to avoid missteps.

How To Run a Genuine Redundancy Process (Step-by-Step)

Genuine redundancies are about business change. Your process should reflect that by being planned, consultative and well-documented.

1) Confirm the Business Rationale

Articulate why the role (or roles) is no longer required-e.g. restructure, automation, cost reduction, or relocation. This rationale should be objective and supported by documents (budgets, organisational charts, board minutes).

2) Define Roles Affected and Selection Criteria

If multiple people perform similar roles but only some positions are to be removed, develop fair, non-discriminatory selection criteria (skills, qualifications, performance metrics tied to role needs). Apply them consistently and keep records.

3) Check Industrial Instruments and Policies

Identify any applicable modern award or enterprise agreement. Many include mandatory consultation rules around major workplace change-timing, information to provide, and obligations to discuss measures to avert or mitigate adverse effects.

4) Consult Properly

Consultation is not a box-tick. Share the proposed change, reasons, likely effects and the roles at risk. Invite feedback and consider alternatives. If employees or their representatives propose reasonable options, assess them genuinely and respond.

5) Explore Redeployment

Look across your business and associated entities for reasonable alternative roles. Consider location, pay, seniority and employee skills. Keep notes of roles considered, suitability and outcomes. If an employee unreasonably refuses suitable redeployment, redundancy pay may not be owed.

6) Confirm Outcomes in Writing

After consultation and redeployment searches conclude, issue formal letters confirming redundancy, final dates, notice (or payment in lieu), redundancy pay (if applicable), and how other entitlements will be handled. Many employers streamline this step using an Employer Redundancy Documents Suite so the communications are consistent and compliant.

7) Calculate and Pay Entitlements

Calculate redundancy pay (if applicable), notice or payment in lieu, and payout of accrued leave. Review any award or enterprise agreement provisions that may vary the default National Employment Standards.

8) Support a Respectful Offboarding

Plan handover, IT access, communications to team and clients, and (if appropriate) outplacement support. A professional, respectful approach helps your culture and your reputation.

If this feels complex or time-sensitive, consider tailored redundancy advice before you start consultation so you can proceed with confidence.

Ending Employment for Other Reasons: Lawful Termination Checklist

When the role still needs to be done but the employee’s performance, conduct or capacity is the issue, you’ll take a different path. The focus is on a valid reason, a fair process and clear documentation.

1) Identify a Clear, Valid Reason

• Performance: Not meeting reasonable, documented standards of the role.
• Misconduct: Breaches of policy or serious misconduct (e.g. dishonesty, safety breaches) that may warrant summary dismissal if proven.
• Capacity: Inability to perform inherent requirements (e.g. medical or capability-based).

The reason should be supported by evidence-KPIs, complaints, witness statements, or medical information (obtained lawfully and appropriately).

2) Follow a Fair Process

Give the employee an opportunity to respond to concerns before making a decision. For performance matters, this often includes clear expectations, support, and a reasonable improvement period. For conduct issues, a formal process with a show cause letter, a chance to respond, and consideration of the response is typical.

Where needed, align your approach to the factors set out in section 387, which the Commission uses to assess procedural fairness in unfair dismissal cases.

3) Use the Right Documentation

Clear, current contracts and policies make these processes easier. Ensure you have an appropriate Employment Contract in place and consider a structured performance management process that matches your policies and any applicable award.

4) Decide on Notice or Alternatives

On termination, provide the correct notice or pay in lieu. In limited circumstances (e.g. proven serious misconduct), notice may not be required. If there are commercial or cultural reasons to remove the employee from the workplace during the notice period, consider garden leave provisions if permitted by the contract.

5) Finalise Entitlements and Offboarding

Pay out accrued but unused annual leave and any other applicable entitlements. Confirm return of property, confidentiality obligations, and post-employment restraints where relevant. Many businesses use an Employee Termination Documents Suite to keep the process consistent and reduce risk.

Common Pitfalls (And How to Avoid Them)

• Calling it redundancy when the work still exists: If you hire a replacement soon after or redistribute substantially similar duties without a sound rationale, the dismissal can be challenged. Test whether the job is genuinely no longer required.
• Skipping consultation: Where a modern award or enterprise agreement applies, consultation is mandatory. Failing to consult can invalidate an otherwise genuine redundancy.
• Overlooking redeployment: You must actively consider reasonable alternatives within your business and associated entities. Keep records of the search.
• Inadequate documentation: Poor records of performance concerns, selection criteria or consultation make it harder to defend a claim. Document each step carefully.
• Incorrect notice or pay: Double-check notice, redundancy pay and leave payouts. If timing is an issue, arrange payment in lieu of notice properly.
• Not updating contracts and policies: Up-to-date contracts, policies and position descriptions make both redundancy and termination processes clearer and fairer.

FAQs Employers Ask About Redundancy vs Termination

Do I Have To Offer Redundancy Pay?

Eligible employees under the National Employment Standards are entitled to redundancy pay for genuine redundancies, unless an exception applies (for example, a small business employer under the threshold, or where the employee unreasonably refuses suitable redeployment). Always check the NES and any applicable award or agreement.

Can a Redundancy Be Unfair?

If the criteria for a genuine redundancy aren’t met-because the job still exists, there was no proper consultation, or redeployment was reasonably available-the dismissal can be challenged as unfair. The Commission will consider the section 387 factors when assessing fairness.

What If an Employee Is on Probation?

Probation doesn’t remove your obligations to act fairly and follow the contract, though shorter minimum employment periods may affect access to unfair dismissal. If you’re ending employment during probation, make sure your process aligns with your contract and consider this probation termination guide.

Do I Need To Consult If We’re Not Covered by an Award?

If no award or enterprise agreement applies, the statutory consultation requirement may not apply-but consultation is still good practice to demonstrate fairness and reduce risk. If an award or agreement does apply, consultation is mandatory.

How Do I Budget for a Redundancy?

Model scenarios early and validate your numbers before commencing consultation. Many employers start with an indicative tool like a redundancy calculator, then confirm entitlements against the NES and any applicable industrial instrument.

Key Takeaways

• A genuine redundancy is role-based (the job is no longer required), while termination is person-based (performance, conduct or capacity).
• To be a genuine redundancy, you must consult where required, and consider reasonable redeployment; if met, unfair dismissal risk is reduced.
• For redundancy, confirm the rationale, set fair selection criteria, consult properly, search for redeployment, and pay the correct entitlements.
• For other terminations, ensure a valid reason, follow a fair process, use the right documents, and provide correct notice or pay in lieu.
• Get your paperwork right from day one-current Employment Contracts, clear policies and consistent letters help you manage risk.
• If you’re unsure which pathway applies or how to implement it, tailored advice and well-drafted document suites can save time and reduce exposure.

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