Genuine Redundancy: What Australian Employers Need To Know

Redundancy is one of the most difficult decisions you’ll make as a small business owner. Even when it’s the right call for your business, it can feel personal - and it can quickly become risky if the legal process isn’t handled carefully.

That’s why many employers look up what a genuine redundancy is. Usually, you’re trying to confirm one key thing: if we need to reduce roles, how do we do it lawfully and minimise the chance of an unfair dismissal claim?

In this guide, we’ll break down what a genuine redundancy is in Australia, the legal criteria you need to meet, and the practical steps you can take to run a redundancy process that’s fair, compliant, and well documented.

This article is general information only and does not constitute legal advice. Because awards, enterprise agreements and individual circumstances can change the legal position, it’s a good idea to get advice for your specific situation before making redundancy decisions.

What Is Genuine Redundancy (And Why Does It Matter For Employers)?

In plain English, a redundancy is where a job is no longer needed. A genuine redundancy is a redundancy that meets the legal requirements under the Fair Work Act 2009 (Cth).

Understanding what is genuine redundancy matters because if a termination is a genuine redundancy, it can be a defence to an unfair dismissal claim - but only where the legal criteria are met and the employee is otherwise eligible to make an unfair dismissal claim (for example, they meet the minimum employment period and other threshold requirements).

Genuine Redundancy Is About The Job, Not The Person

A common mistake we see is employers treating redundancy like “we don’t need this employee anymore”. Legally, it needs to be framed (and supported) as “we don’t need this role anymore.”

This usually happens due to changes such as:

• a downturn in revenue or loss of a key contract
• restructuring to reduce costs
• automation or new systems reducing labour needs
• closing a location or changing operating hours
• outsourcing work or consolidating tasks into fewer roles

Redundancy vs “Performance” Termination

If the real reason for termination is performance, conduct, or “fit”, calling it a redundancy can backfire. That’s when disputes often arise - especially if the employee believes the redundancy was a cover for another reason.

If you’re unsure which situation you’re actually dealing with, it’s worth getting advice early before you start the process.

The Legal Test: When Is A Redundancy “Genuine” Under Australian Law?

To work out whether a redundancy is genuine, employers generally need to satisfy three core elements:

• The role is no longer required to be performed by anyone due to operational changes in your business.
• You have complied with consultation obligations (if an award or enterprise agreement requires consultation).
• Redeployment wasn’t reasonable (either within your business or an associated entity) in the circumstances.

It’s not enough to just believe you have a business reason. Your process and evidence should clearly show these elements were considered.

1. The Job Is No Longer Required

Ask yourself: if we terminate this employee, will someone else still do substantially the same job?

If the answer is “yes”, that doesn’t automatically mean it’s not a redundancy - but it is a red flag that you may need to carefully document the restructure (for example, if duties are genuinely redistributed and the role as a whole no longer exists).

Practical examples of stronger redundancy scenarios include:

• removing a position entirely (e.g. closing a customer service function)
• merging two roles into one genuinely different role (with a different scope or capability requirement)
• reducing headcount due to a proven reduction in workload

2. Consultation Requirements (Awards And Enterprise Agreements)

Many Modern Awards (and enterprise agreements) include a consultation clause requiring you to consult with employees if you’re making major workplace changes that are likely to have significant effects - including termination due to redundancy.

Consultation is not a “tick-the-box email”. It usually means:

• telling the employee what change is proposed and why
• explaining the likely effects (including possible redundancy)
• giving the employee a genuine opportunity to respond and ask questions
• considering any ideas raised (for example, reduced hours, job-sharing, alternative roles)
• confirming the outcome in writing

If you skip consultation when it applies, you can lose the protection of a genuine redundancy defence.

3. Redeployment Must Be Considered

Even if the job is genuinely no longer required, you also need to consider whether redeployment would have been reasonable.

This often includes asking:

• Are there any vacant roles the employee could perform (with reasonable training)?
• Are there any upcoming vacancies you know about?
• Could the employee move to a different site/location?
• Do you have an associated entity where roles exist?

Redeployment doesn’t mean you must create a new role. But you should be able to show you considered realistic alternatives before moving to termination.

Step-By-Step: A Practical Genuine Redundancy Process For Small Businesses

Running a redundancy well is about two things: doing the right thing by your people, and protecting your business from avoidable legal risk. Here’s a practical framework you can follow.

1. Confirm The Business Case And Document It

Before any conversations happen, write down the reason the restructure is needed and how the new structure will work.

Good records include:

• updated org charts (before and after)
• the operational reason for change (e.g. reduced demand, budget cuts, technology changes)
• which roles are affected and why
• why the remaining roles are different (if you’re restructuring rather than removing work entirely)

This isn’t about building a “paper trail” against the employee - it’s about being clear and consistent about your decision-making.

2. Check The Employee’s Coverage (Award / Agreement / Contract)

You’ll want to identify:

• whether the employee is covered by a Modern Award or enterprise agreement (which may require consultation)
• their notice requirements under the contract and the Fair Work Act
• any redundancy pay entitlement (noting there are exemptions in some cases)

This is also the right time to review your paperwork for consistency, including having a properly drafted Employment Contract.

3. Consult Early (Before The Decision Is “Final”)

Consultation works best when you approach it as a process, not a single meeting.

In practice, that usually looks like:

• an initial meeting explaining proposed changes and that their role may be impacted
• providing written information where appropriate
• allowing time for the employee to respond (and to bring a support person if needed)
• a follow-up meeting to discuss feedback and next steps

If consultation obligations apply to you, they’re often tested by whether you gave the employee a real opportunity to influence the outcome (even if the business decision ultimately stays the same).

4. Explore Redeployment Options

Make a shortlist of available roles and assess whether the employee could do them with reasonable training.

If redeployment isn’t possible, document why. For example:

• no vacant roles existed at the time
• available roles required qualifications the employee does not hold
• the role was in a different location and relocation wasn’t reasonable

5. Provide Written Notice (Or Payment In Lieu)

Once a final decision is made, you’ll need to comply with notice requirements. Some employers choose to make payment in lieu of notice, especially where it’s better for the business (and the employee) for the employment to end sooner.

Notice periods can also be affected by minimum legal requirements. If you want to understand the baseline rules for termination notice, minimum notice under section 117 is a helpful reference point.

6. Calculate Final Pay Correctly

Final pay in a redundancy typically includes:

• ordinary wages up to the last day of employment
• notice (worked or paid out)
• unused annual leave (and potentially annual leave loading if applicable)
• redundancy pay (unless an exemption applies)

Many employers find it helpful to run a cross-check using a redundancy calculator as a starting point, and then confirm the legal entitlements for their specific situation.

You’ll also want to make sure the timing and amounts are correct, because final pay issues are one of the most common causes of disputes. Having a clear internal process for calculating final pay can save you a lot of stress.

Redundancy Pay, Notice And Leave: Key Entitlements Employers Should Plan For

Even where a redundancy is genuine, you still need to pay the employee what they’re entitled to. For small businesses, the challenge is often cash flow and timing - so planning ahead is essential.

Redundancy Pay (And Common Exemptions)

Redundancy pay is usually based on the employee’s length of service.

However, not all redundancies require redundancy pay. For example, there are circumstances where a small business employer (generally fewer than 15 employees, calculated in line with Fair Work rules) may be exempt from paying redundancy pay under the Fair Work system.

That said, an exemption from redundancy pay is not the same as an exemption from unfair dismissal risk. You can still face a claim if the redundancy isn’t genuine or the process is mishandled. Also, separate eligibility rules apply to unfair dismissal claims (including minimum employment period requirements and the small business fair dismissal code), so it’s important to look at the specific facts.

Notice Of Termination

Notice can be:

• worked notice (employee continues working during the notice period), or
• payment in lieu (you pay out notice and end employment immediately).

Your employment contract and any award/enterprise agreement may also add requirements, so it’s worth checking the documents you have in place.

Annual Leave And Other Accrued Entitlements

In most cases, unused annual leave must be paid out on termination, including redundancy. The rules can become more detailed if annual leave loading applies, or if the employee has taken leave in advance.

If you want a clear overview of how leave is usually treated in payroll, annual leave payments is a useful baseline reference for employers.

Common Mistakes That Can Turn A “Redundancy” Into Legal Risk

Most small business owners don’t set out to do the wrong thing - but redundancy is an area where small missteps can have outsized consequences.

1. Replacing The Role Too Quickly

If you make a role redundant and then hire someone else into a substantially similar position soon after, it can look like the role was never genuinely redundant.

Sometimes businesses do legitimately restructure and later circumstances change - but if that happens, make sure your documentation clearly explains the timeline and rationale.

2. Not Consulting When You’re Required To

If an award or enterprise agreement requires consultation and you skip it, you may lose the benefit of the genuine redundancy defence.

Even where consultation isn’t strictly required, a consultation-style approach is still a smart risk management step (and it’s simply good people practice).

3. Not Properly Considering Redeployment

Employers sometimes assume redeployment is irrelevant because the employee “wouldn’t be suited” or “wouldn’t want it”. Those assumptions can cause problems later.

Instead, identify realistic options and discuss them openly. If nothing is available, document that you checked.

4. Using Redundancy To Avoid A Performance Process

If there are performance issues, redundancy can be tempting because it looks faster. But it can create a bigger dispute if the employee believes the redundancy was a pretext.

If you’re actually dealing with performance, you may need to go down a performance management path instead of redundancy (or get advice about your options before you act).

5. Underpaying Or Miscalculating Final Entitlements

Final pay errors often escalate quickly, especially if an employee seeks external advice. A careful checklist and payroll verification before issuing the termination letter can make a big difference.

Key Takeaways

• What is genuine redundancy? It’s generally where a job is no longer required due to operational changes, consultation obligations are met (where required), and redeployment isn’t reasonable in the circumstances.
• For employers, genuine redundancy is important because it can be a defence to unfair dismissal claims - but it depends on the facts, the process followed, and whether the employee is eligible to bring an unfair dismissal claim.
• Consultation is a major risk area - if an award or enterprise agreement requires it, you should consult before the decision is final.
• Redeployment should be actively considered and documented, even if you believe there are no suitable alternatives.
• Plan for entitlements like notice, redundancy pay (where applicable), and unused annual leave, and ensure final pay is calculated correctly and paid on time.
• Keeping clear records of the business reason and restructure will help you explain and support your decision if it’s ever challenged.

If you’d like a consultation on running a redundancy process the right way, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.