How Does Redundancy Work in Australia?

Leaner teams, new technology, a change in strategy - there are good business reasons you might need to restructure. When a role is no longer required and a team member is impacted, this is called redundancy.

Handled well, redundancy is a lawful and respectful process that protects your business and your people. Handled poorly, it can lead to claims, fines and reputational harm.

In this guide, we explain how redundancy works in Australia from an employer’s perspective - what “genuine redundancy” means, the steps to follow, what to pay, and the documents you’ll need to stay compliant and reduce risk.

What Is Redundancy In Australia?

Redundancy happens when you decide a job is no longer needed for business reasons - for example, closing a location, cutting a function, automating tasks, or merging roles.

It is about the role, not the person. If you still need that job done by someone, it’s not a redundancy - it’s a staffing decision that needs a different process.

Under the Fair Work Act, a dismissal is a “genuine redundancy” if:

• The employer no longer requires the job to be done by anyone due to operational changes.
• Any consultation obligations under an applicable award or enterprise agreement are met.
• It’s not reasonable to redeploy the employee within your business or any associated entity.

Genuine redundancy is key. If the process isn’t genuine, an employee may be able to bring an unfair dismissal claim.

When Can You Make A Role Redundant?

You can make a role redundant when there’s a real business reason, such as restructuring, cost-saving, or relocation where the role will no longer exist.

Before you proceed, check three things:

• Coverage: Confirm whether an award or enterprise agreement applies to the employee. If so, consultation clauses will set out the steps and timing. Your obligations under Modern Awards usually include notifying employees of proposed changes, discussing measures to avert or mitigate adverse effects, and considering feedback.
• Small business status: If you have fewer than 15 employees, you are a small business employer under the Fair Work Act. Small businesses are generally exempt from redundancy pay (but still need to consult, provide notice, and follow a fair process).
• Redeployment: Consider whether the employee can reasonably be redeployed to another suitable role in your business or a related entity. If redeployment is reasonable, the dismissal may not be a genuine redundancy.

Also note that some employees are not entitled to redundancy pay (e.g. casuals, employees with less than 12 months’ service, fixed-term employees at the end of a fixed term, and some apprentices/trainees). They may still be entitled to notice and other final payments.

Employer Requirements: The Redundancy Process Step-By-Step

A clear, consultative process keeps you compliant and protects your business. Here’s a practical sequence to follow.

1) Plan The Business Case And Selection Criteria

Document the rationale for the restructure and why the role(s) will no longer be required. If multiple employees hold similar roles, identify objective, non-discriminatory selection criteria (e.g. skills, qualifications, documented performance). Avoid criteria that could be perceived as discriminatory (age, disability, family/carer responsibilities, etc.).

2) Check Awards/Agreements And Your Contracts

Confirm any consultation, notice and redundancy pay requirements under relevant instruments and your Employment Contract. Make sure you know the timing obligations (many awards require you to consult before making a final decision).

3) Start Consultation

Inform affected employees in writing that you are proposing changes that may lead to redundancy. Set out the reasons, the roles affected, and the timeline. Invite feedback and consider any suggestions (for example, voluntary redundancy, reduced hours, job sharing, or redeployment).

4) Consider Redeployment

Identify suitable alternative roles within your business and associated entities. “Suitable” means the employee could reasonably do the job (with training if appropriate) and the role is not a token offer. Keep records of the roles you considered and the outcomes.

5) Confirm Outcome And Provide Notice

Once consultation is complete and you confirm there is a genuine redundancy, issue a formal outcome letter. Include the termination date, the notice period (or payment in lieu of notice), any redundancy pay, and details of other entitlements to be paid on termination.

6) Calculate And Pay Entitlements

Calculate redundancy pay (if applicable), notice, accrued annual leave, long service leave (state/territory rules apply), any outstanding wages/allowances, and other owed amounts. We cover calculations below.

7) Optional: Release/Separation Documents

Depending on the situation, you may ask the employee to enter a separation arrangement. This can include a mutual release and confidentiality provisions, usually documented in a separation agreement or deed of release. If you go down this route, make sure consideration is provided and that the employee has a genuine opportunity to get independent advice.

8) Communicate With Care

Treat affected staff respectfully. Communicate clearly and consistently with the broader team to maintain morale. Be mindful of privacy and only share what’s necessary.

9) Keep Records

Maintain records of your business case, consultation steps, redeployment consideration, notices and calculations. Good records are your best defence if a claim arises.

Calculating Notice, Redundancy Pay And Final Pay

Here’s how the key payments generally work under the National Employment Standards (NES). Always check any award/enterprise agreement or contract that may be more generous.

Notice Of Termination

Employees are entitled to a minimum notice period based on their continuous service. This ranges from 1 to 4 weeks, with an extra week if the employee is over 45 and has at least 2 years’ service.

You can require the employee to work the notice or pay payment in lieu of notice. If you pay in lieu, include all components the employee would have earned during the notice period (e.g. base pay, loadings, allowances that would have applied).

Redundancy Pay

Redundancy pay is a separate lump sum based on years of service (after 12 months). Small business employers (fewer than 15 employees) are usually exempt from paying redundancy pay.

To understand the scale and how to apply it in your situation, see this plain-English guide to calculating a redundancy payment.

Accrued Leave And Other Entitlements

• Accrued annual leave: Pay out all accrued but unused annual leave plus leave loading if it normally applies.
• Long service leave: Pay out according to your state or territory’s long service leave laws (different thresholds and rules apply).
• RDOs/TOIL: Pay any owed rostered days off or time in lieu if applicable.
• Bonuses/commissions: If earned under your policy or contract terms, include any payable amounts up to the termination date.

For payroll processing, withholding and tax treatment (for example, ETPs), engage your accountant or payroll provider. You can also read up on superannuation on termination payments to ensure you treat each component correctly.

Final Pay Timing

Final pay should be made promptly. Some awards set specific timeframes. As a best practice, pay on the termination date or the next pay cycle and provide a clear breakdown. This practical guide to final pay outlines common inclusions and pitfalls to avoid.

Documents And Policies To Have In Place

Having the right documents makes redundancy smoother, fairer and lower risk. Consider the following:

• Employment Contract: Clear terms help with notice, redundancy interactions with bonuses or commissions, and post-employment obligations (confidentiality, IP, restraint where appropriate).
• Redundancy Document Suite: Letters for consultation, outcome and termination, plus checklists and a script to keep your process consistent and compliant.
• Separation Agreement or Deed Of Release: Used when offering ex‑gratia sums or to document a negotiated exit; protects both sides with confidentiality and release clauses. If this is on the table, this guide to separation agreements explains the typical inclusions.
• Policies: Redundancy/redeployment policy (optional but helpful), consultation procedure, and record-keeping practices aligned with privacy obligations.
• Position Descriptions: Up‑to‑date PDs make selection and redeployment assessment more objective and defensible.

If your restructure is complex, or multiple roles are impacted, getting tailored advice and template packs set up in advance can significantly reduce risk and time pressure.

Practical Tips To Manage Risk

• Be consistent: Apply the same process and criteria across similar roles.
• Consult early: Awards often require consultation before a final decision - don’t jump straight to termination.
• Check protected attributes: Ensure selection is not influenced by unlawful reasons (e.g. parental leave, disability, union membership).
• Keep a paper trail: Save emails, notes, meeting invites, and decision documents.
• Offer redeployment: Consider training for a suitable role; document offers and responses.
• Review messaging: Internal and external communications should be factual and privacy‑compliant.

Key Takeaways

• Redundancy is about the job, not the person - it’s genuine only if the role is no longer required and consultation and redeployment steps are satisfied.
• Follow a clear process: plan the restructure, consult under any award or agreement, consider redeployment, then issue outcome letters and pay entitlements.
• Know your obligations: small businesses usually don’t pay redundancy pay, but all employers must provide notice (or pay in lieu) and settle accrued entitlements.
• Calculate payments carefully: work out notice, redundancy payment (if applicable), leave and tax treatment - and double‑check timing and payslip details.
• Put strong documents in place: use an Employment Contract, a practical Redundancy Document Suite, and consider a well‑drafted separation agreement where appropriate.
• Good records and respectful communication go a long way to reducing legal risk and protecting your culture.

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