How to Make an Employee Redundant in Australia

Restructuring is part of running a business. Markets shift, technology changes, and sometimes the role you needed last year simply isn’t required now.

If you need to make a position redundant, the key is doing it lawfully and respectfully. That protects your business from claims, keeps team morale intact, and helps the departing employee leave on fair terms.

Below, we’ll walk through what a “genuine redundancy” is in Australia, when redundancy is appropriate, the step-by-step process to follow, how to calculate notice and redundancy pay, and common pitfalls to avoid. We’ll keep it practical so you can move forward with confidence.

What Is A Genuine Redundancy In Australia?

A redundancy is about the job, not the person. A role is redundant when you no longer need that job to be done by anyone because of changes in your business operations. For example, you might be reorganising teams, closing a location, introducing new tech, or cutting product lines.

Under the Fair Work framework, a dismissal will generally be a genuine redundancy if:

• the job is no longer required to be performed by anyone;
• you complied with any consultation duties in an applicable award or enterprise agreement; and
• it wasn’t reasonable to redeploy the employee within your business (or an associated entity).

These elements mirror the idea behind a genuine redundancy test. If any part is missing (for example, you didn’t consult when required), you can end up in unfair dismissal territory even if your commercial reasons are sound.

When Is Redundancy Appropriate (And When It Isn’t)?

Redundancy is appropriate when structural change means the role itself is not needed. It’s not a performance management shortcut. If the work still exists and you just want a different person doing it, redundancy won’t be the right path.

Redundancy may be appropriate when you:

• Restructure to streamline functions (e.g., merging two roles into one).
• Close or downsize a site, department, product, or service.
• Automate tasks or outsource work so the internal position is no longer required.

Redundancy is generally not appropriate when you:

• Have a conduct or capability issue (use performance management processes instead).
• Plan to refill the same role soon after.
• Target an individual rather than the functions of the role.

It’s also important to separate redundancy from other options. In some cases, you can avoid redundancies by lawfully varying roles, adjusting rosters or hours, or redeploying to an open vacancy. If you’re considering alternatives, get across your obligations when changing employment contracts or reducing hours first.

Step-By-Step: How To Make A Position Redundant

1) Map The Business Case And Selection Rationale

Start by documenting why the role is no longer required. Link it to your operational or financial rationale (for example, a product line exit or a duplicated function after a restructure).

If more than one employee performs similar duties, decide on objective selection criteria. Criteria might include the functions that remain, skills required for the future model, and fair, non-discriminatory factors. Keep records of how you applied those criteria.

2) Check Industrial Instruments And Contracts

Identify whether the employee is covered by a modern award or an enterprise agreement. Most awards require consultation before you make a decision to proceed with redundancy. Also review the employee’s Employment Contract for notice provisions, redundancy terms, and any special benefits.

If you’re unsure about award coverage, this is a good point to seek tailored Redundancy Advice so you don’t miss a mandatory step.

3) Start Consultation Early

Consultation is more than a heads-up. It involves:

• Informing the employee of the proposed change and the reasons behind it;
• Providing relevant information about the impact on their role; and
• Genuinely considering their feedback and any alternatives they propose.

Do this before you make a final decision. Keep notes of meetings and provide information in writing. If you’re making multiple roles redundant, ensure you consult with each affected employee.

4) Explore Reasonable Redeployment

Redundancy won’t be genuine if there’s a reasonable redeployment opportunity within your business or an associated entity. Consider:

• Vacancies that exist now or will exist shortly;
• Whether the employee could do the role with reasonable training; and
• Comparable roles with similar remuneration and status.

Document the roles you considered, what was offered, and the employee’s response. If a suitable role exists and the employee accepts, the redundancy may no longer be necessary.

5) Make The Decision And Confirm In Writing

Once consultation concludes and you’ve considered redeployment, you can make a decision. Provide a written letter that:

• Explains the redundancy and the business reasons;
• Confirms the termination date and notice period (or payment in lieu);
• Outlines redundancy pay (if applicable), accrued entitlements and final pay timing; and
• Includes information about returning company property and post-employment obligations (e.g., confidentiality).

Where notice can’t be worked, you may choose payment in lieu of notice. Ensure the amount covers the full notice entitlement and check whether superannuation is payable on the in-lieu component by reviewing payment in lieu and super.

6) Calculate Entitlements Accurately

Redundancy may involve several payments: notice (or in lieu), redundancy pay (based on service), and accrued leave entitlements. We cover the detail below, but you can cross-check with a practical tool like the Redundancy Calculator.

7) Pay Out On Time And Provide Records

Final pay should be processed promptly in accordance with any applicable industrial instruments and state requirements. Provide a payslip showing the breakdown. If you’re unsure what belongs in final pay, refer to this final pay guide.

It’s important not to withhold monies as leverage for property returns or other issues. If there’s a genuine overpayment or debt, handle it separately and in line with your obligations around withholding pay.

8) Communicate Internally And Support Transition

Plan your internal comms carefully. Explain the structural change (not the individual’s performance), outline how work will be covered, and offer support to the departing employee where possible (for example, references or outplacement assistance). This helps protect culture and reduce disruption.

9) Keep A Paper Trail

Maintain records of your business case, consultation materials, redeployment searches, selection rationale, payments, and correspondence. Good records are invaluable if questions arise later.

How To Calculate Redundancy Pay, Notice And Final Pay

Here’s a practical overview of the typical components to consider. Specific entitlements can vary by award/enterprise agreement and by the employee’s service, so use the below as a framework and check your instruments.

Notice Of Termination

• Employees are entitled to minimum notice (or payment in lieu) based on service length and sometimes age.
• Confirm the correct period using this notice periods guide, then decide whether it’s worked or paid in lieu.
• If paying in lieu, ensure the payment equals what the employee would have earned during the notice period, in line with payment in lieu requirements.

Redundancy Pay

• Redundancy pay is usually based on continuous service (e.g., a set number of weeks’ pay). Some small businesses may be exempt, and some employees (e.g., short service or casuals) may not be eligible.
• Work out eligibility and the correct amount with the redundancy payment guide and validate with the Redundancy Calculator.

Accrued Entitlements

• Pay out accrued but unused annual leave. Award or agreement terms may require leave loading.
• Long service leave follows state or territory rules and service length; check local legislation.
• Sick and carer’s leave generally isn’t paid out on termination, but it can still affect timing and process. For example, understand how redundancy interacts with sick leave entitlements.

Superannuation And Tax

• Ordinary time earnings generally attract superannuation, but not all termination components are OTE. Review your obligations for each component, including any payment in lieu and superannuation questions.
• Tax treatment varies for termination payments. Speak with your accountant to ensure correct withholding and reporting.

Common Mistakes To Avoid (And How To Manage Risk)

Skipping Consultation Or Doing It Too Late

Failing to consult when required is one of the quickest ways to turn a redundancy into an unfair dismissal. If an award or agreement applies, start consultation before you make a final decision and keep an open mind to feedback.

Not Considering Redeployment

If a suitable vacancy exists and you don’t consider it, the redundancy may not be genuine. Look across your whole business (and associated entities) and document the search.

Using Redundancy To Manage Performance

Redundancy isn’t a shortcut around performance management. If you have conduct or capability concerns, follow your usual processes. Where you do proceed with redundancy, keep communications tightly focused on the structural change and the role, not the person.

Misapplying Selection Criteria

When multiple employees perform similar roles, use fair, objective criteria that align with the functions you’re keeping. Avoid criteria that could be indirectly discriminatory. Keep a clear record of how you reached your decision.

Getting The Numbers Wrong

Miscalculating notice, redundancy or leave entitlements is a common pain point. Cross-check with the relevant award/EA, your contract, and practical resources like the Redundancy Calculator and this final pay guide.

Overlooking Probation Or Service Exceptions

Some entitlements depend on service length. The process must still be fair and consistent, but if you’re within a probation period or dealing with short service, read up on termination during probation and confirm which entitlements apply.

Missing The Basics: Contracts And Policies

Up-to-date contracts and policies make the process smoother. Ensure each team member has a current Employment Contract and that your workplace rules are documented (a Staff Handbook Package is a practical way to bundle essential policies). If you’re planning a restructure that may affect multiple staff, consider getting help to prepare the right letters and checklists through a Redundancy Document Suite.

Not Planning Communications

How you announce a restructure matters. Share the “why” at a business level, avoid commentary on individual performance, and equip leaders to answer questions. Thoughtful communication reduces anxiety and preserves your employer brand.

Key Takeaways

• Redundancy is about the role, not the person. It’s genuine when the job is no longer required, you consult where required, and redeployment isn’t reasonable.
• Follow a clear process: define the business case, check awards/agreements, consult, explore redeployment, decide and confirm in writing, and pay entitlements correctly and on time.
• Calculate entitlements carefully, including notice (or in lieu), redundancy pay (if applicable), and accrued leave. Use practical tools like the Redundancy Calculator and check whether super applies.
• Avoid common pitfalls: skipping consultation, overlooking redeployment, using redundancy to fix performance issues, misapplying selection criteria, or miscalculating payments.
• Good documentation helps: current Employment Contracts, clear policies, and well-prepared letters reduce risk and make the process smoother.
• If in doubt, get tailored guidance early-one misstep can turn a lawful restructure into a costly dispute.

If you’d like a consultation on making an employee redundant in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.