NES Redundancy Pay: What Australian Employers Need To Know

General information only: This article is intended as general information for Australian employers and is not legal advice. Redundancy entitlements can vary depending on awards, enterprise agreements, contracts and the specific facts of your situation.

If you’re running a small business, redundancy can be one of the toughest employment decisions you’ll make.

Even when you’re doing the right thing commercially (for example, restructuring because work has dried up or you’re changing how your business operates), there are still strict legal rules you need to follow - especially around redundancy pay under the National Employment Standards (NES).

The good news is that once you understand what the NES requires, redundancy pay becomes much easier to plan for and manage. In this guide, we’ll break down how NES redundancy pay works, when it applies, how the redundancy pay table is used, and what employers commonly miss when calculating the total cost of a redundancy.

What Is NES Redundancy Pay (And Why Does It Matter)?

NES redundancy pay is a minimum legal entitlement under the Fair Work Act 2009 (Cth). It requires eligible employees to receive a redundancy payment when their job is made redundant.

In plain English: if you no longer need a role to be done by anyone (or you no longer need it done in the same way), and you end the employee’s employment for that reason, you may have to pay redundancy.

It matters because redundancy pay is one of the most common “surprise costs” for employers. It’s also an area where mistakes can quickly lead to underpayments, disputes, and Fair Work compliance risk.

Redundancy Pay vs Notice vs Unfair Dismissal Risk

It’s easy to mix up the moving parts, so it helps to separate them:

• Redundancy pay (NES severance pay): a lump sum based on the employee’s length of service (if eligible).
• Notice of termination (or payment in lieu): separate entitlement based on minimum notice periods and any contract/award terms. Paying redundancy does not remove your notice obligations. (If you’re paying out notice instead of having them work it, payment in lieu of notice is a common option, but it needs to be handled properly.)
• Process and risk management: redundancy has its own consultation and selection rules under modern awards/enterprise agreements, and getting this wrong can increase dispute risk (even if the redundancy itself is genuine).

Think of redundancy pay as one part of your total termination “package”, not the whole thing.

When Do You Have To Pay NES Redundancy Pay?

You generally need to pay redundancy pay under the NES when:

• you terminate an employee because you no longer require their job to be performed by anyone (or you no longer require it to be performed in the same way), and
• the employee is eligible (for example, they’re not a casual and they’ve completed at least 12 months of continuous service), and
• there isn’t an exemption that applies (more on that below).

Common real-world examples include:

• your business is downsizing and you need fewer staff in a particular team
• you’re closing a location or reducing operating hours
• you’re automating work (for example, moving from manual administration to software)
• you’re outsourcing a function (for example, IT support or payroll)
• you’re changing your business model and certain duties are no longer required

What Makes A Redundancy “Genuine”?

From an employer perspective, the key is that the role is no longer required - not simply that you want to exit a particular employee.

As a practical check, ask yourself:

• Is the job actually going away (or significantly changing), rather than being filled by someone else?
• Have you considered whether there’s other suitable work you can redeploy the employee into?
• Do you have evidence for the business reason (for example, restructure plan, financials, loss of key contract, operational change)?

Even if you’re confident the redundancy is genuine, you still need to manage consultation and ensure final pay is accurate.

Small Business Exemption: Under 15 Employees

A major “fork in the road” for NES redundancy pay is whether you are a small business employer for redundancy purposes.

If you employ fewer than 15 employees (counted on a headcount basis, not FTE), you may be exempt from paying redundancy pay under the NES. This is commonly called the small business redundancy exemption.

That said, small business employers still need to:

• pay the employee’s notice of termination (or pay in lieu)
• pay accrued entitlements like unused annual leave (and potentially long service leave depending on the state/territory rules and eligibility)
• follow any award/enterprise agreement consultation requirements that apply

If you’re unsure whether you count as a small business employer (especially where you use related entities, regular casuals, or labour hire), it’s worth getting advice early - the “15 employee” calculation can be trickier than it looks.

Redundancy Pay Table (NES) Explained

The redundancy pay table under the NES sets minimum redundancy pay based on an employee’s period of continuous service.

To be entitled to redundancy pay under the NES, an employee usually must have completed at least 12 months of continuous service.

NES Redundancy Pay Table

Employee’s Period Of Continuous Service	Minimum Redundancy Pay (Weeks)
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
At least 10 years	12 weeks

Important: many employers are surprised that the redundancy pay amount drops from 16 weeks (at 9-10 years) down to 12 weeks (at 10+ years). That’s a feature of the NES table, not a typo.

What Is “Continuous Service” For Redundancy Pay?

Continuous service is not always as simple as “their start date to their end date”. It can be affected by things like unpaid leave, unpaid absences, or business transfers.

If you’ve acquired a business, moved employees between related entities, or made changes to employment arrangements over time, it’s worth double-checking how service is counted before you confirm redundancy figures.

Does A Modern Award Or Enterprise Agreement Change The Table?

The NES is the minimum standard, but:

• a modern award or enterprise agreement may include consultation obligations and redundancy-related processes you must follow, and
• some employment contracts or policies may provide redundancy pay above the NES (for example, an enhanced severance package).

In practice, the NES redundancy figure is often just the starting point. You’ll want to check the employee’s award coverage, employment contract, and any workplace policies that might promise more generous redundancy benefits.

How To Calculate The Total Cost Of A Redundancy (Not Just The NES Payment)

When employers search “nes redundancy pay”, they often want one number. But in real workplaces, redundancy cost is usually made up of several parts.

Here’s a simple way to think about it: redundancy pay is one line item in a bigger final pay calculation.

Step 1: Work Out If Redundancy Pay Is Payable At All

Before you calculate weeks, confirm eligibility and exemptions, including:

• Is the employee covered by the NES (most are)?
• Are you a small business employer (under 15 employees)?
• Is the employee a casual?
• Has the employee completed at least 12 months’ continuous service?
• Does an exemption apply? (We cover common exemptions below.)

Step 2: Calculate The Employee’s “Base Rate Of Pay”

NES redundancy pay is generally calculated using the employee’s base rate of pay for their ordinary hours.

In many cases, this excludes things like:

• overtime
• penalty rates
• bonuses

Allowances and loadings can be trickier. Some are excluded from the NES “base rate of pay”, but others may be payable separately or treated differently under an award, enterprise agreement, contract, or the employee’s specific pay structure. If an employee’s remuneration is packaged (for example, an annual salary intended to absorb certain entitlements), it’s worth checking the underlying instrument and how “ordinary hours” are defined before you finalise the redundancy figure.

Step 3: Apply The Redundancy Pay Table (Weeks)

Once you’ve confirmed the weeks from the redundancy pay table, multiply those weeks by the employee’s weekly base rate (based on their ordinary hours).

If you need a quick estimate, the redundancy calculator can help you sense-check the numbers (but you should still confirm entitlements against the employee’s exact circumstances).

Step 4: Add Notice (Or Payment In Lieu)

Redundancy pay and notice are separate. In many redundancies, employers either:

• require the employee to work out their notice period, or
• end employment immediately and pay notice instead.

If you’re paying notice instead of having the employee work it, make sure the payment in lieu of notice is calculated correctly and permitted under the employment contract and/or relevant industrial instrument.

Step 5: Pay Out Accrued Entitlements (And Check Long Service Leave)

Most redundancies also require you to pay out things like:

• unused annual leave (often including annual leave loading if applicable)
• unused time off in lieu (if applicable)
• other accrued entitlements under the contract or policy

Long service leave can be particularly state/territory-specific and can also depend on the reason for termination (including redundancy). If long service leave might be in play, it’s worth confirming the rules that apply to your business location.

To reduce the risk of missing something, it helps to use a consistent checklist approach when you’re calculating final pay.

When Is NES Redundancy Pay Not Payable? Common Exemptions And Special Cases

Even where a job is genuinely redundant, NES redundancy pay is not always payable.

Here are some common exemptions and scenarios employers should know about.

Casual Employees

Casuals are generally not entitled to redundancy pay under the NES.

That said, the “casual vs permanent” classification needs to be correct. If someone is effectively working like a permanent employee, misclassification can create broader compliance issues (not just redundancy).

Employees With Less Than 12 Months’ Service

If the employee has not completed at least 12 months of continuous service, redundancy pay under the NES is typically not payable (though notice and other entitlements may still apply).

Small Business Employers (Fewer Than 15 Employees)

As mentioned earlier, if you’re a small business employer, you may not have to pay redundancy under the NES.

However, you still need to handle the termination lawfully and pay other minimum entitlements.

Fixed Term Arrangements And “Maximum Term” Contracts

If an employee’s employment ends because a genuine fixed term arrangement expires at the end date (or at the end of a specified task or season), redundancy pay under the NES may not be payable in the same way as it is for an ongoing employee whose role is made redundant.

This is a higher-risk area than it looks because contract wording and what happens in practice both matter. For example, if you end the employment before the stated end date for operational reasons, redundancy pay may still be triggered. “Maximum term” style contracts can also raise issues depending on how they are drafted and used (including whether the arrangement is truly limited to a set end point).

If you’re using fixed term arrangements, it’s worth ensuring your Employment Contract is properly drafted and matches how the work is actually being performed.

Alternative Employment Or Redeployment

If you offer the employee alternative employment (including redeployment within your business or an associated entity), redundancy pay outcomes can change depending on the circumstances.

In some cases, an employer can apply to the Fair Work Commission to have redundancy pay reduced (including to nil) if the employer obtains other acceptable employment for the employee, or if the employer can’t pay the redundancy amount. Whether the alternative is “acceptable” is fact-specific, so it’s important to document the role offered, the terms, and the employee’s response.

Termination For Misconduct (Not A Redundancy)

If the real reason for termination is conduct or performance, you generally shouldn’t label the termination as a redundancy.

If there are performance or misconduct concerns alongside a restructure, it’s important to be careful about process, documentation, and messaging. In some cases, employers issue a show cause letter during a disciplinary process - but redundancies should not be used as a shortcut to avoid a fair process.

Practical Tips To Manage Redundancy Pay Risk (And Keep Things Fair)

Redundancy is one of those areas where doing the “maths” right is only half the job. The other half is managing your legal process and communication so you reduce the risk of disputes.

1. Plan The Restructure Before You Announce It

Before you speak to employees, make sure you’re clear on:

• which roles are changing and why
• the proposed timeline
• your selection criteria (if multiple employees are in similar roles)
• whether there are redeployment options
• your estimated termination costs (including redundancy, notice, and leave)

This helps you avoid backtracking later, which is where misunderstandings often start.

2. Check Award Or Enterprise Agreement Consultation Requirements

Many modern awards and enterprise agreements include consultation obligations when you introduce major workplace change (including redundancy-related change).

If consultation is required and you skip it, you can create compliance exposure - even if the redundancy itself is genuine.

3. Put The Details In Writing

Employees should receive clear written confirmation of:

• the reason their role is redundant
• their termination date
• how notice will be handled
• their redundancy pay (if payable) and how it was calculated
• their final pay components and timing

This is also your record if questions are raised later.

4. Don’t Underestimate The Cost Of Getting It Wrong

Underpayments and process issues can become expensive quickly - not just due to backpay, but also time, distraction, and reputational impact.

In more serious cases, there can be penalties for non-compliance. Keeping an eye on your compliance settings (contracts, policies, payroll processes) can reduce the chance of stumbling into Fair Work Act penalties.

5. Get Support If The Situation Is Complex

Redundancy gets complicated fast when you have multiple employees affected, award coverage, business sales, or uncertain “small business employer” status.

If you want to move quickly but still reduce legal risk, getting tailored redundancy advice can help you confirm eligibility, consultation requirements, and the correct redundancy pay calculation before you communicate final figures.

Key Takeaways

• NES redundancy pay is a minimum legal entitlement for eligible employees whose roles are made redundant under the National Employment Standards.
• The redundancy pay table sets minimum weeks of pay based on continuous service, and redundancy pay is separate from notice and accrued leave payouts.
• If you’re a small business employer (fewer than 15 employees), you may be exempt from paying redundancy under the NES - but you still have notice and final pay obligations.
• Redundancy pay calculations depend on service length and base rate of pay, and you should also budget for notice (or payment in lieu) and unused entitlements.
• Awards and enterprise agreements can add consultation and process requirements, so it’s important to check these before you announce changes.
• Clear documentation, careful communication, and a consistent final pay process can significantly reduce disputes and compliance risk.

If you’d like help working through NES redundancy pay, consultation obligations, or redundancy documentation, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.