NSW Redundancy Pay: Entitlements, Calculations And Notice Periods

Redundancy is one of those situations most small business owners hope they never have to deal with, but many eventually do - especially when there’s a downturn, a restructure, a site closure, or you’re changing how work is done.

If you employ staff in New South Wales, you may have searched for NSW redundancy pay because you want a clear answer to a practical question: What do I actually need to pay, when do I need to pay it, and what steps do I need to follow so we don’t end up in a dispute?

This guide walks you through redundancy pay in Australia (including NSW workplaces), the difference between redundancy pay and notice, how to calculate redundancy entitlements, and the common compliance issues employers run into.

Tip: Redundancy is a technical legal area. Getting the “numbers” right is important, but so is getting the process right (consultation, selection, redeployment). Most disputes arise because of process, not just payment.

What Is Redundancy Pay (And When Does It Apply In NSW)?

In simple terms, redundancy pay is compensation payable to an employee when their job is no longer needed and you end their employment for that reason.

In Australia, redundancy pay is largely governed by the National Employment Standards (NES) under the Fair Work Act 2009 (Cth). That means the baseline rules are broadly the same across Australia, including NSW (although an employee’s award, enterprise agreement or contract can add extra obligations).

Redundancy Pay vs “Termination For Performance”

Redundancy is not a “soft termination” because someone isn’t performing. If the real reason you’re ending employment is the employee’s performance or conduct, calling it redundancy can create serious risk.

For a redundancy to be genuine, the role itself must no longer be required to be done by anyone, or the work is genuinely changing such that the existing position is no longer needed.

Common Business Reasons For Redundancy

• Loss of a major contract or a decline in customer demand
• Re-structuring the business (e.g. merging teams or removing layers of management)
• Changes in technology or systems that make a role unnecessary
• Relocation or closure of a site
• Outsourcing work (where the role genuinely disappears)

When Redundancy Pay Is Usually Owed

In many cases, redundancy pay will be owed when:

• the employee is covered by the NES (most employees are), and
• you end their employment because the role is no longer required, and
• no exemption applies (more on exemptions below).

Importantly, redundancy pay is separate from:

• notice of termination (or payment in lieu), and
• final pay items like outstanding wages and unused annual leave.

What Are The Key NSW Redundancy Rules Employers Need To Follow?

When people talk about “redundancy laws NSW”, they’re usually referring to the Fair Work rules that apply to NSW employers, plus any extra obligations in an award, enterprise agreement or employment contract.

From a risk-management point of view, there are 3 pillars to a compliant redundancy:

1) The Role Is No Longer Required (Genuine Redundancy)

You need a real business reason for the position to be removed. If you “make someone redundant” and then immediately hire someone else to do the same job (or a substantially similar job), that’s a red flag.

2) Consultation Obligations (Often Under Awards)

Many modern awards include a consultation clause requiring you to consult with employees (and sometimes their representatives) about major workplace change, including redundancies.

Consultation generally involves:

• telling affected employees what is changing and why
• discussing the expected impact
• genuinely considering measures to reduce the impact (e.g. alternative roles, reduced hours, different duties)

Even where consultation isn’t strictly required by an award, it’s still a best practice step because it reduces confusion and helps you show your decision-making was fair.

3) Redeployment (Looking For Suitable Alternatives)

To strengthen the position that a redundancy is genuine, you should consider whether the employee can be redeployed within your business (or within an associated entity, depending on the structure).

This doesn’t mean you must create a new job. But it does mean you should consider available roles that are reasonable and suitable, taking into account factors like:

• the employee’s skills and experience
• location and travel requirements
• pay level and hours
• any training required (and whether it’s reasonable)

If redeployment is reasonably available and you don’t consider it, the redundancy may be challenged as not genuine.

Who Is Entitled To Redundancy Pay (And Who Is Exempt)?

A key part of getting NSW redundancy pay right is knowing whether the employee is actually entitled under the NES, or whether an exemption applies.

The Small Business Exemption (Under 15 Employees)

Generally, small businesses (fewer than 15 employees) are exempt from paying redundancy pay under the NES.

This headcount includes:

• full-time and part-time employees
• casual employees who are employed on a regular and systematic basis
• employees of associated entities may also need to be counted, depending on how your business is structured

Even if you’re exempt from redundancy pay, you still usually must provide:

• notice of termination (or pay in lieu), and
• final pay (like outstanding wages and unused annual leave).

Important: some awards, enterprise agreements or contracts may still provide redundancy entitlements even where the NES exemption applies. This is one of the biggest “surprises” we see for small business owners.

Other Common Exemptions

Redundancy pay is also not required in certain situations, including (commonly):

• casual employees (in most cases)
• employees with less than 12 months’ continuous service
• some fixed-term employees, where their employment ends because the agreed term finishes (however, whether this applies can be fact-specific and may depend on the contract wording and the employee’s circumstances)
• some trainees/apprentices (depending on the arrangement and whether the role is for a specified period of time, task or season)

Because these rules can interact with awards and contracts, it’s worth checking the employee’s classification and terms before you communicate final figures.

How Is NSW Redundancy Pay Calculated? (With Practical Examples)

When an employee is entitled, statutory redundancy pay is generally calculated based on the employee’s:

• length of continuous service, and
• base rate of pay for ordinary hours.

It’s not usually calculated on bonuses, loadings, allowances, overtime, or reimbursements (unless an award/contract specifically says otherwise). But it can still get tricky quickly, especially where someone’s hours vary or where there are above-award arrangements.

Redundancy Pay Weeks Under The NES

Under the NES, redundancy pay is typically expressed as “redundancy weeks” based on service. The scale generally increases over time, up to a cap (and then reduces slightly at the 10+ year mark under the NES).

As a rough guide, many employers see these common service brackets in practice:

• 1-2 years: 4 weeks
• 2-3 years: 6 weeks
• 3-4 years: 7 weeks
• 4-5 years: 8 weeks
• 5-6 years: 10 weeks
• 6-7 years: 11 weeks
• 7-8 years: 13 weeks
• 8-9 years: 14 weeks
• 9-10 years: 16 weeks
• 10+ years: 12 weeks

Note: The above reflects the NES scale commonly used across Australia. Always check the employee’s exact continuous service dates and whether an award/enterprise agreement provides different (often higher) redundancy entitlements.

Example 1: “How Much Redundancy For 1 Year?”

Let’s say you employ a full-time employee in NSW who has worked with you for 1 year and 3 months, and they are entitled to redundancy pay.

• NES redundancy for 1-2 years: 4 weeks
• If their base weekly pay is $1,200, redundancy pay would be: $4,800

That $4,800 is the redundancy component only. You’ll still need to add notice (or payment in lieu) and other final pay amounts.

Example 2: “How Much Redundancy For 2 Years?”

If the employee has 2 years and 2 months of service:

• NES redundancy for 2-3 years: 6 weeks
• If base weekly pay is $1,200: $7,200

Example 3: Part-Time Employees

For part-time employees, redundancy weeks are still calculated based on their ordinary hours and base rate. Practically, that means you calculate their weekly base pay based on their normal rostered hours, then multiply by the applicable redundancy weeks.

A Quick Way To Sense-Check Your Figures

If you want a quick estimate, the redundancy calculator can help you sanity-check the outcome before you finalise the numbers in writing.

Just keep in mind calculators are a guide. Your final redundancy payout may be affected by award terms, contract terms, and how you define “base rate of pay”.

Notice Periods, Payment In Lieu, And Final Pay: What Else Must You Pay?

One of the most common issues we see is employers calculating redundancy pay correctly, but missing other amounts that must be included in the employee’s termination payments.

In most cases, a redundancy termination involves:

• notice of termination (or payment in lieu)
• redundancy pay (if entitled)
• final pay items (outstanding wages, unused annual leave, etc.)

Redundancy Notice Period NSW: What You Need To Know

Notice periods are generally governed by the NES minimums (and can be increased by awards, enterprise agreements, or the employment contract).

Notice is separate to redundancy pay. Even if you pay redundancy, you still usually owe notice.

Some businesses choose to have the employee work out the notice period. Others prefer to end employment immediately and make a payment in lieu of notice. If you’re considering that option, payment in lieu of notice needs to be handled carefully so the employee receives what they would have earned if they worked out their notice.

For the legal framework behind minimum notice, it can also help to understand section 117 (the NES notice provision), particularly where there’s any disagreement about how much notice applies.

Final Pay (Annual Leave, Outstanding Wages, Other Amounts)

Final pay is often where errors happen, especially if payroll is rushed or the termination date changes.

Your final pay obligations will commonly include:

• wages up to the termination date
• unused annual leave (paid out)
• any applicable leave loading (if required by the award/contract)
• any accrued entitlements that must be paid out under the relevant instrument

If you want a structured way to make sure you’re not missing anything, calculating final pay is a useful checklist-style reference.

What If The Employee Is On Sick Leave During A Redundancy?

This is another practical issue that comes up often: “Can we proceed if the employee is on personal/carer’s leave?” or “Does sick leave change the redundancy payout?”

Sometimes you can proceed, but the details matter (including how you handle consultation, timing, and communications). If this is your scenario, it’s worth checking how redundancy interacts with personal leave, because redundancy and sick leave can raise additional compliance concerns.

Separation Certificates And Paperwork

Beyond the money, don’t forget the paperwork. Employees may request a separation certificate for government and administrative purposes. Having a consistent process helps reduce back-and-forth after termination. If you’re unsure what’s required, employer separation certificates is a practical reference point.

Common Redundancy Mistakes Small Business Employers Make (And How To Avoid Them)

Even with the best intentions, redundancies can go off track quickly. Here are some of the common issues we help small businesses avoid.

1) Choosing The “Wrong” Person Without Clear Criteria

If a restructure affects multiple people in similar roles, selection decisions can be challenged as unfair or discriminatory if you can’t explain why a particular role (or person) was selected.

Even where only one role is being removed, documenting your business rationale is essential.

2) Treating Redundancy Like A Performance Tool

If performance is the real issue, you should generally follow a performance management process rather than use redundancy.

Performance-based exits have their own risks and requirements, and they’re not interchangeable with redundancies. In some situations, issues arise because the employee is relatively new; if that’s relevant, it’s worth understanding how termination during probation works (and how it differs from redundancy).

3) Forgetting Award Obligations (Consultation And Redundancy)

Awards can impose consultation steps, minimum engagement requirements, and sometimes redundancy terms that are different to the NES.

Before you issue a redundancy letter, confirm:

• the employee’s correct award coverage and classification
• any consultation steps and timeframes
• whether the award provides redundancy pay above the NES

4) Underpaying Or Overpaying The Redundancy Payout

Underpayment can lead to disputes and backpay claims. Overpayment can create cashflow pressure and, in some cases, a precedent that makes future restructures harder.

The safest approach is to calculate carefully, get the termination date correct, and provide a written breakdown to the employee.

5) Poor Communication (Which Can Escalate Quickly)

Redundancy is personal, even when it’s a commercial necessity. A clear, respectful conversation and a written summary of next steps can significantly reduce legal risk and protect your workplace culture.

Key Takeaways

• NSW redundancy pay is generally governed by the National Employment Standards (NES), but awards, enterprise agreements and employment contracts can add extra obligations.
• A redundancy should be genuine: the role is no longer required, consultation obligations are followed (where applicable), and redeployment is considered.
• Employees may be exempt from redundancy pay in certain situations, including the small business exemption (fewer than 15 employees), casual employment, and service under 12 months.
• Redundancy pay is not the only payment you may owe - notice (or payment in lieu) and final pay items like annual leave payouts must also be handled correctly.
• Most redundancy disputes arise from process and documentation issues, not just the calculation, so it’s worth getting advice before you make the decision final.

If you’d like help calculating NSW redundancy pay, checking award coverage, or preparing compliant redundancy documents and a consultation process, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.