Redundancy Legal Advice for Employers: Navigating Australian Employment Law

Redundancy is never easy. Whether you’re restructuring, responding to a downturn, or introducing new technology, there are times when a role genuinely isn’t needed anymore.

When that happens, you need a clear, lawful process. Done right, you’ll minimise risk, treat people fairly and protect your business. Done poorly, you could face unfair dismissal claims, underpayment issues and reputational damage.

In this guide, we’ll explain what redundancy means in Australia, when it’s considered “genuine”, the step-by-step process to follow, your legal obligations, practical alternatives to consider and common pitfalls to avoid.

Our aim is to help you move through a difficult change with confidence and care.

What Does Redundancy Mean In Australia?

Redundancy happens when a particular job is no longer required to be done by anyone in your business. It’s about the role, not the person in it.

Typical reasons include a restructure, business closure (in part or whole), automation or outsourcing, or sustained financial pressure. Redundancy should not be used to address performance or conduct problems - those must be managed under a fair performance process.

In Australian employment law, a dismissal is a “genuine redundancy” when it meets the statutory test in section 389 of the Fair Work Act 2009 (Cth). That test focuses on whether the job is no longer required, whether proper consultation obligations were met, and whether reasonable redeployment was genuinely considered.

When Is It A ‘Genuine Redundancy’?

A dismissal will usually be a genuine redundancy where you can show:

• Your business no longer requires the person’s job to be performed by anyone (for example, due to restructuring, closure, or new technology).
• You complied with any consultation requirements in an applicable modern award, enterprise agreement or contract of employment (for many employers, modern awards set specific steps and timelines).
• You explored reasonable redeployment opportunities within your business (and any associated entities) before deciding to end employment.

If any of these elements are missing, you could be exposed to an unfair dismissal claim. The Fair Work Commission will look closely at your rationale, your consultation steps, and the seriousness of your redeployment efforts.

Keep in mind that a redundancy can still be “genuine” even if employees disagree with the business decision - what matters is that the job is genuinely no longer needed and that you have followed the proper process.

Step-By-Step Process To Manage Redundancy Lawfully

Having a clear, documented process helps you stay compliant and reduces the risk of disputes. Here’s a practical sequence employers can follow.

1) Define The Business Rationale

Be precise about why the role is no longer required. Is it a restructure? Budget constraints? A change in operating model? Put your rationale in writing. If you later need to justify your decision, this documentation will be important.

2) Check Contractual And Industrial Instrument Obligations

Review the employee’s contract and identify any applicable modern award or enterprise agreement. These often contain mandatory consultation processes, timelines and information you must provide. Failing to follow these steps could undermine a genuine redundancy, even if the business case is sound.

3) Begin Consultation - Early And In Good Faith

Consultation is more than notifying people after a decision has been made. It usually involves:

• Sharing proposed changes and reasons as early as practicable.
• Inviting feedback, considering suggestions and discussing impacts (including measures to mitigate them).
• Discussing potential redeployment options and training possibilities.

Document your meetings, emails and responses. If an award or agreement applies, consult strictly in line with its requirements.

4) Explore Redeployment (Within Your Business And Group)

Take a genuine, proactive approach to redeployment. Look for roles the employee can reasonably perform now or with reasonable training. Consider different locations, shifts or slightly altered duties. If you’re part of a group, check associated entities, too. Keep records of vacancies assessed, conversations held and the reasons a role was or wasn’t suitable.

5) Decide And Provide Notice (Or Pay In Lieu)

Once consultation is complete and there are no reasonable redeployment options, you can move to termination of employment on the grounds of redundancy. Provide written notice in line with the National Employment Standards (NES), any applicable award/agreement and the contract. Where you choose to pay instead of requiring the employee to work their notice, ensure any payment in lieu of notice is correctly calculated.

Be aware that casual employees are typically not entitled to notice under the NES, and some other categories are excluded by law. Always check the specific rules that apply to your workforce.

6) Calculate And Pay Redundancy Entitlements

Many employees are entitled to redundancy pay based on their length of continuous service (with a scale set by the Fair Work Act). However, there are important exceptions - including small business employers (fewer than 15 employees), casual employees, apprentices and employees engaged for a specified period, task or season.

Use up-to-date thresholds and double-check calculations before final pay. A practical tool like our redundancy calculator can help you estimate entitlements at a high level, but always confirm against current legislation and any award or contractual terms.

7) Finalise Termination And Accrued Entitlements

Provide a written termination letter that clearly states the reason (genuine redundancy), the end date, the notice (worked or paid), redundancy pay (if applicable), and payment of accrued entitlements such as annual leave. Depending on the circumstances, you may need to consider the treatment of personal leave balances, outstanding commissions or bonuses and the timing of payments.

For clarity around annual leave on termination, see our overview of annual leave on resignation. If the employee takes personal leave during a notice period, check the interaction between redundancy and sick leave before finalising amounts.

8) Offer Practical Support (Optional, But Good Practice)

While not legally required, many employers choose to provide job search support, references, or outplacement services. This can ease the transition and demonstrate care for departing team members, which helps morale and your employer brand.

What Are Your Legal Obligations (Notice, Pay, Consultation)?

To stay compliant and reduce risk, keep these core obligations front of mind:

• Consultation: If a modern award or enterprise agreement applies, you must consult in line with its process (timing, information to be provided, discussion of measures to mitigate adverse effects). Even where no award applies, consultation is good practice and may be required by contract.
• Notice Of Termination: Provide written notice under the NES, the award/enterprise agreement and any contract. If you choose not to require the employee to work their notice, make a correct payment in lieu. Casual employees typically have no notice entitlement under the NES.
• Redundancy Pay: Many employees are entitled to redundancy pay under the Fair Work Act. Key exclusions include small business employers (fewer than 15 employees), casual employees, apprentices/trainees and those engaged for a specified period, task or season. Redundancy pay may also not be owed where suitable alternative employment is offered and unreasonably refused.
• Redeployment: Actively look for suitable alternative roles within your business and associated entities. Keep a clear record of openings considered and why each was or wasn’t suitable.
• Record-Keeping: Maintain dated records of your business rationale, consultation steps, redeployment searches, and the calculations behind notice, redundancy pay and accrued leave.
• Compliance With Other Laws: Redundancy decisions must not be discriminatory (for example, because of age, sex, disability, pregnancy or carer responsibilities). Redundancy should not be used to mask issues with performance or conduct.

If you’re unsure about exclusions, entitlements or consultation timing, seeking tailored redundancy advice before you act can help you avoid costly mistakes.

Common Pitfalls Employers Should Avoid

Most redundancy disputes arise from process errors rather than the business decision itself. Watch out for:

• Skipping Genuine Consultation: Telling employees after the decision is made - without seeking input or discussing alternatives - can undermine a “genuine redundancy” finding.
• Inadequate Redeployment Efforts: Not checking across your group (or not documenting that search) is a common reason genuine redundancy fails.
• Misusing Redundancy For Performance Issues: Redundancy must not be a shortcut to remove a poor performer. Use a fair performance process instead.
• Incorrect Notice Or Redundancy Pay: Underpaying notice (worked or paid in lieu) or redundancy pay is a frequent source of claims. Double-check your notice in lieu and redundancy calculations against current thresholds.
• Weak Documentation: If you can’t show why the role wasn’t needed, how you consulted, or how you searched for redeployment, you’ll be on the back foot in any dispute.
• Overlooking Contractual/Industrial Instruments: Many awards have detailed consultation rules. Missing a step can be enough to cause problems, even where the business case is strong.

Alternatives To Redundancy Worth Considering

Redundancy is often a last resort. Depending on your situation, you may be able to avoid it - or reduce the number of roles impacted - by exploring alternatives such as:

• Redeployment With Training: Offer reasonable training to move an employee into a vacant role that’s suitable with upskilling.
• Agreed Changes To Hours Or Duties: By agreement, you might reduce hours, adjust rosters or change duties to meet operational needs. Always formalise changes properly and ensure they’re consistent with any applicable award or enterprise agreement. For more on varying terms, see changing employment contracts.
• Temporary Measures: Explore unpaid leave, job share or other flexible arrangements with employee consent. If considering reduced hours, follow best practice and legal requirements for reducing employee working hours.
• Recruitment Freeze Or Natural Attrition: Avoid backfilling departing employees where feasible, so you can reallocate work without involuntary job losses.

Even if redundancy remains necessary, showing you seriously considered alternatives can help demonstrate fairness and reduce conflict.

Practical Tips For A Smoother Process

• Map your structure and roles before you announce anything, so you can clearly explain what is changing and why.
• Designate a decision-maker and a note-taker for each consultation meeting to ensure consistent communication and records.
• Prepare a simple redundancy pack (letter, factsheet, FAQ) so employees understand entitlements and next steps.
• Schedule payments and IT access changes in advance to avoid delays or security issues on the termination date.

Key Takeaways

• A redundancy is about the job - not the person - and it’s “genuine” when the role is no longer required, you’ve consulted as required, and you’ve genuinely considered redeployment (as set out in the Fair Work Act).
• Follow a clear process: define your business rationale, check award/contract obligations, consult in good faith, explore redeployment, then provide notice and calculate entitlements correctly.
• Know the rules for notice and redundancy pay, including exclusions for small business employers, casuals, apprentices and fixed-period roles, and double-check any redundancy calculations before you pay.
• Avoid common pitfalls like skipping consultation, weak redeployment searches, or misusing redundancy for performance issues - strong records will be your best defence if challenged.
• Consider alternatives such as redeployment, agreed variations to hours or duties, and other flexible options before proceeding to redundancies.
• When in doubt, get tailored redundancy advice early - it’s the fastest way to reduce legal risk and support a respectful, compliant process.

If you would like a consultation on redundancy legal advice for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.