Redundancy Payment Victoria: Employer Obligations

Making roles redundant is one of the tougher decisions you’ll make as a small business owner. When demand shifts, technology changes, or you restructure to stay viable, you may need to reduce headcount. If that happens in Victoria, you’ll want to be confident you’ve handled redundancy payments and process the right way.

This guide walks you through redundancy payment rules in Victoria from an employer’s perspective - what counts as a genuine redundancy, when redundancy payout applies (and when it doesn’t), how to calculate redundancy pay, and the other amounts you must include in a final pay. We’ll also cover practical steps to follow so you stay compliant and minimise risk.

What Counts As A Genuine Redundancy In Victoria?

In Australia (including Victoria), a redundancy is “genuine” when a role is no longer required because of changes to your operational needs - for example, business closure, restructuring, outsourcing, or introducing new systems that remove the need for the position.

To be genuine, you must also meet two key obligations:

• Consultation: If a modern award or enterprise agreement applies, follow the consultation process (notify affected employees, discuss measures to avoid/minimise impacts, invite feedback).
• Redeployment: Take reasonable steps to explore redeployment within your business (and associated entities, if applicable). If suitable roles are available and the employee unreasonably refuses them, redundancy pay may not be required.

If a dismissal is not a genuine redundancy - for example, if the role still exists and you replace the person, or you skip required consultation - the employee may have unfair dismissal rights. Getting your process right is just as important as getting the payout calculation right.

Do You Have To Pay A Redundancy Payment In Victoria?

Often, yes - but there are important exceptions. Redundancy pay in Victoria is driven by the National Employment Standards (NES) in the Fair Work Act, plus any additional rules in awards or enterprise agreements.

Key situations where redundancy pay is not required

• Small business employers: If you have fewer than 15 employees (headcount across all associated entities), you’re a NES “small business employer” and redundancy pay generally does not apply.
• Short service: Employees with less than 12 months of continuous service usually aren’t entitled to redundancy pay (although notice still applies).
• Serious misconduct: If employment ends for serious misconduct, redundancy pay does not apply.
• Reasonable redeployment offered: If you genuinely offer a suitable, comparable role and the employee unreasonably refuses it, redundancy pay may be reduced or not payable.
• Casuals and some contract types: Casual employees are not entitled to redundancy pay. Fixed-term contracts that end on the agreed date (without early termination) also generally don’t attract redundancy pay.

Always check the specific award or enterprise agreement that applies to your business. Some industries (especially construction and manufacturing) can have additional obligations, such as redundancy trust funds or higher severance scales in certain agreements.

How Do You Calculate A Redundancy Payment In Victoria?

For most Victorian employers, the NES redundancy pay scale applies based on an employee’s period of continuous service with you:

• 1 to <2 years: 4 weeks
• 2 to <3 years: 6 weeks
• 3 to <4 years: 7 weeks
• 4 to <5 years: 8 weeks
• 5 to <6 years: 10 weeks
• 6 to <7 years: 11 weeks
• 7 to <8 years: 13 weeks
• 8 to <9 years: 14 weeks
• 9 to <10 years: 16 weeks
• 10+ years: 12 weeks (note the scale reduces after 10 years due to long service leave interactions)

Redundancy pay is calculated on the employee’s “base rate of pay” for ordinary hours of work (excluding bonuses, overtime, loadings, allowances, and penalties) unless a contract or applicable instrument says otherwise.

Service and exclusions

• Service generally includes periods of paid leave.
• Certain periods don’t count toward service (for example, unpaid leave that doesn’t count as service under the Fair Work Act).
• If there’s a transfer of business and you recognise prior service, that time may count for redundancy purposes.

If you want a quick sense-check before you finalise amounts, you can use a practical tool like the redundancy calculator and then work through the full steps to calculate a redundancy payment in line with the NES and any applicable award or agreement.

What Else Must You Include In The Final Pay?

Redundancy pay is only one component of what you owe when employment ends due to redundancy. In Victoria, you’ll usually need to include the following in the final pay:

Notice or payment in lieu

You must either allow the employee to work their statutory or contractual notice period or make a payment in lieu of notice. The NES notice scale runs from 1 to 4 weeks, plus an extra week if the employee is over 45 and has at least 2 years of service, unless a higher notice period is set by contract or instrument.

Accrued but unused annual leave

Pay out all accrued but unused annual leave at the employee’s ordinary rate. If an award or agreement entitles them to annual leave loading on termination, include it as required.

Long service leave

Victoria has specific long service leave (LSL) rules under the Long Service Leave Act 2018 (Vic). Employees generally accrue LSL based on service and, if employment ends, you must pay out any accrued but unused LSL. For practical guidance, see how to calculate long service leave in Victoria.

Other entitlements, allowances or adjustments

• Accrued but unpaid wages
• Time off in lieu (if the instrument requires payout on termination)
• Any contractual bonuses or commissions that have become payable under the contract terms

To pull everything together accurately, it can help to follow a checklist for calculating final pay to ensure nothing is missed.

Process: Consultation, Selection And Redeployment

Compliance is about more than the dollars. A defensible process helps avoid disputes and reduces unfair dismissal risk.

1) Plan the business case

Document why roles are no longer required and the objective criteria used to identify affected positions (e.g. restructure, duplicated functions, closure of a site, automation). Solid records matter if your decision is challenged.

2) Check your instruments

Confirm the applicable award(s) or enterprise agreement(s) and any redundancy, consultation, redeployment and severance obligations above the NES.

3) Consult properly

Where an award/EA applies, notify affected employees as early as practicable, provide relevant information about the changes, invite their input, and genuinely consider measures to avoid or minimise impacts. Keep notes and copies of communications.

4) Assess redeployment options

Look for suitable, comparable roles in your business and associated entities. Consider location, pay, status and hours. Make written offers where appropriate and keep a record of responses.

5) Confirm termination in writing

Issue a clear letter confirming the genuine redundancy, notice period (or payment in lieu), the redundancy payment and other final entitlements, plus the final work date and return-of-property steps.

6) Pay on time

Pay all entitlements promptly in line with your instrument and payroll cycle. Late or underpaid termination amounts create avoidable risk.

Special Rules And Victorian Watchpoints

While redundancy pay is set nationally under the NES, there are local considerations for Victorian employers.

• Construction sector funds: Certain Victorian construction industry awards or EAs require contributions to redundancy funds and can impose higher severance obligations. Check your instrument and fund rules before you calculate.
• Transmission of business: If your business is sold and the new employer offers suitable employment with recognition of service, redundancy pay may not be payable - but you must get the details right.
• Parental leave and sickness: Employees on parental leave or sick leave can still be made genuinely redundant, but special rules around consultation and redeployment apply. Consider interactions such as redundancy and sick leave carefully.
• Small business threshold: Remember the “fewer than 15 employees” headcount includes associated entities and regular and systematic casuals. Get the count wrong and you could misapply the small business exemption.
• Tax treatment: Redundancy payments can have concessional tax treatment up to a cap if they’re genuine severance payments. While we don’t provide tax advice, coordinating with your accountant is wise.

What Documents Should Employers Prepare?

The right documents help you run a fair process and evidence compliance if a claim arises.

• Redundancy Plan and Business Case: Internal document outlining the reasons, the selection criteria and the operational need to remove roles.
• Consultation Notices and Meeting Records: Written notice to affected employees and notes of consultation meetings and responses.
• Redeployment Assessment and Offers: Records of roles considered and any written offers made to employees.
• Termination Letter (Redundancy): A clear letter setting out the genuine redundancy, notice, termination date and the itemised final entitlements.
• Separation Agreement (optional): In some cases, a mutual separation agreement and deed of release is appropriate to finalise terms and reduce legal risk.

If you want plug-and-play, lawyer-drafted templates aligned with Australian employment law, our Redundancy Document Suite includes the core documents you’ll need for a compliant process.

Worked Example: Redundancy Payment In Victoria

Let’s imagine you operate a small manufacturing business in Victoria with 20 employees. You’re restructuring to consolidate two teams into one, removing three roles that have become duplicated.

1. You confirm your headcount (20) means the small business redundancy exemption doesn’t apply.
2. You check the applicable modern award and identify consultation obligations and any redundancy fund contributions.
3. You run a consultation process with the affected employees, inviting suggestions to minimise impacts.
4. You assess redeployment options across your company group and make one written offer, which is accepted.
5. For the remaining two employees, you calculate redundancy pay under the NES scale based on their service, issue termination letters, and include notice (or pay in lieu), unused annual leave and accrued long service leave as required by Victorian law.

Because you planned the process and documented each step, the risk of claims is significantly reduced, and employees receive the correct entitlements on time.

Practical Tips To Reduce Risk

• Confirm headcount early, including associated entities and regular casuals.
• Check all applicable instruments - the NES sets the floor, not the ceiling.
• Document selection criteria and keep records of consultation and redeployment steps.
• Use itemised calculations for each entitlement in the final pay to prevent disputes.
• Stay consistent in communications and be respectful - tone matters in how employees respond.
• When timelines are tight, consider payment in lieu of notice to meet business needs while remaining compliant.

Key Takeaways

• In Victoria, redundancy payment obligations come from the NES and any applicable award or enterprise agreement; small business employers (fewer than 15 employees) are generally exempt from redundancy pay.
• A redundancy must be genuine: meet consultation duties and take reasonable steps to redeploy suitable staff before paying redundancy.
• Use the NES scale to calculate redundancy pay on the base rate for ordinary hours, and double-check award/EA requirements and any sector-specific funds.
• Final pay usually includes redundancy pay, notice (or payment in lieu), accrued annual leave and long service leave as required by Victorian law.
• Process matters: plan, consult, assess redeployment, confirm in writing, and pay on time to reduce legal risk.
• Templates and legal support - such as a tailored Redundancy Document Suite - make it easier to run a compliant process with clear, consistent documents.

If you’d like a consultation about redundancy payment obligations in Victoria and the documents you’ll need, contact us on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.