Redundancy Rules In Australia: What Employers Need To Know

Restructuring is part of growing a business - and sometimes that means a role is no longer needed. If you’re considering a redundancy, it’s important to follow the right steps so you stay compliant, treat your team fairly, and reduce the risk of disputes.

In this guide, we break down how redundancy works in Australia from an employer’s perspective. We’ll cover what counts as a “genuine redundancy”, when redundancy is appropriate (and when it’s not), a simple step-by-step process you can follow, how to calculate payments, and the common pitfalls to avoid.

With the right process and paperwork in place, you can make necessary changes to your workforce with confidence.

What Is A Genuine Redundancy (For Employers)?

Redundancy is about the job, not the person. A role becomes redundant when you no longer need it to be done by anyone because of changes in your business - for example, closing a location, automating tasks, merging teams, or restructuring to reduce duplication.

Under the Fair Work Act, a “genuine redundancy” generally requires that:

• The role is no longer required to be performed by anyone.
• You’ve complied with any consultation obligations in an applicable award or enterprise agreement.
• It wasn’t reasonable to redeploy the employee within your business or an associated entity.

These principles are captured in the law that defines genuine redundancy and helps employers distinguish it from other types of termination. For a plain-English overview of those rules, it’s worth reading this guide to Section 389 of the Fair Work Act.

When Can You Make A Role Redundant?

Redundancy is appropriate when changes to your operational needs mean the job won’t exist going forward. Typical scenarios include:

• Restructure or reorganisation eliminating a position or consolidating duties.
• Business downsizing following revenue changes or cost pressures.
• Closing a site, department or function.
• Introducing technology that automates or materially changes the work.

Redundancy is not a solution for underperformance or conduct issues. If performance is the concern, use proper performance management processes or consider other lawful grounds for termination.

Also check your obligations under any applicable modern award or enterprise agreement. Many instruments set out specific consultation steps and timelines you must follow before making a role redundant. If you’re unsure whether an award applies, it’s a good idea to review your coverage and obligations around Modern Awards.

What Process Should You Follow To Do Redundancy Lawfully?

Every workplace is different, but the following framework helps most small employers carry out a compliant and respectful redundancy process.

1) Plan And Document The Business Rationale

Map out the structural change, why the role is no longer required, and how the work (if any) will be redistributed. Keep evidence of your business case - it’s crucial if your decision is later questioned.

2) Identify Consultation Obligations

Check any applicable award or enterprise agreement for mandatory consultation steps (for example, providing written notice, discussing measures to avoid or minimise the impact, and considering employee feedback). Even if no instrument applies, consultation is still best practice.

3) Consider Reasonable Redeployment

Look across your organisation and associated entities for suitable roles the employee could reasonably perform (with training if appropriate). Document the roles you’ve considered and why they are or aren’t suitable. Offering redeployment opportunities, where possible, is a key factor in showing a genuine redundancy.

4) Meet With The Employee And Provide Information

Hold a consultation meeting, explain the proposal and the reasons, and invite feedback. Provide relevant information (for example, the proposed timing and the impact on the role). It’s common to hold more than one meeting to fairly consider any alternatives the employee suggests.

5) Confirm The Decision And Provide Written Notice

If you decide to proceed, provide a written termination letter for redundancy. Include the notice period (or confirm if you’ll pay in lieu), the final day of employment, and what the final pay will include.

6) Calculate Final Pay And Redundancy Entitlements

Work out the employee’s minimum entitlements (redundancy pay, notice, accrued leave and any award or contract amounts) and set a clear timeline for payment. We cover the components in more detail below, and you can also refer to this practical overview of how to calculate redundancy payments.

7) Provide Support And Wrap Up Properly

Offer employment references where appropriate, confirm the return of company property, and ensure access to systems is closed on the exit date. Some employers offer outplacement support or agree a release of claims via a deed (more on that below).

How To Calculate Redundancy Entitlements And Final Pay

Your minimum obligations come from the National Employment Standards (NES) and any applicable award, enterprise agreement and employment contract. Always check all sources - the highest entitlement applies.

Redundancy Pay

Employees (other than excluded categories like some small business employees with fewer than 15 employees, casuals, and certain fixed-term roles) are often entitled to redundancy pay. The NES scale is based on years of service and sets minimum weeks of pay.

To understand what’s likely payable in your situation, it helps to start with the national rules, then confirm any extra amounts in your award or contract. This guide walks through the basics of calculating redundancy pay in plain English.

Notice Of Termination (Or Payment In Lieu)

You must either allow the employee to work out their notice period or pay them instead of notice. The required notice depends on service length and age (and again, awards or contracts may increase it). If you prefer to end employment immediately, you can usually make a payment in lieu of notice - just be sure you pay the correct amount and include it in final pay.

Accrued Leave And Other Entitlements

• Accrued but untaken annual leave is paid out.
• Long service leave payout depends on the applicable state or territory law (and length of service).
• Unpaid wages, allowances and any contractual amounts must be included in final pay.

For a helpful checklist of what to include and the timing requirements, refer to this guide to calculating final pay.

Tax, Super And Timing

Statutory redundancy payments may receive concessional tax treatment. Superannuation usually isn’t payable on redundancy pay, but is payable on ordinary time earnings and typically on payments in lieu of notice (depending on the definition of OTE and your fund’s rules). If you’re relying on payment in lieu, this short guide clarifies common questions about notice and how it’s paid.

Interaction With Leave Or Sick Leave

Employees may be on leave or unwell when a redundancy arises. You can generally proceed with a genuine redundancy during periods of paid or unpaid leave, but you still need to meet your consultation and redeployment obligations and pay the correct entitlements. If you’re navigating overlap with sick leave or personal leave, build in extra time for consultation and communication.

Common Pitfalls (And How To Avoid Unfair Dismissal Claims)

Most employer risks arise from process gaps. Here’s what to watch for.

Not Consulting Properly

Skipping consultation required by an award or agreement can mean the redundancy is not “genuine”, opening the door to an unfair dismissal claim. Map the consultation steps, keep notes and allow a reasonable timeframe for feedback.

Sham Redundancy

If the job still exists and is later re-filled (or never truly changed), a tribunal may find the dismissal wasn’t a genuine redundancy. Be clear on the structural change, avoid backfilling the same role, and document your rationale carefully.

Ignoring Redeployment

You must consider reasonable redeployment across your business and associated entities. Keep a record of roles reviewed, why they were unsuitable (e.g. location, skills mismatch, pay banding), and any roles you offered the employee. This is central to a “genuine redundancy” assessment under Section 389.

Incorrect Entitlements

Miscalculating redundancy pay, notice, leave payouts or super can lead to underpayment issues. Cross-check the NES, your award or agreement, and the contract - then double check your numbers against a practical checklist for final pay.

Inadequate Communication

Delivering the news respectfully matters. Provide clear written communication, be available for questions, and ensure the employee understands timing, payments and next steps. Where appropriate, some employers offer to document a clean exit via a deed.

Should You Use A Deed Of Release Or Separation Agreement?

While not mandatory, some employers choose to finalise redundancy on agreed terms via a deed. A deed of release can record payments (including any ex gratia amounts), confirm post-employment obligations (like confidentiality) and provide a release of claims (subject to legal limits).

If you want to package the exit with clear terms, it’s generally wise to have a well-drafted document. For context and typical clauses, review this guide to creating a deed of release. If you’d prefer tailored support from the outset, our team also provides practical redundancy advice for employers.

Useful Documents And Policies To Have In Place

Having the right foundations makes redundancy smoother if it ever becomes necessary. Consider these documents for your HR toolkit:

• Employment Contract: Clear terms on notice, redundancy benefits (if any above minimum), and post-employment obligations help everyone understand their rights. If you engage permanent staff, start with a solid Employment Contract template tailored to your business.
• Workplace Policies / Staff Handbook: A structured set of policies supports consistent processes around consultation, communication and record-keeping.
• Redundancy Letter Templates: Drafts for consultation and outcome letters help you meet timing and content requirements.
• Deed Of Release (Optional): If you agree to finalise on additional terms or include a release, a properly drafted deed is important - see the guidance on deeds of release and settlement.
• Termination Document Suite: Coordinated templates and checklists ensure you cover the legal basics consistently; if you need a complete pack, our redundancy advice and termination document suite services can help.

Practical Tips For Small Employers

• Start early: the moment a restructure is on the table, check award obligations and plan your timeline.
• Keep records: consultation notes, redeployment options considered, and calculation workings are your best protection.
• Be consistent: apply fair, objective selection criteria when multiple similar roles are affected.
• Coordinate payroll and HR: ensure calculations are checked and payments are made on time to avoid complaints.
• Communicate with care: redundancy is difficult for everyone - clarity and empathy go a long way.

Key Takeaways

• A genuine redundancy is about the role, not the person - it requires business need, consultation where required, and consideration of redeployment.
• Follow a clear process: plan your rationale, consult properly, assess redeployment, give notice, and pay the correct entitlements.
• Final pay typically includes redundancy pay (if applicable), notice or payment in lieu, and accrued leave - double check all sources (NES, awards and contracts).
• Most risks come from process gaps: poor consultation, inadequate redeployment efforts, or underpaying entitlements.
• Where appropriate, consider documenting exit terms via a deed and ensure your core HR documents (contracts, policies, templates) are up to date.
• If in doubt, get tailored guidance - a short chat upfront can prevent costly disputes later.

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