What Is Voluntary Redundancy in Australia?

Restructuring is a normal part of running a business. Markets change, technology shifts, and sometimes roles evolve or are no longer needed.

When you’re planning those changes, offering voluntary redundancy can be a respectful, lower‑risk way to reduce headcount while supporting staff and protecting your brand.

Below, we break down what voluntary redundancy means for employers, how it differs from “genuine redundancy,” when it makes sense to offer it, and a step‑by‑step process to stay compliant and fair from start to finish.

What Is Voluntary Redundancy For Employers?

Voluntary redundancy is where you invite eligible employees to nominate themselves to leave the business in exchange for a redundancy package. It’s “voluntary” because employees choose whether to express interest - you don’t select them initially.

From an employer’s perspective, it can be a constructive first step before any compulsory redundancies. It helps you:

• Reduce the need for forced selection (which can be more contentious)
• Preserve morale and demonstrate a fair process
• Manage costs with a clearly scoped package and timeframe
• Retain key talent by avoiding blunt selection criteria too early

Importantly, a voluntary redundancy still needs to be a genuine redundancy under the Fair Work Act framework - the job itself must no longer be required, and you must follow consultation and redeployment obligations.

Voluntary Vs Genuine Redundancy: What’s The Difference?

These terms are often used together, but they’re not the same thing.

Genuine Redundancy (Legal Concept)

In simple terms, a redundancy is “genuine” if:

• The employer no longer requires the job to be done by anyone (due to changes in operational requirements)
• The employer complied with any consultation obligations in an applicable modern award or enterprise agreement
• It wasn’t reasonable to redeploy the employee within the employer’s enterprise (or an associated entity)

When a redundancy is genuine, the employee generally can’t succeed in an unfair dismissal claim based on the termination itself. However, other claims (e.g. discrimination or general protections) can still arise if the process is mishandled.

Voluntary Redundancy (Process Choice)

Voluntary redundancy is a way to get to the same endpoint (a genuine redundancy) with an optional expression‑of‑interest stage. You invite volunteers, consider business needs, and then accept or decline expressions at your discretion. If the underlying role is still required or you haven’t met consultation and redeployment obligations, it may not amount to a genuine redundancy in law.

When Should You Offer Voluntary Redundancy?

Offering voluntary redundancy can make sense where you foresee structural change but want a respectful, lower‑risk path first. Common scenarios include:

• Restructuring teams after a merger or technology change
• Closing a location or consolidating duplicated functions
• Responding to sustained revenue decline or cost pressures

Small Business Exemption From Redundancy Pay

Under the National Employment Standards (NES), employers with fewer than 15 employees are generally exempt from statutory redundancy pay. However, you still need to follow any consultation obligations in modern awards/enterprise agreements, give the correct notice (or pay in lieu), and manage accrued entitlements lawfully.

If you’re not exempt, you’ll need to consider how to calculate redundancy pay and embed it in your offer.

Will Voluntary Redundancy Save Time And Cost?

Often, yes. It can reduce the administrative burden of applying selection criteria across large cohorts, and it may lower dispute risk. That said, you should still budget for statutory entitlements, package design, transition support and potential recruitment to fill any critical gaps created by volunteers you accept.

How To Run A Compliant Voluntary Redundancy Process

A clear, well‑documented process protects your business and supports your people. Here’s a practical roadmap.

1) Plan The Structure And Business Case

• Define the operational change (e.g. function consolidation, new system, location closure).
• Identify the roles impacted and why those roles are no longer required.
• Map possible redeployment options within your enterprise (and associated entities).
• Draft your communication plan and timelines (EOI window, decision dates, exit dates).

This upfront planning underpins a “genuine redundancy” rationale and helps you handle questions confidently.

2) Check Awards, Agreements And Contracts

Most awards/enterprise agreements set consultation requirements when you decide on major workplace changes. Typically, you must inform employees (and their representatives), discuss measures to avert or mitigate adverse effects, and consider any matters raised. Build this into your timeline before inviting expressions of interest.

Also review employment contracts for notice provisions, mobility or redeployment clauses, and any specific redundancy terms. If you need a bundle of compliant paperwork for the process, Sprintlaw can assist with an Employee Termination Documents Suite.

3) Set Your Eligibility Rules And EOI Pack

Decide who can express interest. You might limit EOI to certain business units, locations or roles, or exclude critical roles. Typical EOI packs include:

• A cover letter explaining the change, EOI window and how to apply
• An overview of the proposed redundancy package and how it’s calculated
• FAQs about process, timelines and redeployment
• Contact details for confidential questions

Keep the tone supportive and factual. Make it clear that expressions are not guarantees - you reserve the right to accept or decline based on business needs.

4) Consult Properly And Invite Expressions Of Interest

Provide the required information to employees and, where applicable, their representatives. Allow reasonable time for feedback. Then open your EOI process for a defined period (e.g. two weeks) and provide a clear channel for questions.

5) Assess EOIs Against Business Needs

Evaluate volunteers using objective criteria aligned to your restructure (e.g. whether the role will genuinely cease, impact on capability, skill overlap, redeployment suitability). Keep written records of your assessment and reasons.

If not enough volunteers come forward (or if accepting certain EOIs would hurt critical operations), you may still need a selection process for compulsory redundancies. If you get to that stage, ensure your selection criteria are fair, evidence‑based and non‑discriminatory.

6) Confirm Redeployment Options

Before accepting any volunteer for redundancy, confirm whether it would be reasonable to offer redeployment within your enterprise or associated entities. Document the search you undertook, roles considered, and why redeployment is or isn’t reasonable.

7) Make Offers And Issue Documentation

For accepted volunteers, issue an offer letter that sets out the package and conditions (including any Deed of Release, return of property, confidentiality, intellectual property confirmation and post‑employment obligations). You’ll also need to provide notice (or consider payment in lieu of notice) and confirm payout of accrued entitlements.

8) Manage Exit And Handover

Plan a professional, supportive exit. Consider handover timeframes, access removal, references, and outplacement support. Communicate transparently with remaining staff to maintain morale and business continuity.

What To Include In A Voluntary Redundancy Package

Your package should be consistent, lawful and clearly explained. Typical components include:

Redundancy Pay

If you’re not a “small business employer” (fewer than 15 employees) and the employee has at least 12 months’ continuous service, the NES generally requires redundancy pay on a scale based on service. Many employers also add a discretionary sweetener to encourage volunteers. If you’re unsure about amounts, revisit how to calculate redundancy pay under the NES and any applicable instrument.

Notice (Or Payment In Lieu)

Provide the required notice period under the NES or contract, or pay in lieu if you need an immediate exit. Using payment in lieu of notice can simplify logistics and reduce disruption, but you’ll still need to manage return of property and post‑employment obligations.

Accrued Entitlements

• Unused annual leave must be paid out
• Long service leave is handled under state and territory laws (and sometimes pro‑rata rules apply)
• Personal/carer’s (sick) leave isn’t generally paid out, but check any applicable enterprise agreement or contract

If redundancy coincides with a period of personal leave, it’s worth confirming how redundancy and sick leave interact in your circumstances.

Superannuation And Tax

Superannuation treatment depends on the nature of each payment. Some components attract super, others don’t. It’s best practice to confirm whether you must pay super on specific termination payments - start with this overview on termination payments and coordinate with your payroll adviser or accountant.

Genuine redundancy payments can attract concessional tax treatment up to a cap. Make it clear in your letter that the business will process payments consistent with ATO requirements, and employees should seek their own tax advice.

Deed Of Release

It’s common to ask volunteers to sign a Deed of Release in exchange for the package, confirming settlement of employment‑related claims (with standard carve‑outs for things you can’t contract out of). This isn’t mandatory, but it’s a sensible risk‑management step, particularly if you’re offering above the minimums.

Other Add‑Ons

• Outplacement or career transition support
• Extended employee assistance program (EAP) access
• Retention of work devices or small gestures (handled via proper asset transfer records)

Legal Risks, Compliance And Documentation

Voluntary redundancy reduces risk, but it’s not risk‑free. Here are key areas to manage carefully.

Consultation And Transparency

Failing to consult in accordance with a modern award or enterprise agreement is a common pitfall. Even with a voluntary process, you still need to share information about the change, invite feedback and genuinely consider measures to mitigate adverse impacts.

Selection Decisions And Discrimination

If you reject or accept volunteers in a way that disproportionately impacts a protected attribute (age, sex, disability, family or carer’s responsibilities, etc.), you could face discrimination or general protections claims. Use objective criteria tied to your restructure and document your reasoning.

Redeployment Obligations

Always record your redeployment inquiries across associated entities and why redeployment is or isn’t reasonable for each affected person. This is central to genuine redundancy and unfair dismissal risk.

Notice Periods And Timing

Missteps around notice, effective termination dates, or payments in lieu can be costly. If you’re unsure about rights and timing, review employee notice periods to make sure your offers and letters line up with the law and any contract terms.

Fit‑For‑Purpose Documentation

Prepare clean, consistent paperwork that reflects your specific business and any applicable industrial instrument. Employers often bundle the following:

• EOI letter and FAQs
• Consultation notices and meeting records
• Offer of voluntary redundancy (with an itemised breakdown of payments)
• Deed of Release
• Termination letter and certificate of service (if appropriate)
• Property return checklist and confidentiality/IP confirmations

If you’d like a lawyer to curate the set for your situation, our team can support you with targeted redundancy advice or a tailored documents suite.

If Voluntary Isn’t Enough

Sometimes the EOI phase won’t reach your target. If you proceed to compulsory redundancies, apply fair selection criteria and maintain a clear evidence trail. For other types of separations (like probationary exits), be mindful that different rules apply - for context, see this overview on termination during probation.

Key Takeaways

• Voluntary redundancy is an employer‑led invitation for staff to nominate themselves to exit with a package - but the end result still needs to be a genuine redundancy in law.
• Use a structured process: plan your business case, consult under any award or agreement, invite EOIs, assess fairly, confirm redeployment options, then issue clear offers and documentation.
• A compliant package usually includes statutory redundancy pay (unless you’re a small business employer), notice or payment in lieu, and payout of accrued entitlements, with careful treatment of super and tax.
• Document everything: consultation steps, selection rationale, redeployment inquiries and final decisions - it’s your best defence against unfair dismissal or discrimination claims.
• Fit‑for‑purpose letters, a Deed of Release and a consistent communications plan will reduce risk and support a smooth, respectful exit experience.
• If you need help scoping payments, you can start with guidance on redundancy pay and payment in lieu, then get tailored legal advice to finalise your approach.

If you would like a consultation on planning or documenting a voluntary redundancy process for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.