Employer’s Guide To Redundancy Laws In Australia

Restructures and downturns are part of doing business, but letting people go is never easy. When redundancies are on the table, getting the legal steps right matters - it protects your business from claims and helps you support your team respectfully and lawfully.

In this guide, we’ll walk through what counts as a “genuine redundancy” in Australia, your consultation and redeployment obligations, how to calculate redundancy pay and notice, and the practical steps to run a compliant process. We’ll also cover common risks and some alternatives you can consider before you decide to proceed.

If you’re facing a tight timeline or a complex restructure, don’t stress - with the right plan and advice, you can make fair, compliant decisions that set your business up for the next phase.

What Is A Genuine Redundancy In Australia?

Under the Fair Work Act 2009 (Cth), a dismissal will be a genuine redundancy if all three of the following are satisfied:

• The role is no longer required to be performed by anyone because of operational changes (for example, a restructure, technology change, relocation, business closure or cost reduction).
• You have complied with consultation obligations in any applicable modern award or enterprise agreement.
• It wasn’t reasonable to redeploy the employee within your business or an associated entity.

If any of these elements are missing, the employee may be able to argue the termination wasn’t a genuine redundancy and bring an unfair dismissal claim.

1) Role No Longer Required

This is about the job, not the person. If substantially the same work will continue and be performed by someone else, it’s unlikely to be a genuine redundancy.

2) Consultation Obligations

Most modern awards and enterprise agreements require meaningful consultation before you make a final decision. That means sharing information, discussing ways to avoid or minimise job losses, and considering feedback before you confirm the outcome.

3) Redeployment Must Be Considered

You must turn your mind to other suitable roles - including roles with associated entities - that the employee could reasonably perform (with reasonable training). Keep records of roles reviewed, skill match, location, and pay level.

Do I Need To Consult Before Making Roles Redundant?

In many cases, yes. If the employee is covered by a modern award or enterprise agreement, you’ll need to consult in line with that instrument’s requirements.

Even if there’s no award or agreement coverage, consulting openly is best practice. It reduces legal risk and helps maintain trust.

What Does “Meaningful Consultation” Look Like?

• Inform: Explain the proposed change, business reasons, timing, and likely effects on the role.
• Invite feedback: Ask for ideas to avoid or reduce job losses (for example, reduced hours, job-sharing or alternative duties).
• Genuinely consider: Assess suggestions in good faith and respond.
• Document: Keep notes of meetings, emails, proposals considered, and outcomes.

Consultation is not a box-ticking exercise. It should occur before a final decision, with a real opportunity for input.

How Should I Select Between Similar Roles?

Where you’re choosing between several employees in comparable positions, use objective criteria (skills, qualifications, performance, versatility, business needs) and apply them consistently. Avoid any criteria that could be discriminatory (for example, age, gender, pregnancy, disability, family or carer responsibilities, union membership). Keep a clear record of your rationale.

Redundancy Pay, Notice And Final Pay: What Are My Obligations?

The National Employment Standards (NES) set minimum entitlements for redundancy pay (severance), notice (or payment in lieu), and payout of accrued entitlements. More generous terms in an award, enterprise agreement or employment contract will apply on top of the NES.

Redundancy Pay

Permanent employees with at least 12 months’ continuous service are generally entitled to redundancy pay, with amounts based on years of service under the NES. Small businesses with fewer than 15 employees are usually exempt from redundancy pay, but other obligations still apply.

Start by confirming who is eligible, then calculate the amount. Work through the steps in the guide to calculating your redundancy payment, and use the redundancy calculator to estimate figures.

Notice Of Termination Or Payment In Lieu

You must provide minimum notice (or pay the equivalent instead). The NES sets minimum notice periods by length of service, with an extra week if the employee is over 45 and has at least two years’ service.

If timing is critical, you can make a payment in lieu of notice. This is generally what the employee would have earned during the notice period (including ordinary hours and applicable loadings).

Accrued Entitlements And Final Pay

On termination, you need to pay out accrued but unused annual leave (plus leave loading if it applied), and any long service leave under the relevant state or territory law. You’ll also process any outstanding wages, allowances and approved expenses.

To help with timing, content and calculation, follow the employer steps for final pay.

Tax, Super And Withholding - Important Clarifications

Superannuation is generally payable on ordinary time earnings (OTE). As a rule of thumb:

• No super is payable on genuine redundancy payments.
• No super is payable on a lump-sum payment in lieu of notice for super guarantee purposes.
• Super applies if the employee works their notice (because those are ordinary wages).

For a breakdown of when super applies to termination amounts, see the guide on super on termination payments.

Tax treatment for termination amounts (including redundancy pay and payments in lieu) can be complex. Different components may be treated as employment termination payments (ETPs) with specific withholding rules and caps. It’s important to check your payroll settings and get accounting advice to ensure the correct withholding and reporting.

Small Business Exemption

Businesses with fewer than 15 employees (including certain associated entities and regular and systematic casuals) are generally exempt from paying redundancy pay under the NES. You must still provide notice (or payment in lieu), pay out accrued entitlements, and comply with any consultation obligations under an award or agreement.

Step-By-Step: How To Run A Lawful Redundancy Process

Every workplace is different, but this step-by-step plan will help you run and document a compliant process from start to finish.

1) Confirm The Business Case

• Clarify the operational change (restructure, closure, relocation, technology change, budget constraint).
• Identify the roles (not the people) affected and why the work is no longer required.
• Prepare internal briefing notes to document reasons and approvals.

2) Map Consultation Obligations

• Check any applicable modern award or enterprise agreement for consultation clauses and timelines.
• Prepare consultation letters outlining the proposal, reasons, possible impact and timing.
• Plan meeting dates and who will attend (offer a support person).

3) Consider Alternatives And Redeployment

• List current and upcoming vacancies across your business and associated entities.
• Assess if roles are suitable with reasonable training; record your analysis.
• Discuss options such as reduced hours or different duties (by agreement) if they could avoid or minimise redundancies.

4) Apply Fair Selection Criteria (If Needed)

• Choose objective criteria aligned with business needs (skills, qualifications, performance, versatility).
• Apply them consistently across comparable employees and keep an audit trail.
• Avoid any discriminatory criteria or assumptions.

5) Consult, Listen And Respond

• Hold consultation meetings, invite feedback, and genuinely consider suggestions.
• Provide written updates and responses after each step.
• Make a final decision only once consultation is complete.

6) Confirm The Outcome

• Issue a written outcome letter confirming redundancy, last day of work, notice (or payment in lieu), and redundancy pay (if applicable).
• Include a clear breakdown of final pay, accrued leave and payment timing.
• Offer an exit meeting to discuss logistics (equipment return, references, support).

7) Implement With Care

• Communicate respectfully and clearly; allow a support person where possible.
• Plan IT and property handback to minimise disruption and maintain security.
• Consider outplacement or EAP support where feasible.

8) Keep Your Records

• File consultation documents, meeting notes, selection rationale, redeployment searches, and outcome letters.
• Retain payroll and calculation worksheets for redundancy, notice and leave payouts.
• Update organisational charts and internal policies if structures have changed.

Common Risks And Practical Alternatives

Redundancy decisions are often scrutinised. Here are common pitfalls and ways to reduce risk, followed by alternatives you can consider.

Key Risks To Manage

• Not a genuine redundancy: The work still exists, consultation was perfunctory, or redeployment wasn’t genuinely explored. Reduce this by documenting why the role is no longer required, consulting meaningfully, and recording a thorough redeployment search.
• Adverse action or discrimination: Selection criteria or timing appears linked to a prohibited reason (for example, illness, parental leave, age, union activity). Use neutral, objective business criteria and have HR/legal review your matrix before finalising.
• Pay calculation errors: Underpaying redundancy, notice or accruals, or incorrect tax treatment. Cross-check NES, any award/EA and contracts, sense-check with payroll, and use the redundancy calculator as a validation step.
• Award/EA non-compliance: Skipping required consultation steps or failing to engage employee representatives where required. Map obligations early, use a checklist and keep written records at each step.
• Poor communication: Productivity dips and cultural fallout. Communicate early and honestly, treat departing staff with respect, and support the remaining team.

Alternatives To Redundancy

• Redeployment: Offer suitable alternative roles (with reasonable training) across your group.
• By‑agreement adjustments: Temporarily vary hours, duties or patterns (documented with genuine consent).
• Voluntary separation: In some restructures, voluntary redundancy can be appropriate if selection remains fair and compliant.
• Mutual separation: Where appropriate, a well-drafted Employee Separation Agreement can record agreed terms and reduce disputes.
• Stand down (limited circumstances): Only available where there’s a stoppage of work the employer can’t reasonably be held responsible for - get advice before relying on this option.
• Transition periods: Paid notice or garden leave can soften the transition and protect business interests.

If you’re weighing options or dealing with multiple awards and locations, our team can provide tailored Redundancy Advice to help you choose the right path and meet your obligations.

What Documents Should Employers Prepare?

The right paperwork keeps your process compliant, transparent and consistent. Depending on your situation, you may need:

• Consultation Letter: Outlines the proposed change, reasons and potential impact, and invites feedback.
• Meeting Scripts/Notes: Ensures consistent messaging and complete records of discussions.
• Selection Matrix: Objective criteria and scoring underpinning decisions between comparable roles.
• Redundancy Outcome Letter: Confirms the decision, last day, notice (or payment in lieu), redundancy pay, final pay and logistics.
• Final Pay Breakdown: Clear schedule of amounts for wages, notice, redundancy pay, annual leave and long service leave (where applicable), plus timing - align this with your final pay workflow.
• Employee Separation Agreement (where appropriate): A deed documenting agreed terms, releases, confidentiality and post-employment obligations.

When timing matters, confirm whether a payment in lieu of notice is appropriate, and sense‑check super treatment using the guide to super on termination payments.

Practical FAQs For Employers

Do Casuals Get Redundancy Pay?

Generally, no. NES redundancy pay applies to permanent employees. Check any enterprise agreement or contract for more generous terms.

How Quickly Do I Need To Pay?

Timeframes can be set by an award, agreement or contract. As best practice, pay promptly after termination and provide a clear written breakdown of all amounts.

Can I Make Someone Redundant During Parental Or Sick Leave?

It’s possible if the role is genuinely not required and all obligations are met, but discrimination and adverse action risks are higher. Take extra care with consultation and redeployment, and consider obtaining tailored Redundancy Advice early.

What If The Employee Finds Another Role Internally?

If redeployment is suitable and accepted, redundancy shouldn’t proceed for that employee. Confirm changes in writing and update your selection matrix and organisation chart.

Key Takeaways

• A genuine redundancy requires operational change, meaningful consultation, and no reasonable redeployment options.
• Map your award/EA obligations early, use objective selection criteria, consult before deciding, and document every step.
• Calculate entitlements carefully - redundancy pay (if applicable), notice or payment in lieu, and accrued leave - and issue a clear final pay breakdown.
• Super is not payable on redundancy pay or a lump‑sum payment in lieu of notice for super guarantee purposes; worked notice attracts super. Check tax and withholding rules for termination payments.
• Consider alternatives such as redeployment, agreed changes to hours or duties, voluntary separation or a documented Employee Separation Agreement where appropriate.
• Complex restructures benefit from early guidance - targeted Redundancy Advice helps you meet obligations with confidence.

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