How To Calculate Your Redundancy Payment In Australia

Facing redundancy can be stressful, whether you’re an employer planning a restructure or an employee trying to understand your entitlements.

One of the first questions people ask is simple: how much is a redundancy payment in Australia?

In this guide, we’ll walk through how redundancy pay works under the National Employment Standards (NES), who is eligible, how to calculate it step-by-step, and what else should be included in final pay. We’ll also flag the common mistakes we see and share practical tips so you can move through the process confidently and compliantly.

If you want a quick way to estimate the numbers, you can also use our redundancy calculator after you’ve read through the rules below.

What Is A Redundancy Payment?

A redundancy payment (sometimes called a redundancy payout) is money paid to an employee when their position is genuinely no longer required. It’s about the role, not the person.

Redundancies commonly arise when businesses restructure, downsize, relocate, or introduce new technology that changes how work is done. The purpose of redundancy pay is to provide a financial buffer while the employee transitions to new work.

In Australia, redundancy pay entitlements for eligible employees are set out in the National Employment Standards (part of the Fair Work Act 2009). Most modern awards or enterprise agreements cannot provide less than the NES minimum, though some may provide more generous terms, so it’s worth checking the applicable instrument.

Who Is Entitled To Redundancy Pay?

Not everyone receives a redundancy payout. Here’s a quick snapshot of how eligibility typically works under the NES.

• Generally eligible: Permanent full-time and part-time employees with at least 12 months’ continuous service whose job is made genuinely redundant.
• Generally not eligible:
  • Employees with less than 12 months’ service
  • Casual employees
  • Apprentices
  • Employees in a small business (fewer than 15 employees) at the time of dismissal
  • Employees terminated for reasons other than redundancy (e.g. performance or conduct)
  • Employees whose fixed-term contract has naturally ended

A couple of important clarifications often missed:

• Small business headcount: The “fewer than 15 employees” test includes regular and systematic casuals and the employees of associated entities at the time of dismissal. Make sure you count correctly before applying the exemption.
• Trainees vs apprentices: Apprentices are excluded from redundancy pay under the NES. Trainees are not a blanket exclusion-check the relevant award/enterprise agreement and the circumstances.
• Transfer of business: If there is a sale/transfer and the employee’s service with the new employer is recognised (or they’re offered suitable alternative employment and reasonably refuse), different rules can apply to redundancy pay. Careful review is needed in sale or transfer scenarios alongside the Business Sale Agreement or related documents.

The NES Redundancy Pay Scale (And How To Use It)

The starting point for calculating a redundancy payment is the NES scale. This sets out “redundancy weeks” based on the employee’s years of continuous service with the employer.

Years of Continuous Service	Weeks of Redundancy Pay
Less than 1 year	0 weeks
1 – 2 years	4 weeks
2 – 3 years	6 weeks
3 – 4 years	7 weeks
4 – 5 years	8 weeks
5 – 6 years	10 weeks
6 – 7 years	11 weeks
7 – 8 years	13 weeks
8 – 9 years	14 weeks
9 – 10 years	16 weeks
10+ years	12 weeks

Why does it reduce to 12 weeks after 10 years? That’s how the NES scale is set-once an employee reaches 10 years’ service, the maximum under the NES is 12 weeks. Some awards or agreements may offer more, so always check the specific instrument.

What about the rate you multiply by? Redundancy pay is calculated on the employee’s base rate of pay for ordinary hours of work at the time of termination. This generally excludes overtime, penalty rates, loadings, allowances, bonuses and commissions unless a contract or instrument expressly includes them.

For employees whose hours changed over time, use the current ordinary hours at termination (consistent with the NES concept of base rate for ordinary hours). If an award or agreement prescribes a different method (for example, an averaging rule), follow that instrument.

Step-By-Step: Calculate A Redundancy Payout

Here’s a practical way to work it out.

1. Confirm eligibility
   Check that the role is genuinely redundant and the employee meets NES eligibility (including the small business test and any exclusions).
2. Work out continuous service
   Count from the date the employee commenced permanent employment to the end date, considering any periods that don’t count as service if applicable under the NES or an award/agreement.
3. Find the “redundancy weeks”
   Match years of service to the NES table above.
4. Identify ordinary weekly pay
   Use the base rate of pay for ordinary hours at the time of termination.
5. Apply the formula
   Redundancy Payment = Ordinary Weekly Pay × Redundancy Weeks (from the NES scale).
   Example: If ordinary weekly pay is $1,200 and service is 5 years (10 weeks), redundancy pay is $12,000 (before tax).
6. Add other final pay items
   Redundancy pay is separate from other entitlements. Final pay often includes outstanding wages, accrued annual leave, long service leave (if applicable), and payment in lieu of notice if you’re not requiring the employee to work through the notice period. For a full checklist, see calculating final pay for employees.
7. Consider superannuation and tax
   Superannuation is generally not payable on redundancy pay, payment in lieu of notice, or unused leave paid out on termination because these are typically not “ordinary time earnings.” For more detail, see do you pay superannuation on termination payments? and payment in lieu of notice and superannuation.
   Tax note: Different components of final pay are taxed differently. Sprintlaw doesn’t provide tax advice-check the Australian Taxation Office guidance or speak with your accountant about tax treatment and any tax-free thresholds that may apply to a genuine redundancy.

Want the numbers fast? Try our redundancy calculator to estimate the payout before you finalise the calculation.

Key Employer Considerations During Redundancy

Getting the number right is important, but so is your process. A well-managed, compliant process reduces risk and supports staff through change.

• Genuine redundancy: Ensure the role is no longer required. Redundancy shouldn’t be used to replace disciplinary action or performance management.
• Consultation obligations: If a modern award or enterprise agreement applies, you will likely have to consult with affected employees before making a final decision (e.g. provide information, consider alternatives). Keep records of consultation steps.
• Notice requirements: Give written notice (or pay in lieu) in accordance with the NES and any applicable instrument. If paying in lieu, factor it into final pay correctly and consider superannuation implications (not usually payable on in-lieu payments).
• Fair Work compliance: Ensure you’re meeting obligations around redundancy, unfair dismissal, discrimination and any recent legislative changes that may affect your process.
• Documentation: Provide clear letters confirming redundancy, set out final pay breakdowns, and issue any forms required by third parties. Many employers also use employee separation agreements (deeds of release) in appropriate cases, and issue employer separation certificates where needed.
• Related entitlements: Be careful with overlaps, such as redundancy and sick leave, or long service leave differences across states. If unsure, get tailored advice.

If you need help with process and paperwork, our team supports employers with redundancy advice and can prepare a redundancy document suite that fits your workplace.

FAQs About Redundancy Pay

How Much Do You Get For Redundancy?

It depends on years of continuous service and your ordinary weekly pay at termination. Using the NES scale, many employees will be entitled to between 4 and 16 weeks’ pay, with 12 weeks applying once service reaches 10 years (unless an award/agreement provides more).

How Much Redundancy For 1 Year, 3 Years Or 5 Years?

• 1 year: 4 weeks
• 3 years: 7 weeks
• 5 years: 10 weeks

Multiply those weeks by the base weekly pay for ordinary hours at termination.

How Is Redundancy Pay Calculated If Hours Have Changed?

Use the employee’s base rate for ordinary hours at the time of termination. If a modern award or enterprise agreement sets an averaging method, follow that. Otherwise, you don’t “average” by default under the NES-stick to ordinary hours at termination unless your instrument says differently.

Is Superannuation Paid On Redundancy?

Generally, super is not payable on redundancy pay, payment in lieu of notice, or unused leave paid out on termination because these components are not usually ordinary time earnings. For more detail, see termination payments and super.

What Else Is Included In Final Pay?

Final pay typically includes outstanding wages, accrued annual leave, long service leave (if applicable), and any payment in lieu of notice if you’re not requiring the employee to work out their notice. Redundancy pay is in addition to those items.

What If There’s A Business Sale Or Transfer?

In transfer-of-business scenarios, redundancy obligations can change. If the new employer recognises service, or the employee is offered suitable alternative employment, redundancy pay may not be required in the same way. Always review the deal documents and get advice alongside your Business Sale Agreement.

Common Mistakes To Avoid

• Using the wrong base rate (include only ordinary hours at termination unless your instrument says otherwise)
• Miscounting service or applying the small business exemption incorrectly
• Overlooking more generous award/agreement terms
• Forgetting other final pay items or misunderstanding super/tax treatment
• Skipping consultation steps where an award/agreement requires it

Key Takeaways

• Redundancy pay in Australia is set by the NES and depends on years of continuous service, multiplied by the base rate for ordinary hours at termination.
• Most eligible employees receive 4–16 weeks under the scale, with 12 weeks applying after 10 years’ service unless an award/agreement is more generous.
• Redundancy pay is separate from final pay items like outstanding wages, accrued annual leave, long service leave and notice (or in-lieu).
• Super is generally not payable on redundancy pay, in-lieu notice payments or unused leave on termination, and tax treatment varies-check ATO guidance or your accountant.
• Eligibility matters: consider the small business exemption, apprentices, and transfer-of-business rules before paying or denying redundancy.
• A compliant process (genuine redundancy, consultation, correct notice, clear documentation) reduces risk and supports staff through change.

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