Even in a growing business, there are times when you need to change your structure, reduce costs, or stop offering a particular service. If that change means you no longer need a role to exist, you may be looking up how to make someone redundant in Australia and wondering what a “safe” process looks like.
Redundancy can feel personal, but legally it’s meant to be about the role - not the person. The challenge for small businesses and startups is that a poorly handled redundancy can quickly turn into an unfair dismissal claim, a discrimination issue, or a costly underpayment problem.
Below, we’ll walk you through how to make someone redundant in a way that’s practical, legally mindful, and suited to real-world business pressures.
What Does “Redundancy” Mean In Australia (And When Is It Not Redundancy)?
In Australia, a redundancy generally happens when your business no longer needs a particular job to be performed by anyone.
That could be because you’re:
- restructuring your team (for example, combining two roles into one),
- introducing new technology or automation,
- closing a location or business line,
- outsourcing work, or
- experiencing a genuine downturn in revenue and needing to reduce labour costs.
In Fair Work terms, most redundancy disputes come back to whether it was a genuine redundancy. While the law is nuanced, the key ideas are usually:
- the role is no longer required (not just that the employee is underperforming),
- you’ve complied with any consultation requirements (often found in a modern award or enterprise agreement), and
- you’ve considered redeployment within your business (and in some cases, within associated entities).
When is it not really redundancy?
- If you still need the same job done but want a different person to do it.
- If it’s actually a performance or conduct issue (those should be managed through a performance process, not “making the position redundant”).
- If you remove someone’s title but keep the same duties and simply re-hire for a “new” role that looks very similar.
If you’re unsure whether you’re genuinely making a position redundant, it’s worth getting advice early - it can save you from having to defend the decision later.
When Can You Make a Position Redundant (And What Should You Check First)?
Before you start the process of making someone redundant, it helps to do a quick legal and practical “pre-check”. This is where many small businesses go wrong - not because the business reason isn’t real, but because the paperwork and process don’t match the reality.
1) Check The Employee’s Coverage (Award, Enterprise Agreement Or Contract)
Your employee may be covered by a modern award or enterprise agreement that requires you to consult about major workplace change (including redundancy). Even if you have a solid business reason, missing a required consultation step can create risk.
This is also a good time to review the employee’s Employment Contract (and any policies referenced in it), because there may be notice provisions or redundancy-related terms that sit alongside the National Employment Standards (NES).
2) Confirm It’s The Role That’s Going - Not The Person
Write down (internally) what’s changing in your business and why the role is no longer needed. This doesn’t need to be a novel, but it should be clear enough that:
- a third party could understand the reason, and
- your actions match the explanation (for example, you don’t keep the same role going under a new name).
3) Identify Whether You’re A “Small Business Employer”
Small business employers (generally, fewer than 15 employees) have different redundancy pay obligations under the NES. In many cases, a small business employer will not have to pay redundancy pay under the NES (though employees may still be entitled to other payments like notice and accrued leave, and separate obligations can still arise under an award, enterprise agreement, or contract).
That said, small business status doesn’t remove all risk - you still need to handle the process carefully, pay what’s owed (such as notice and accrued leave), and avoid adverse action/discrimination issues.
4) Consider Redeployment Options Early
One of the biggest practical issues in redundancy is redeployment: could this employee reasonably be placed into another role in your business?
This doesn’t mean you have to create a role that doesn’t exist. But you should consider whether there are:
- vacant roles,
- roles likely to become vacant soon,
- alternative duties that align with the employee’s skills (with reasonable training), or
- a part-time arrangement if the employee is open to it (and if it works for your business).
Step-By-Step: How To Make Someone Redundant In Australia
If you’re looking for a practical roadmap for how to make someone redundant, here’s a step-by-step process that suits most small businesses and startups (while still leaving room for your specific award/contract obligations).
Step 1: Plan The Restructure And Document The Rationale
Start with a clear business plan for the change. Common examples include removing a layer of management, consolidating roles, or ceasing a product/service line.
At this stage, prepare a short internal document that covers:
- what’s changing,
- why the role is no longer required,
- when the change takes effect, and
- what alternatives were considered (including redeployment).
This becomes important if you later need to explain why the decision was made.
Step 2: Identify The Role(s) Affected And Use A Fair Selection Process (If Needed)
If only one role exists and you’re removing it entirely, selection may be straightforward.
But if you have multiple employees in similar roles and only some positions are being removed, you’ll need a defensible selection approach. Your selection criteria should be objective and business-related, such as:
- skills and qualifications relevant to the future needs of the business,
- demonstrated performance (supported by records),
- experience in key tasks you still need done, and
- operational requirements (for example, coverage of key shifts).
Avoid criteria that could be discriminatory (directly or indirectly), such as age, parental responsibilities, disability, pregnancy, race, or protected workplace rights.
Step 3: Consult With The Employee (And Comply With Any Award Consultation Terms)
Consultation is not just a “nice-to-have” - in many cases it’s required, particularly under modern awards.
Consultation usually means you:
- meet with the employee,
- explain the proposed change and the reasons,
- give them an opportunity to respond and ask questions, and
- genuinely consider feedback (including alternatives that could avoid redundancy).
It’s also good practice to let the employee bring a support person to the meeting, particularly if the conversation may be difficult.
Step 4: Consider Redeployment (And Make A Genuine Offer If Appropriate)
Where redeployment is possible, consider making an offer in writing and giving the employee a reasonable amount of time to consider it.
Redeployment conversations should be practical. For example:
- Is the role at the same level and pay?
- If not, is the employee open to a different level of responsibility?
- What training would be needed, and is it reasonable?
- What start date would work?
If redeployment is not reasonable on the facts (or no suitable role exists), document why.
Step 5: Confirm The Decision In Writing (And Give Notice Or Payment In Lieu)
Once consultation is complete and you’ve considered redeployment, you can confirm the redundancy in writing.
The letter should clearly state:
- the employee’s last day of employment (or notice period),
- that the employment is ending due to redundancy,
- the final pay components (notice, redundancy pay if applicable, accrued leave), and
- any required return of company property and handover expectations.
If you don’t want the employee to work out their notice period, you may be able to provide payment in lieu of notice. This can be useful where you need to manage confidential information, customer relationships, or workplace morale - but it must be done correctly.
Step 6: Finalise Offboarding Paperwork
Even where the redundancy process is smooth, offboarding admin matters. In many cases, you’ll also be asked for an Employment Separation Certificate, which helps the employee with Services Australia (Centrelink) processes.
You should also plan for:
- final payslip and payroll reconciliation,
- revoking system access,
- collecting keys/devices, and
- confirming what happens to company information and intellectual property (if relevant to their role).
Redundancy Pay, Notice And Final Entitlements: What Do You Need To Pay?
Redundancy costs can be one of the biggest stress points for small businesses - especially if cashflow is already tight. But underpaying (even accidentally) can create bigger problems later.
In most cases, your payment obligations can include:
- notice of termination (or payment in lieu),
- redundancy (severance) pay if the employee is eligible,
- accrued but unused annual leave,
- any other owed entitlements under the employee’s contract/award (for example, some awards include additional redundancy-related obligations).
Notice Periods
Minimum notice is often set by the NES, but can be affected by contracts, awards, age, and length of service. If you’re unsure, it’s important to calculate it carefully (and to confirm whether you can pay it out rather than having it worked).
It can help to cross-check your approach against Fair Work Act section 117, which deals with notice of termination and related rules.
Redundancy Pay
Redundancy pay (sometimes called severance pay) may apply depending on:
- the employee’s length of continuous service,
- whether an exception applies (for example, the NES generally does not require redundancy pay where the employer is a small business employer), and
- any specific award, enterprise agreement, or contract terms.
If you want a quick estimate to help with budgeting, a redundancy calculator can be a useful starting point (although you should still confirm your exact obligations for your situation).
What If The Employee Is On Sick Leave (Or Takes Sick Leave During Notice)?
This is a common issue, particularly if the business has been under strain for a while and stress leave is involved.
In many cases, the redundancy can still proceed - but you need to be careful about timing, documentation, and ensuring the redundancy is genuinely about the position, not the employee’s illness or absence.
It’s also worth considering how the situation interacts with entitlements and risk areas covered in redundancy and sick leave.
What About Annual Leave, Long Service Leave, Or Other Accruals?
Generally:
- unused annual leave is paid out on termination,
- long service leave depends on state/territory rules and eligibility, and
- other entitlements depend on the contract, award, and company policies.
Final pay mistakes are a major source of disputes, so it’s a good idea to run a final audit before processing the last pay.
Common Pitfalls When Making Someone Redundant (And How To Avoid Them)
Most redundancy problems don’t come from bad intentions - they come from moving too quickly, skipping consultation, or using redundancy as a shortcut for another issue.
If the real reason is underperformance, poor attitude, or misconduct, redundancy is usually the wrong tool. This can increase the risk of claims and make the decision harder to defend.
If performance is the issue, you’ll usually need a performance management approach (and a properly drafted employment contract and policies help a lot here).
Pitfall 2: Not Following Award Consultation Requirements
Some businesses consult informally but don’t meet the technical requirements in the applicable award or enterprise agreement. For example, you might be required to provide certain information, consult at a particular time, or discuss measures to reduce impacts.
If you’re not sure whether an award applies, it can be worth reviewing your coverage and overall award compliance position before you begin.
Pitfall 3: Re-Hiring For A “New” Role That Looks The Same
If you make a position redundant and then advertise an extremely similar role shortly after, you may create the impression the redundancy was not genuine.
If your business genuinely changed direction again, document that change. The goal is for your actions to align with your rationale at each point in time.
Pitfall 4: Not Considering Redeployment Properly
Sometimes the legal and practical solution is redeployment (even if the role is not identical).
If you have other roles available, and you don’t consider them seriously, the redundancy can be challenged on the basis that there was a reasonable redeployment option.
Pitfall 5: Getting The Payments Wrong
Underpaying notice, redundancy, or leave can lead to:
- Fair Work disputes,
- backpay claims,
- penalties (in some cases), and
- reputational damage (which can be especially hard on startups and small teams).
If cashflow is tight, it’s still better to address it upfront (for example, getting advice on timing and obligations) than to guess.
Pitfall 6: Not Thinking About Broader Risk (Adverse Action, Discrimination, And Procedural Fairness)
Even where a redundancy is genuine, the context matters. If the employee recently raised a workplace complaint, requested flexible work, took parental leave, or made a safety report, you need to be particularly careful that your decision-making is clearly separated from those events.
This is one area where tailored advice is often worthwhile, because the “facts around the redundancy” are as important as the restructure itself.
Key Takeaways
- In Australia, redundancy is meant to be about the role no longer being required - not about wanting to remove a particular employee.
- A safer redundancy process usually involves planning the restructure, consulting properly, and considering redeployment before confirming the decision.
- If multiple people do similar work, use objective selection criteria and keep records showing how you made the decision.
- Your payment obligations may include notice (or payment in lieu), redundancy pay (if eligible), and unused leave - and the correct amounts depend on the NES, awards, and the employment contract.
- Common risk areas include skipping consultation, re-hiring into a similar role, and miscalculating final entitlements.
- When in doubt, getting advice early can help you restructure with confidence and reduce the risk of disputes.
If you’d like help planning or documenting a redundancy process for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
