What Are Redundancy Entitlements?

Whether you’re an employer planning a restructure or an employee facing change, understanding redundancy entitlements in Australia can remove a lot of stress.

Redundancy is about the role, not the person. When a job is no longer required due to genuine business reasons, certain legal entitlements and processes are triggered under the National Employment Standards (NES) and any applicable award or enterprise agreement.

In this guide, we’ll walk through what counts as a “genuine redundancy”, who is entitled to redundancy pay, what must be paid on termination, and the steps employers should follow to stay compliant.

We’ll also cover small business rules and practical alternatives if you’re trying to avoid redundancies through redeployment or reduced hours. If you need help applying these rules to your situation, we’re here to support you.

What Is a Genuine Redundancy in Australia?

A redundancy is “genuine” when your business no longer needs a role to be performed by anyone because of changes like a downturn in work, a restructure, new technology, relocation or a merger.

It’s not about an individual’s performance. In a genuine redundancy, the job itself disappears or materially changes so it can be done by fewer employees or in a different way.

For a redundancy to be lawful, employers usually need to meet three key obligations:

• Follow any consultation obligations in the relevant award or enterprise agreement (for example, notifying affected employees, discussing measures to mitigate adverse effects, and considering feedback).
• Explore reasonable redeployment opportunities within the business or an associated entity.
• Ensure the reason for ending employment is the role becoming unnecessary, not something improper (like targeting an employee for raising concerns).

If these elements aren’t met, an employee may argue the dismissal was not a genuine redundancy and bring an unfair dismissal claim. Getting tailored redundancy advice early can help you plan the process and reduce risk.

Who Is Entitled to Redundancy Pay (And Who Isn’t)?

Under the NES, most permanent employees with at least 12 months of continuous service are entitled to redundancy pay if their role is genuinely redundant.

However, there are important exceptions.

Employees Who Usually Receive Redundancy Pay

• Full-time and part-time employees with 12 months or more service (scaled based on years of service).
• Employees covered by an enterprise agreement or contract that provides more generous redundancy pay (these terms apply if they are more favourable).

Employees Who Usually Don’t Receive Redundancy Pay

• Small business employees (where the employer has fewer than 15 employees at the time of termination).
• Casual employees.
• Employees with less than 12 months of service.
• Apprentices and trainees (in many cases, depending on the instrument and status).
• Employees on a time-limited (fixed-term) contract that reaches its natural end date.

Keep in mind, even if redundancy pay is not owed, other entitlements will still apply on termination, including notice (or pay in lieu), accrued annual leave, and potentially long service leave depending on state or territory laws.

If you’re an employee and want a quick estimate of statutory redundancy pay based on your service, a simple way to sense-check the numbers is using a redundancy calculator.

What Payments Are Included in Redundancy Entitlements?

Redundancy entitlements in Australia typically bundle several components. What’s payable depends on the employment instrument (award or enterprise agreement), the employment contract, and applicable laws. Here are the common items to consider.

Redundancy Pay (Severance)

Statutory redundancy pay under the NES is calculated using a sliding scale based on the employee’s continuous service (from 4 weeks for 1-2 years up to a capped maximum).

Some enterprise agreements or contracts provide more generous severance, so always check the applicable instrument first.

Notice of Termination or Pay in Lieu

Employees must receive the required notice period or payment in lieu of notice. The minimum notice is set by the NES and increases with the employee’s length of service, with an extra week if the employee is over a certain age and meets service thresholds under the NES.

During the notice period, employers may place an employee on garden leave (where the employee remains employed and paid but is not required to work), provided the contract allows for it and it’s managed appropriately.

Accrued but Unused Annual Leave

Any accrued annual leave must be paid out on termination, including applicable leave loading if it applies under the relevant award or agreement.

Long Service Leave (LSL)

LSL entitlements vary by state and territory. In some jurisdictions, pro-rata LSL may be payable after a minimum period of service if employment ends due to redundancy. Always check the state or territory law where the employee works.

Superannuation

Ordinary-time-earnings super continues as normal during notice (if worked). Whether super is payable on other termination amounts depends on the nature of the payment. For clarity around different components, see how super interacts with termination payments.

Other Contractual or Policy Benefits

Some contracts include enhanced severance, outplacement support, bonuses, or ex gratia amounts. If your business is offering additional benefits, document them clearly and consider using a Deed of Release to finalise all claims.

Tax Treatment

Genuine redundancy payments can have favourable tax treatment up to a calculated limit. Employers should give a detailed termination payment breakdown so employees can confirm the tax treatment with their tax adviser.

Final Pay Timing and Records

Employers need to process all amounts promptly and provide final payslips and termination records. For a step-by-step checklist, it’s useful to review the core elements of final pay under Australian law.

What Process Should Employers Follow?

A compliant redundancy is about both substance and process. Even where the role is genuinely no longer required, skipping consultation or redeployment steps can cause legal risk.

1) Plan and Document the Business Case

Map out why the role is no longer needed, what alternatives you considered, and how the change will be implemented. Keep records of cost pressures, structural changes, or technology shifts that justify the decision.

2) Identify Applicable Instruments and Policies

Confirm which awards or enterprise agreements apply and whether your employment contracts add to or modify minimum entitlements. These instruments set the rules for consultation, selection, notice, leave, and redundancy pay.

3) Consult With Affected Employees

Most modern awards and enterprise agreements require you to notify employees of major workplace changes, provide relevant information (in writing), and discuss measures to avert or mitigate adverse effects (such as redeployment or reduced hours).

Consultation must be genuine, not just a tick-box. Consider feedback and be open to alternatives that achieve the business outcome with less impact where reasonably possible.

4) Explore Reasonable Redeployment

Before confirming redundancy, consider whether suitable roles exist in your business or any associated entities. “Suitable” usually means roles the employee can reasonably perform with their skills and experience (with reasonable training, if appropriate). Keep notes on your search.

5) Confirm Selection Criteria (If Multiple Roles)

If several employees perform similar roles and you only need fewer positions, ensure your selection criteria are objective and non-discriminatory (for example, skills, qualifications and documented performance). Avoid criteria that could amount to adverse action or discrimination.

6) Issue Written Notice and Provide Entitlements

Issue a written termination letter confirming the redundancy, final day of employment, notice or payment in lieu of notice, and all other termination amounts. Provide payslips and any required certificates.

7) Use the Right Documentation

Many employers finalise the exit with a deed confirming settlement terms and the employee’s agreement to confidentiality and post-employment obligations. A practical way to manage paperwork is using a tailored redundancy document suite that aligns with your awards and contracts.

8) Support and Communication

Deliver the message respectfully and provide practical next steps. Consider offering outplacement assistance or EAP access. Clear, compassionate communication reduces risk and supports your team through change.

Small Business Redundancies: Do Different Rules Apply?

Yes. If you are a “small business employer” (fewer than 15 employees, including the dismissed employee and any regular casuals employed on a systematic and regular basis), redundancy pay under the NES generally doesn’t apply.

However, small businesses still have other obligations:

• Provide the minimum notice (or pay in lieu).
• Consult under any applicable award or enterprise agreement.
• Pay out accrued annual leave and any applicable long service leave.
• Ensure the redundancy is genuine and non-discriminatory.

Small business employers often have tighter margins and fewer roles to redeploy, so planning, documentation and open communication are especially important.

Alternatives to Redundancy: Can You Change Hours or Roles Instead?

Redundancy is not always the only option. If you’re trying to avoid job losses, consider lawful alternatives that align with your contracts and awards.

Reducing Hours or Changing Rosters

Reducing hours or varying rosters usually requires employee agreement and must comply with the applicable award or enterprise agreement. There are also consultation requirements. For a practical overview of how to implement this lawfully, see the guide to reducing employee working hours.

Redeployment

Redeployment into a suitable role (possibly with training) can be a fair and lawful way to retain talent while achieving cost savings. Keep records of all roles considered and the reasons for any decisions.

Fixed-Term or Project Roles

If a role is tied to a project or a grant, ensure your contracts reflect that. When a fixed-term contract naturally ends, redundancy pay generally doesn’t apply. If you’re assessing whether to end early, consider your obligations carefully.

Standing Down vs Redundancy

Standing down is only available in narrow circumstances (for example, when an employee cannot usefully be employed due to a stoppage of work for causes beyond your control). It’s not a substitute for redundancy when work has simply reduced or the business has restructured; treating stand downs incorrectly can increase legal exposure.

Medical Non-Capacity and Performance Issues

Ending employment due to medical incapacity or performance has different legal processes and risks. Don’t use redundancy to avoid those processes. If medical or performance is the issue, follow the appropriate steps for that circumstance instead of redundancy.

When to Get Help

If you’re unsure whether redundancy is the right path, a short consultation can save time and reduce risks. Our team can help you pressure-test your plan, check instruments, and sequence the steps for compliance-focused execution. When you’re ready, we can also prepare or review your termination letters and redundancy advice documents so you can move forward confidently.

FAQs About Redundancy Entitlements

How Do You Calculate Redundancy Pay?

Redundancy pay under the NES is based on years of continuous service and the employee’s base rate of pay for ordinary hours. If an enterprise agreement or contract offers a more generous formula, that applies. If you’re cross-checking your numbers, a quick way to sense-check is using a redundancy calculator.

Do Employees Accrue Leave During Notice?

If an employee works out their notice, usual accruals apply. If you provide pay in lieu, accruals normally stop on the termination date (because there’s no ongoing employment). Make sure your payroll settings reflect the correct approach.

Do You Pay Super on Redundancy?

Super is payable on ordinary time earnings during worked notice. Whether it’s payable on other termination amounts depends on the nature of the payment. This is addressed in more detail in guidance on termination payments.

What About Sick Leave or Personal Leave?

Unused paid personal/carer’s leave is not paid out on termination under the NES. However, awards, agreements or contracts may include extra benefits. If you’re managing overlap between redundancy and absences, it helps to understand how redundancy interacts with illness and carers’ responsibilities under your instruments.

What Paperwork Do We Need?

At a minimum: written notice, final payslip, and termination calculations. Many employers also use a deed to finalise obligations and protect confidentiality and IP. Having a structured redundancy document suite keeps everything consistent and compliant.

Key Takeaways

• A redundancy is genuine when the job is no longer required due to business changes, and you’ve consulted and considered redeployment.
• Most permanent employees with at least 12 months’ service receive redundancy pay, except small business employees and other specific exclusions.
• Termination entitlements typically include redundancy pay, notice or payment in lieu of notice, accrued annual leave, any applicable long service leave, and correctly handled super and tax.
• Follow a clear process: plan the business case, check instruments, consult, consider redeployment, confirm selection criteria, issue written notice, and process final pay correctly.
• Small businesses (fewer than 15 employees) are usually exempt from redundancy pay, but all other termination obligations and consultation duties still apply.
• Consider alternatives such as lawful reducing employee working hours or redeployment before proceeding with redundancies.
• Tailored support and well-drafted documents - like a practical redundancy document suite and targeted redundancy advice - help you stay compliant and minimise risk.

If you’d like a consultation about redundancy entitlements or help preparing compliant documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.