Redundancy is one of the toughest parts of running a small business in the community services space. Even when you’ve done everything “right”, it can still feel personal - because your team matters, and you’re usually operating with tight budgets, changing funding models, and unpredictable demand.
If your employees are covered by the Social, Community, Home Care and Disability Services Industry Award 2010 (often called the SCHADS Award) (as varied from time to time), you also need to make sure you follow the right process and pay the right entitlements when a role becomes genuinely redundant.
This guide breaks down what SCHADS Award redundancy typically involves for employers in Australia, including what a “genuine redundancy” looks like, what consultation steps you should take, how redundancy pay and notice usually work, and the common compliance traps we see small businesses fall into.
Quick note: the SCHADS Award is updated from time to time, and redundancy is also heavily shaped by the National Employment Standards (NES) under the Fair Work Act. If your situation is complex (for example, you have multiple sites, government funding conditions, or you’re changing service delivery models), it’s worth getting tailored advice early.
What Does “Redundancy” Mean Under The SCHADS Award In 2023?
At a practical level, redundancy happens when you no longer need a particular job to be performed by anyone.
For small business employers, redundancy often arises due to:
- loss or reduction of funding;
- program or service closure;
- restructure (for example, consolidating roles or changing how services are delivered);
- site closure or relocation;
- outsourcing or bringing work in-house;
- changes to client demand (for example, reduced hours of home care services).
Redundancy Is About The Role - Not The Person
This is one of the most important principles to keep in mind. If the “issue” is performance, conduct, or capability, redundancy is usually the wrong process.
Redundancy is about the job itself no longer being required. If you still need the role, but you’d prefer someone else to do it, that’s not redundancy - and it can create significant risk (including unfair dismissal risk).
How The SCHADS Award Fits In
The SCHADS Award requirements around redundancy work alongside (and often point back to) the NES redundancy framework.
In other words:
- the NES sets out minimum entitlements like redundancy pay and notice of termination; and
- the SCHADS Award adds award-specific terms you must follow (including consultation requirements for major workplace change, and other employment conditions that may be relevant).
If there’s inconsistency, the rule of thumb is that you must comply with whichever term gives the employee the greater entitlement (subject to how the law applies).
When Is It A “Genuine Redundancy” (And Why Does It Matter)?
When employers search for SCHADS redundancy, what they often really want to know is: “How do we do this properly, so we don’t end up in a dispute?”
A “genuine redundancy” is important because it’s a key concept used in unfair dismissal claims. If a redundancy isn’t “genuine”, a dismissal may be challenged as unfair.
Common Elements Of A Genuine Redundancy
While every situation is different, a redundancy is more likely to be genuine when:
- the role is no longer required (because of operational changes);
- you have complied with consultation obligations (including any applicable award consultation clause); and
- redeployment has been genuinely considered (for example, whether there is a suitable alternative role within your organisation or associated entities, where relevant).
Red Flags That Can Undermine A Redundancy
Some patterns that commonly create problems:
- You make someone redundant, then advertise a very similar role shortly after.
- You “select” one employee for redundancy without a clear operational reason (especially where multiple people do the same job).
- You treat redundancy like a quick exit strategy without consultation or redeployment checks.
- You don’t document the business reasons for the restructure.
If you’re not sure whether redundancy is the best fit (or whether you’re actually dealing with performance or misconduct), it may be worth speaking with an employment lawyer about redundancy before you start the process.
What Consultation Steps Do Employers Need To Follow Under The SCHADS Award?
Consultation is one of the biggest compliance traps in any redundancy process.
Under modern awards (including the SCHADS Award), there are usually consultation requirements when you’re introducing a major workplace change that’s likely to have significant effects on employees - and redundancy is a classic example of that.
What Consultation Usually Looks Like In Practice
While the exact steps depend on your circumstances, a compliant consultation process often includes:
- Notifying affected employees that you’re considering changes and explaining what’s changing and why.
- Providing relevant information about the change (for example, restructure proposal, expected timing, impacts on roles/hours/locations).
- Inviting feedback and genuinely considering it (this is not a “tick-the-box” meeting).
- Considering measures to avert or minimise the impact (for example, alternative duties, reduced hours by agreement, redeployment, training).
- Keeping records (meeting notes, written communications, organisational charts, role comparisons).
What To Say (And Not Say) During Consultation
In a small business, it’s easy to accidentally communicate that the decision is already made. But if consultation is required, you should generally avoid language like “we’ve decided you’re redundant” before you’ve completed the consultation process.
Instead, you might communicate that:
- you are proposing a restructure due to business reasons;
- the employee’s role may be impacted;
- you want to consult and explore options, including redeployment; and
- no final decision has been made until consultation is complete.
If you are also managing performance concerns in parallel, take extra care - mixing issues can create confusion and risk.
How Do Redundancy Pay, Notice, And Final Pay Work For SCHADS Redundancy?
Once redundancy is confirmed, employers usually need to think about three separate categories of entitlements:
- Redundancy pay (a severance-style payment based on service, if applicable);
- Notice of termination (or payment in lieu of notice); and
- Final pay items (like outstanding wages, accrued annual leave, and other owed amounts).
1) Redundancy Pay (NES)
Redundancy pay is typically set by the NES and is calculated based on the employee’s period of continuous service. The longer the service, the higher the redundancy pay (up to the cap set by the NES).
If you want a rough estimate as a starting point, you can use a redundancy calculator to understand how redundancy pay is typically approached in Australia.
Important: redundancy pay rules can be affected by a number of factors, including whether you’re a small business employer (see below), the employee’s length of service, and whether any exemptions apply.
2) Notice Of Termination (Or Payment In Lieu)
In most redundancies, you must provide the employee with a minimum notice period (based on the NES, and sometimes increased by award terms) or pay them instead of requiring them to work the notice period.
If you plan to end employment immediately, you’ll usually be looking at payment in lieu of notice as part of the final pay.
Notice requirements can be affected by things like:
- the employee’s length of service;
- their age and service combination (in some cases);
- what the SCHADS Award requires; and
- what the employment contract says (as long as it doesn’t undercut the minimums).
3) Final Pay: Wages, Leave, And Other Entitlements
Final pay is not just redundancy pay. It usually includes:
- ordinary wages up to the termination date;
- any applicable allowances;
- accrued but unused annual leave;
- notice (if paid out rather than worked);
- redundancy pay (if payable); and
- any other contractual or policy-based entitlements.
For many SCHADS employers (especially those operating 24/7 rosters), final pay can be tricky if you have overtime, broken shifts, allowances, or time-in-lieu arrangements. It’s worth checking your process carefully and using a clear checklist for calculating final pay.
If the employee resigns during the process or you agree to an earlier end date, you should also be careful about how you calculate unused leave and final entitlements. As a helpful reference point, many businesses look at how annual leave on resignation works, as the principles around paying out accrued leave are often similar in a termination context.
Are There Any Exemptions Or Special Rules For Small Business Employers?
Possibly - and this is another area where employers can get caught out if they assume the rules are the same for everyone.
Small Business Redundancy Pay Exemption
Under the Fair Work Act, a “small business employer” is generally an employer with fewer than 15 employees (counted in a specific way).
Small business employers are often exempt from having to pay redundancy pay under the NES.
However:
- you may still need to give notice (or pay in lieu);
- you still need to pay accrued entitlements like annual leave;
- you may still have award consultation obligations; and
- you still need the redundancy to be genuine to reduce unfair dismissal risk.
Also, some contracts, policies, enterprise agreements, or other industrial instruments can create redundancy-like payments even if the NES exemption applies. This is why it’s important to review your documents before you commit to numbers.
Fixed-Term, Maximum-Term, And Casual Arrangements
SCHADS businesses often use a mix of permanent staff, casuals, and fixed-term arrangements (for example, to align with program funding).
Redundancy pay may not apply in the same way to:
- genuine casual employees (but be careful - “casual” status has specific legal meaning);
- employees on certain fixed-term arrangements (depending on the contract and the circumstances of the end of employment).
If your employment paperwork isn’t clear, it’s worth reviewing your Employment Contract templates and actual signed agreements before you start the redundancy process, so you’re working from the correct baseline.
Practical Steps To Run A Compliant SCHADS Redundancy Process
When you’re dealing with SCHADS Award redundancy in 2023, having a structured process helps you keep things consistent, fair, and defensible if your decision is later questioned.
Here’s a practical approach many small businesses follow.
Step 1: Document The Business Case
Before speaking to the employee, make sure you can clearly explain:
- what has changed operationally (funding, service model, client demand, etc.);
- why that change means the role (or part of the role) is no longer required; and
- when the change is expected to happen.
Even a short internal memo or restructure summary can be valuable later.
Step 2: Identify Who Is Affected (And Why)
If only one role is impacted, this can be straightforward. But if multiple people perform similar duties, you’ll generally need a fair selection method.
Common selection criteria may include:
- skills and qualifications required for ongoing work;
- client continuity considerations;
- operational requirements across rosters/locations;
- comparative cost (used carefully and not in a discriminatory way).
Be cautious: selection criteria that directly or indirectly discriminate can create separate legal issues.
Step 3: Consult Properly (Don’t Rush This)
Run a consultation meeting (or meetings) that give the employee a genuine opportunity to respond. Where relevant, allow them to bring a support person.
It can help to provide information in writing and follow up with a written summary of discussions.
Step 4: Consider Redeployment
Redeployment doesn’t mean you must create a job that doesn’t exist. But it does mean you should genuinely consider whether there is a suitable alternative role the employee could reasonably do (with or without reasonable training).
In SCHADS workplaces, redeployment options might include:
- a similar role at another site;
- a modified role with different client allocation;
- a part-time alternative if full-time work is reduced;
- administration/coordination duties if service delivery needs shift.
Step 5: Confirm The Outcome In Writing
If redundancy proceeds, issue a written letter confirming:
- the termination date;
- the reason (redundancy due to operational change);
- the notice period (worked or paid out);
- the breakdown of final entitlements (or when it will be provided); and
- any next steps (return of property, final timesheets, etc.).
Step 6: Pay Correctly And On Time
Underpayment risk is real - especially where there are allowances, overtime, or shift-based entitlements. Use a clear final pay checklist, and make sure payroll understands what needs to be included.
Step 7: Support A Smooth Exit (Without Creating Legal Risk)
Even when redundancy is lawful, how you handle the process matters. A respectful and consistent approach can reduce disputes and protect your culture.
If the employee is upset or challenges the process, avoid turning redundancy into a disciplinary matter unless there’s a separate, clear reason to do so.
Key Takeaways
- SCHADS Award redundancy is usually driven by the NES redundancy framework, alongside SCHADS Award consultation obligations and other award conditions.
- A redundancy should be about the role no longer being required - if it’s performance-related, you may need a different process.
- Consultation is critical: you generally need to inform employees of proposed changes, invite feedback, and genuinely consider ways to reduce the impact.
- Redundancy pay, notice (or payment in lieu), and final pay are different entitlements - and all need to be calculated carefully.
- Small business employers may be exempt from redundancy pay in some cases, but you’ll often still need to provide notice, pay accrued leave, and run a fair process.
- Having clear contracts and a structured redundancy process can significantly reduce your legal risk and make a difficult transition more manageable.
If you’d like help managing a SCHADS redundancy process or reviewing your redundancy documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
