An Employer’s Guide To Voluntary & Forced Redundancies

When your business needs to restructure, reduce costs or change direction, letting people go is one of the hardest decisions you’ll make. Redundancy is sometimes the right step, but it has to be handled carefully to stay compliant with Australian law and to treat your team with respect.

In this guide, we’ll walk you through voluntary and forced redundancies in Australia - what they mean, when they’re lawful, and how to manage the process end-to-end. We’ll also cover entitlements, consultation and communication tips, plus practical steps to reduce risk and avoid unfair dismissal or discrimination claims.

If you’re feeling overwhelmed, that’s normal. With a clear plan and the right documents, you can run a lawful and compassionate process that protects your business and supports your people.

What Is Redundancy In Australia?

Redundancy happens when a job is no longer needed by the business - it’s the role that’s redundant, not the person. Common reasons include restructures, new technology, outsourcing, loss of a major client, or closing a location or department.

For most employees covered by the national workplace relations system, “genuine redundancy” has a specific legal meaning. It isn’t about performance or conduct; it’s about the role truly disappearing or changing so substantially that it no longer needs to be done by anyone at the business.

A genuine redundancy generally requires three things:

• The job is no longer required due to operational changes.
• You have complied with any consultation obligations in an applicable award or enterprise agreement.
• Reasonable redeployment options were considered before termination.

Voluntary Vs Forced Redundancy

There are two common ways to approach redundancies:

Voluntary Redundancy

A voluntary redundancy (often offered as an “expression of interest”) invites eligible employees to nominate themselves to exit with a redundancy package. You’re not obliged to accept every expression of interest - you’ll still need to ensure business continuity and apply objective criteria if demand exceeds the roles available for redundancy.

Why employers use it:

• Can reduce the need for forced redundancies.
• Often perceived as fairer and less disruptive to morale.
• May deliver faster outcomes when handled transparently.

Key considerations:

• Define eligibility, timing, package terms and the approval process upfront.
• Make it clear that nominations may be refused based on business needs.
• Ensure the program doesn’t inadvertently discriminate (e.g., on age, disability, parental status).
• Keep consultation obligations in mind - a voluntary program doesn’t replace required consultation under an award or enterprise agreement.

Forced Redundancy

Forced redundancies occur when you select specific roles for redundancy after consultation. This is common when operational changes mean you can’t keep certain positions even if no one volunteers.

Good practice includes objective selection criteria (skills, qualifications, location, documented performance metrics relevant to the role) and careful communication about the business rationale. If a selection pool exists (e.g., multiple people doing substantially the same job), apply criteria consistently, document your reasoning, and consider reasonable redeployment options before final decisions.

When Is A Redundancy Genuine?

Whether a redundancy is “genuine” is critical. If it isn’t, your business could face an unfair dismissal claim. Under the Fair Work Act, the benchmark is set out in section 389, and you’ll want to satisfy all three limbs: the role is no longer required, consultation obligations were met, and redeployment was genuinely considered.

Role No Longer Required

Be able to explain the operational reason in plain terms - for example, automating a process, merging teams, or ceasing a service line. Keep board or management papers and structure charts that evidence the change.

Consultation Requirements

If a modern award or enterprise agreement applies, it will usually set out how and when to consult, including providing information about the proposed changes and genuinely considering employee feedback. Skipping this step can render a redundancy non-genuine even if the role is genuinely no longer needed.

Redeployment

You must consider whether a substantially similar or suitable vacant role exists in your business (or associated entities, if relevant), and whether training could reasonably help the employee transition. Keep notes of what you checked, what roles were considered and why they weren’t suitable.

Even where a redundancy is genuine, the dismissal can still be challenged as harsh, unjust or unreasonable (see section 387 factors), so a fair process and respectful communications remain essential.

Step-By-Step Redundancy Process For Employers

Every business is different, but this framework will help you run a compliant and humane process.

1) Plan The Business Case And Structure

• Define the operational change: what’s changing and why?
• Map the “before and after” org chart to show impacted roles.
• Identify any applicable awards or enterprise agreements and the consultation clauses you must follow.
• Draft a timeline for consultation, consideration, decisions and implementation.

At this early stage, it’s wise to seek tailored Redundancy Advice to stress-test your plan and reduce legal risk.

2) Set Objective Selection Criteria (If Needed)

If multiple employees hold similar roles, define objective criteria, such as essential skills, qualifications, inherent requirements, location and documented performance against role-specific metrics. Avoid criteria that could be discriminatory (including indirect discrimination).

3) Consult With Affected Employees

• Start with a meeting to outline the proposal, business rationale and potential impacts.
• Provide written information and invite feedback, ideas to mitigate impact, or alternatives to redundancy.
• Offer a reasonable period for response and genuinely consider submissions.

If you’re running a voluntary program, share clear eligibility and package terms during consultation so employees can make informed choices.

4) Consider Redeployment

Look for suitable roles in the same location or other sites, at similar seniority and pay (with reasonable training if needed). Keep records of the roles you assessed, interviews offered and outcomes. Redeployment interviews should be genuine, not a box-ticking exercise.

5) Decide And Notify

Once consultation closes and redeployment is exhausted, confirm decisions in writing. Issue outcome letters that explain the business reason, the consultation process undertaken, and the effective date. If you are offering a package that includes an ex gratia amount or post-employment obligations, you may also provide an Employee Separation Agreement for review.

6) Calculate And Pay Entitlements

Redundancy pay, notice (or pay in lieu), accrued annual leave and, in some cases, long service leave may be owing. Use your applicable award, enterprise agreement and the National Employment Standards as your starting point. For budgeting and accuracy, this resource on how to calculate a redundancy payment is a helpful guide.

If you can’t provide working notice, consider Payment in Lieu of Notice and ensure calculations align with applicable instruments. Document the breakdown clearly in the final pay letter.

7) Finalise Documentation And Offboarding

• Provide termination letters, statements of service where appropriate, and any required forms (for Centrelink, you’ll need to issue an Employer Separation Certificate).
• Confirm return of property and system access offboarding.
• Offer EAP/support information if available, and communicate respectfully with remaining staff to manage morale.

To streamline paperwork and reduce errors, many employers use a tailored Redundancy Document Suite, covering scripts, letters and agreements aligned with your awards and processes.

8) Keep Clear Records

Maintain a secure file of the business case, consultation notes, redeployment checks, selection criteria and decision rationale. Good records are your best defence if a claim is made later.

Risk Hotspots To Watch

• Failure to consult: Not following award/EA consultation can undermine a genuine redundancy.
• Selection bias: Using subjective or discriminatory criteria, or targeting someone because they took leave or raised issues, can lead to adverse action claims.
• Sham redundancy: Eliminating a role then rehiring the same position shortly after can be challenged.
• Insufficient redeployment effort: Not exploring reasonable alternatives, including retraining, risks non-genuine redundancy findings.
• Communication missteps: Inconsistent or unclear messaging can damage trust and increase disputes.

Entitlements, Notice And Payments

Getting entitlements right is critical for compliance and for maintaining goodwill. Here are the key components to consider.

Redundancy Pay

Under the National Employment Standards, employees (with some exceptions like small business employers, casuals and certain fixed-term roles) may be entitled to redundancy pay based on continuous service. Check the NES table, award or enterprise agreement - the highest entitlement prevails.

Notice Of Termination

Employees are entitled to notice (or pay in lieu), scaled by service length and age (a small additional week of notice applies if the employee is over a certain age and meets the service threshold). If you opt to pay out notice instead of having the employee work it, ensure your calculations for payment in lieu of notice are correct and clearly itemised in the termination letter and final payslip.

Accrued Leave And Other Entitlements

• Annual leave: Pay out accrued but unused annual leave, plus leave loading if applicable under an award or agreement.
• Long service leave: State and territory laws govern eligibility and payout; check the relevant jurisdiction for pro-rata rules.
• Superannuation: Super is not generally payable on redundancy pay, but check whether it applies to notice paid in lieu and other components (see your instrument and ATO guidance).

Tax, Ex Gratia And Deeds

If you’re offering an ex gratia amount (a discretionary payment beyond minimum entitlements), it’s common to condition this on signing a separation deed that includes a release of claims, confidentiality and post-employment obligations. For more complex scenarios, a carefully drafted Deed of Release and Settlement can provide additional certainty. Always allow the employee reasonable time to obtain advice before signing.

Communication Tips That Matter

• Be transparent about the business rationale and the process you followed.
• Use plain English in meetings and letters; avoid jargon.
• Deliver news in person where possible, followed by written confirmation.
• Offer reasonable support (references, EAP, time to attend interviews during notice) to help people transition.

Voluntary Redundancy Program Design Essentials

If you’re designing a voluntary program, set out a clear written framework covering:

• Eligibility: Roles or business units in scope, and any exclusion criteria.
• Package: Minimum entitlements plus any enhancements, and how they’re calculated.
• Nomination process: How to express interest, the approval criteria, and decision timelines.
• Approvals: A reserve right to decline nominations to preserve critical skills or roles.
• Documentation: Standard letters and, where appropriate, a separation agreement for voluntary exits.

Even with a voluntary program, remember you still need to consult where required and consider redeployment for any employees who do not or cannot volunteer but whose roles may be impacted.

Post-Redundancy Housekeeping

• Confirm final pay, itemised components, and timing.
• Issue required paperwork, including the Employer Separation Certificate where needed.
• Update internal records, revoke access, and collect equipment.
• Communicate respectfully with remaining staff about the restructure to steady culture and morale.

Key Takeaways

• Redundancy is about the role - not the person - and a “genuine redundancy” requires operational need, proper consultation and genuine redeployment consideration.
• Offer voluntary redundancy where it suits your business, but set clear program rules and keep consultation and anti-discrimination obligations front of mind.
• Follow a documented, step-by-step process: plan the business case, consult, apply objective criteria, check redeployment, decide and notify, then calculate and pay entitlements accurately.
• Get the paperwork right: use clear letters, agreements and checklists; a tailored Redundancy Document Suite helps keep everything consistent and compliant.
• Calculate entitlements carefully, including redundancy pay, notice (or payment in lieu), and accrued leave - resources on redundancy payment calculation are a useful starting point.
• Even if the redundancy is genuine, poor process can still lead to claims under the section 387 factors - communicate clearly, consult in good faith, and document decisions.
• For complex restructures or voluntary programs, early Redundancy Advice can reduce risk and help you implement a fair, defensible process.

If you’d like a consultation on planning or carrying out voluntary or forced redundancies in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.