Workplace Relations
Redundancy in Australia: What Employers Need to Know
Making a role redundant is one of the most legally sensitive decisions an employer can make. Get it wrong and you face unfair dismissal claims, penalties, and costly litigation. This guide walks you through the genuine redundancy requirements, consultation process, and pay entitlements so you can manage restructures with confidence.
What the Law Says
Redundancy is governed by the Fair Work Act 2009, specifically:
- Section 119 — Sets out the redundancy pay entitlements under the National Employment Standards, ranging from 4 to 16 weeks based on length of service.
- Section 389 — Defines "genuine redundancy" with three strict requirements: the job is no longer required, consultation obligations have been met, and redeployment was not reasonable.
- Section 121 — Exempts small business employers (fewer than 15 employees) from NES redundancy pay obligations.
- Section 117 — Requires employers to give minimum notice of termination (or payment in lieu) based on years of service.
Additionally, most modern awards contain specific consultation clauses that must be followed when implementing major workplace changes, including redundancies.
Redundancy Pay Entitlements
Under the NES, employees are entitled to redundancy pay based on their period of continuous service:
| Period of Continuous Service | Redundancy Pay |
|---|---|
| 1 year – 2 years | 4 weeks |
| 2 years – 3 years | 6 weeks |
| 3 years – 4 years | 7 weeks |
| 4 years – 5 years | 8 weeks |
| 5 years – 6 years | 10 weeks |
| 6 years – 7 years | 11 weeks |
| 7 years – 8 years | 13 weeks |
| 8 years – 9 years | 14 weeks |
| 9 years – 10 years | 16 weeks |
| At least 10 years | 12 weeks |
Note: The reduction from 16 weeks to 12 weeks at 10 years is built into the NES scale.
What Employers Must Do
1. Document the business reason
Record the operational changes that make the position genuinely redundant. This might include restructures, technology changes, outsourcing, or a downturn in business.
2. Consult with affected employees
Follow the consultation clause in your modern award or enterprise agreement. Notify employees as soon as a definite decision is made and discuss ways to mitigate the impact.
3. Consider redeployment
Before finalising the redundancy, genuinely consider whether the employee could be redeployed to another role within the business or any associated entity.
4. Provide written notice
Give the employee the required notice period (1-5 weeks depending on service) or payment in lieu. Employees over 45 with 2+ years of service receive an additional week.
5. Calculate and pay entitlements
Pay all owed entitlements on the last day including redundancy pay, notice pay, unused annual leave, and unused long service leave (where applicable).
6. Keep detailed records
Document every step of the process including the business case, consultation records, redeployment considerations, and all correspondence with the affected employee.
Common Mistakes and How to Avoid Them
Mistake: Using redundancy to dismiss a poor performer
Fix: If the real reason is performance, use the performance management process instead. If the FWC finds the role still exists, the redundancy will not be genuine.
Mistake: Skipping the consultation process
Fix: Check your award or enterprise agreement for specific consultation requirements. Even a brief, genuine consultation is better than none — but thorough is best.
Mistake: Not considering redeployment
Fix: Document what alternative roles were considered, even if none were suitable. A failure to consider redeployment can invalidate the redundancy.
Mistake: Selecting employees based on protected attributes
Fix: Never select employees for redundancy based on age, gender, disability, or other protected attributes. Use objective, documented criteria.
Mistake: Rehiring for the same role too soon
Fix: If you need to fill a similar role shortly after making someone redundant, it undermines the genuineness of the redundancy. Wait and ensure any new role is substantially different.
Penalties and Consequences
If a redundancy is found not to be genuine, the consequences can be severe:
- Unfair dismissal compensation — up to 26 weeks' pay (capped at around $87,100).
- Reinstatement orders — the FWC can order you to re-employ the dismissed worker.
- General protections claims — if the redundancy was actually motivated by a prohibited reason, penalties up to $93,900 (individual) or $469,500 (company) apply.
- Adverse action claims — if the selection criteria breached anti-discrimination laws, additional penalties and compensation apply.
When to Get Professional Help
Redundancy is high-risk. Consider engaging a qualified HR consultant when you:
- Are planning a restructure affecting multiple roles
- Are unsure whether a redundancy would be considered "genuine"
- Need help managing the consultation process
- Have received an unfair dismissal claim following a redundancy
- Want to ensure your selection criteria are objective and defensible
Jordan Firme Business Consultants helps employers plan and execute redundancies that are compliant, compassionate, and legally defensible.
Frequently Asked Questions
A redundancy is genuine when the employer no longer requires the job to be done by anyone because of changes in operational requirements, the employer has complied with any consultation obligations in the applicable modern award or enterprise agreement, and it would not have been reasonable to redeploy the employee within the business or an associated entity.
Redundancy pay under the NES ranges from 4 weeks pay (1-2 years of service) up to 16 weeks pay (9-10 years of service). After 10 years, the entitlement remains at 12 weeks. Small businesses with fewer than 15 employees are exempt from paying redundancy pay under the NES.
No. Under Section 121 of the Fair Work Act, employers with fewer than 15 employees at the time of dismissal are exempt from the NES redundancy pay provisions. However, you must still check your applicable modern award or enterprise agreement, as some contain separate redundancy pay obligations.
If the redundancy is genuine, it is a complete defence to an unfair dismissal claim. However, if the FWC finds the redundancy was not genuine — for example, the role still exists, consultation was not conducted, or redeployment was reasonable — the employee may succeed in their claim.
Most modern awards require employers to notify affected employees as soon as practicable after making a definite decision to make redundancies, discuss the changes with employees, consider employee suggestions to avoid or minimise the impact, and provide information about the changes in writing.
This is a significant risk. If you make an employee redundant and then hire someone else to perform substantially the same role shortly after, it suggests the redundancy was not genuine. The FWC looks at the substance of the role, not just the job title. Generally, you should wait at least 6-12 months and ensure the new role is genuinely different.
Planning a Restructure?
Our HR consultants can help you plan and execute redundancies that meet all legal requirements and minimise risk.
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