Redundancy,  according to Australian employment law, occurs when an employer no longer requires a particular job to be performed by anyone due to operational changes in the business. 

This may result from restructuring, downsizing, technological change, or business closure. When a position becomes redundant, the employee is entitled to specific rights and payments as prescribed by the Fair Work Act, modern awards, enterprise agreements, or employment contracts.

Definition and types of redundancy

Genuine redundancy

Under the Fair Work Act 2009, a genuine redundancy occurs when:

• The employer no longer requires the job to be performed by anyone because of operational changes
• The employer has complied with any consultation obligations in the applicable modern award or enterprise agreement
• It was not reasonable in the circumstances to redeploy the employee within the employer’s enterprise or an associated entity

Voluntary redundancy

• Employee voluntarily accepts an offer to terminate employment
• Usually involves enhanced redundancy packages as an incentive
• Often used when employers need to reduce workforce but want to minimise forced redundancies
• Employee maintains entitlement to redundancy pay

Forced redundancy

• Employer selects which positions and employees will be made redundant
• Must follow fair and objective selection criteria
• Subject to consultation requirements
• May be challenged if not a genuine redundancy

Legal framework in Australia

Fair Work Act 2009

• Establishes National Employment Standards (NES) including redundancy pay
• Defines criteria for genuine redundancy
• Provides unfair dismissal exemption for genuine redundancies
• Outlines consultation requirements

Modern awards and enterprise agreements

• May contain additional provisions beyond NES
• Specify consultation processes for workplace change
• May provide for redundancy pay in excess of NES minimums
• Can include industry-specific schemes

Employment contracts

• May contain enhanced redundancy entitlements
• Cannot provide less than statutory minimums
• Might include specific consultation procedures
• May define selection criteria for redundancies

Entitlements

Redundancy pay (Severance pay)

Based on continuous service with the employer:

• 1-2 years: 4 weeks’ pay
• 2-3 years: 6 weeks’ pay
• 3-4 years: 7 weeks’ pay
• 4-5 years: 8 weeks’ pay
• 5-6 years: 10 weeks’ pay
• 6-7 years: 11 weeks’ pay
• 7-8 years: 13 weeks’ pay
• 8-9 years: 14 weeks’ pay
• 9-10 years: 16 weeks’ pay
• 10+ years: 12 weeks’ pay (reduced due to qualification for long service leave)

Notice period or Payment in lieu

Based on length of continuous service and age:

• Less than 1 year: 1 week
• 1-3 years: 2 weeks
• 3-5 years: 3 weeks
• More than 5 years: 4 weeks
• Plus 1 week if employee is over 45 years old and has completed at least 2 years of service

Other entitlements

• Accrued annual leave (paid at full rate including leave loading)
• Accrued long service leave (subject to state/territory legislation)
• Accrued time in lieu or rostered days off
• Pro-rata payment of relevant allowances
• Superannuation contributions on all eligible payments

Exemptions from redundancy pay

Small business exemption

• Businesses with fewer than 15 employees are exempt from paying redundancy pay

Other exemptions

• Employees with less than 12 months continuous service
• Casual employees
• Fixed-term contract employees whose employment ends at the conclusion of the contract
• Employees terminated due to serious misconduct
• Apprentices or trainees whose employment concludes at the end of training agreement
• Certain transferring employees where employment is continuous

Reduction in redundancy pay

Employers can apply to the Fair Work Commission for a reduction in redundancy pay if:

• They find other acceptable employment for the employee
• They cannot pay the full amount due to financial hardship

Redundancy process and best practice

Consultation requirements

• Discuss the changes with affected employees as soon as a definite decision has been made
• Provide information about the changes and their expected effects
• Consider measures to avoid or minimise negative effects on employees
• Consider employee suggestions about the changes

Selection criteria

• Must be fair, objective, and non-discriminatory
• May include factors such as skills, qualifications, performance, disciplinary record
• Last-in, first-out (LIFO) sometimes used but not required
• Should be transparent and consistently applied

Redeployment considerations

• Identify alternative positions within the organisation or associated entities
• Consider reasonable modifications to positions to accommodate employee
• Assess employee’s skills, qualifications, and experience for alternative roles
• Document redeployment efforts

Documentation best practices

• Record business reasons for redundancy
• Document consultation process
• Maintain evidence of selection criteria application
• Keep records of redeployment efforts
• Provide written notification of redundancy

Tax treatment of redundancy payments

Tax-free component

• Base amount: $11,591 (for 2023-24)
• Plus $5,797 for each completed year of service
• Indexed annually
• Only applies to genuine redundancy payments, not to other termination payments

Taxable component

• Any amount above the tax-free threshold
• Taxed as an employment termination payment (ETP)
• Different tax rates apply depending on age and amount

Payments not eligible for tax-free treatment

• Payment in lieu of notice
• Annual leave and long service leave payouts
• Gratuity or golden handshake payments
• Payments from non-genuine redundancies

Challenging a redundancy

Unfair Dismissal Claims

• Must be filed within 21 days of dismissal taking effect
• Not available if genuine redundancy criteria are met
• Can challenge if redundancy was not genuine (e.g., if consultation requirements not met)
• Fair Work Commission determines claims

General protections claims

• Available if adverse action taken for prohibited reason
• Protects exercise of workplace rights, discrimination, and temporary absence
• Must be filed within 21 days of dismissal taking effect
• Can proceed to court if not resolved through conciliation

Discrimination claims

• Available if selection based on protected attribute (e.g., age, gender, disability)
• Can be pursued through Australian Human Rights Commission or state/territory equal opportunity commissions
• Different time limits apply depending on jurisdiction

State and territory variations

Long service leave

Different entitlements and transferability provisions across jurisdictions:

• NSW: 2 months after 10 years (pro-rata after 5 years if redundant)
• Victoria: 8.67 weeks after 10 years (pro-rata after 7 years)
• Queensland: 8.67 weeks after 10 years (pro-rata after 7 years if redundant)
• WA: 8.67 weeks after 10 years (pro-rata after 7 years)
• SA: 13 weeks after 10 years (pro-rata after 7 years)
• Tasmania: 8.67 weeks after 10 years (pro-rata after 7 years)
• ACT: 6.066 weeks after 7 years (full entitlement)
• NT: 13 weeks after 10 years (pro-rata after 7 years)

Industry-specific schemes

• Building and construction industry portable redundancy schemes
• Coal mining industry redundancy scheme
• Certain manufacturing industry redundancy funds
• State government sector arrangements

Redundancy support services

Government assistance

• Centrelink services and income support
• Employment services and job search assistance
• Skills recognition and training programs
• Career transition assistance for older workers

Employer-provided support

• Outplacement services
• Career counselling
• Résumé and interview preparation
• Financial advice
• Employee assistance program (EAP)

Financial considerations

• Centrelink waiting periods for income support
• Superannuation access options
• Impact on government benefits
• Financial planning for redundancy payments

Managing redundancy for employers

Business planning

• Strategic workforce planning
• Alternative cost-saving measures
• Skills retention strategies
• Phased implementation of changes

Supporting remaining staff

• Communication strategies to address survivor syndrome
• Reassurance about future direction
• Redistribution of workload
• Recognition of increased responsibilities

Legal risk management

• Compliance with consultation obligations
• Thorough documentation
• Consistent application of selection criteria
• Consideration of discrimination risks

Recent developments and trends

COVID-19 impact

• JobKeeper enabling stand down provisions
• Temporary changes to consultation requirements
• Increase in restructuring and redundancies across industries
• Greater focus on remote work capabilities affecting organisational structures

Automation and technology

• Changing skill requirements leading to structural redundancies
• New roles emerging as others become obsolete
• Greater emphasis on retraining and upskilling
• Technological redundancy as a growing trend

Case law developments

• Recent Fair Work Commission and court decisions affecting redundancy interpretation
• Evolving standards for consultation requirements
• Clarification of redeployment obligations
• Interpretation of genuine redundancy provisions