The redundancy process in Australia is the set of steps an employer follows to end a job that is no longer needed: confirm the role has genuinely gone, consult the affected employee, check for redeployment, then give written notice and pay the correct entitlements. Skip a step and the dismissal can stop counting as a genuine redundancy.
Nobody starts a business hoping to run a redundancy process. So most owners put it off, then squeeze it into one awkward meeting once the numbers force their hand. That rushed meeting is where the legal risk lives. Done in order, this is a few weeks of structured conversations. Not a court case waiting to happen.
- Redundancy is about the role, not the person. If the job carries on under a new title, or someone else ends up doing it, it isn’t a genuine redundancy.
- Consult before anything is final. Most modern awards and enterprise agreements require it, and skipping it can turn a redundancy into an unfair dismissal claim.
- Redundancy pay runs from 4 to 16 weeks. It’s owed after 12 months of continuous service unless you’re a small business (fewer than 15 employees) or another exception applies.
- Notice is separate and always applies. It’s 1 to 4 weeks, plus an extra week for employees over 45 with at least 2 years’ service, even in a small business.
- Genuine redundancy pay is partly tax-free. For 2026-27 the limit is $13,598 plus $6,801 for each completed year of service.
What makes a redundancy genuine under the Fair Work Act?
Under section 389 of the Fair Work Act 2009 (Cth), a dismissal is a genuine redundancy only if all three of these are true:
- You no longer need anyone to do the job because of changes in the operational requirements of your business.
- You’ve met any obligation in an applicable modern award or enterprise agreement to consult about the redundancy.
- It wouldn’t have been reasonable in all the circumstances to redeploy the employee within your business or an associated entity.
The first test trips up more owners than the other two. “No longer required” means the duties have disappeared or been absorbed by others. It doesn’t mean you’d prefer someone cheaper in the seat. If you’re already picturing a similar hire in six months, stop and rethink.
Redundancy is also not a shortcut around performance management. When the real issue is how someone does the job, the redundancy label falls apart the moment a tribunal asks who is doing the work now.
When is redundancy the right tool, and when is it the wrong one?
Before you start any redundancy process, check you’re solving the right problem. This is the sorting exercise we’d do with you on a first call.
| Your situation | Is it a redundancy? | Better path |
|---|---|---|
| A restructure, closure or new technology means the role won’t exist | Yes | Run the full redundancy process below |
| The work is being split between remaining staff | Usually yes | Document exactly where each duty is going |
| You need fewer people in a group of similar roles | Yes | Add a fair, objective selection step |
| You want to cut someone’s pay or hours but keep the job | No | A negotiated contract variation, with their consent |
| You’re unhappy with performance or conduct | No | Performance management or a disciplinary process |
| An employee has been unwell for a long time | Rarely | Get advice first, because general protections risk is high |
Row four is the one that surprises people. You can’t make a job “redundant” and then offer the same person the same job for less money. That’s a pay cut, and pay cuts need agreement.
What is the redundancy process, step by step?
Here’s the redundancy process we’d walk any employer through. It works for one role or ten. Bigger restructures add extra obligations, which we cover further down.
Step 1: Build and document the business case (before you tell anyone)
Write down what changed, why this role goes, and where its remaining work will sit. Attach the evidence: financials, lost contracts, a before-and-after org chart. Write it as if a Fair Work Commission member will read it. One might.
Then check three documents. Which modern award or enterprise agreement covers the role, and what does its consultation clause say? Does the employment contract promise anything above the minimum? And do you have a redundancy policy that sets expectations your staff will hold you to?
Step 2: Tell the employee their role is at risk
Meet in person and explain the proposal. Follow up in writing the same day or the next with the proposed change, the reasons, the likely effect on them, and an invitation to respond. Let them know they can bring a support person to the next meeting.
Watch your language here. Award consultation clauses kick in once you’ve decided a change is needed, but before you’ve decided the outcome for the person. “We’re proposing to restructure and your role is affected” is right. “We’re letting you go” is not, and it can undo everything that follows.
Step 3: Consult properly and give them time to respond
Consultation means you’re genuinely open to changing your mind. Ask for alternatives and take notes. Reduced hours, a period of leave, a different role or a voluntary exit are all fair game.
How long? For most businesses there’s no fixed legal minimum, but it has to be reasonable. A few business days suits a simple single-role change. A complex restructure needs longer. Holding every meeting on the same afternoon looks like a box-ticking exercise, because it is one.
Step 4: Check redeployment across the whole group
Look for any role the employee could do with their current skills or reasonable retraining. That includes roles in associated entities, like a related company or a sister business. A role can still be suitable if it pays less, sits at a lower level or has different hours. Offer it and let them decide.
Record every role you considered and why it did or didn’t fit. Here’s the part many guides get wrong: if you find the employee other acceptable work and they turn it down, you can apply to the Fair Work Commission to reduce the redundancy pay you owe, in some cases to nil.
Step 5: If several roles are affected, select fairly
When you need three people out of five, use criteria you could defend in writing: skills, qualifications, documented performance and what the business will need next. Apply them the same way to everyone. Never let parental leave, sick leave, age, a workplace complaint or union membership come into it. Those turn a redundancy into a general protections or discrimination claim.
Some employers ask for expressions of interest first. Voluntary redundancy can make the process kinder, but it’s still a redundancy. The role still has to go, the same pay applies, and you can decline a volunteer whose skills you can’t lose.
Step 6: Confirm the outcome in a meeting and in writing
Once you’ve weighed the feedback and redeployment options, meet again to explain the decision. Then give a formal letter covering the outcome, the reasons, the alternatives you considered, the final day, the notice arrangements and every payment with its due date. A redundancy termination letter template keeps that from becoming a blank-page exercise at the worst possible moment.
Deliver it in person. Email or text feels efficient to you and brutal to them.
Step 7: Give notice (or pay in lieu) and process final pay
You can have the employee work out their notice, or end things sooner and pay the notice period instead. If you’re paying it out, a payment in lieu of notice letter records exactly what you’re paying and why. Most modern awards require final pay within 7 days of the last day of work, so line up payroll early.
Step 8: Decide whether you want a deed of release
A deed of release is optional. The employee agrees not to bring claims about the employment or its end, and in return they get something extra. That “something extra” matters. Paying only what they’re already legally owed gives them no reason to sign, and weakens the deed if it’s ever tested.
Offer a genuine ex gratia amount, give them time to get independent advice, and use a deed of release (redundancy) template built for this exact situation.
A realistic redundancy process timeline
| Stage | What you do | Typical timing |
|---|---|---|
| Planning | Business case, award check, cost estimate | Before anyone is told |
| At-risk meeting | Explain the proposal, confirm in writing | Day 1 |
| Feedback window | Consultation meetings, alternatives discussed | Usually 3 to 10 business days |
| Redeployment check | Review and document every possible role | Alongside the feedback window |
| Outcome meeting | Confirm decision, hand over letter | After feedback is genuinely considered |
| Notice period | Worked or paid in lieu | 1 to 5 weeks under the NES |
| Final pay | All entitlements paid | Within 7 days under most awards |
How much redundancy pay do you owe?
The formula is simple: base rate of pay × the number of weeks in the scale below. Base rate means ordinary hours only. Leave out overtime, bonuses, commissions, loadings, allowances and penalty rates.
Continuous service counts from the start date. Most unpaid leave and any unauthorised absence don’t count towards it, although they don’t break the service either.
| Period of continuous service | NES redundancy pay |
|---|---|
| Less than 1 year | Nil |
| At least 1 year but less than 2 years | 4 weeks |
| At least 2 years but less than 3 years | 6 weeks |
| At least 3 years but less than 4 years | 7 weeks |
| At least 4 years but less than 5 years | 8 weeks |
| At least 5 years but less than 6 years | 10 weeks |
| At least 6 years but less than 7 years | 11 weeks |
| At least 7 years but less than 8 years | 13 weeks |
| At least 8 years but less than 9 years | 14 weeks |
| At least 9 years but less than 10 years | 16 weeks |
| 10 years or more | 12 weeks |
Yes, it drops at 10 years. It isn’t a typo. The scale assumes long service leave takes over the heavy lifting at that point, a position that goes back to the 2004 Redundancy Case.
Treat the table as a floor. Your award, enterprise agreement, employment contract or policy may promise more, and the most generous source wins. Senior contracts often carry their own redundancy clause, so read it before you run the numbers. Our guide to how redundancy payments work goes deeper on the calculation.
Who doesn’t get redundancy pay?
- Casual employees, although regular casuals still count when you work out whether you’re a small business.
- Employees engaged for a specified period, task or season, when that period or task simply ends.
- Employees dismissed for serious misconduct.
- Apprentices and trainees engaged only for the duration of their training arrangement.
- Employees who move to a new employer in a transfer of business, where the new employer recognises their service.
- Employees of a small business employer, unless an award, agreement or contract says otherwise.
Separately, you can ask the Fair Work Commission to reduce the amount if you’ve found the employee other acceptable work, or if the business genuinely can’t afford the full payment.
Small business redundancy: the headcount traps
You’re a small business employer if you have fewer than 15 employees at the time you give notice. The count is where people slip up. It includes the person you’re making redundant, anyone else being terminated at the same time, casuals employed on a regular and systematic basis, and employees of any associated entity.
So a café with 12 staff and a related catering company employing 4 isn’t small. And if a larger business has dropped below 15 because of insolvency or bankruptcy, the exemption doesn’t apply at all.
The exemption only covers redundancy pay. Notice, leave payouts, award consultation and unfair dismissal exposure all still apply. More on that in our guide to whether small businesses have to pay redundancy.
What goes into final pay after a redundancy?
Redundancy pay is only one line. Final pay also includes:
- Notice or pay in lieu. 1 week (up to 1 year’s service), 2 weeks (1 to 3 years), 3 weeks (3 to 5 years) or 4 weeks (more than 5 years). Add 1 week if the employee is over 45 with at least 2 years’ service.
- Accrued annual leave. Paid out in full, plus leave loading if the award or contract says loading applies on termination.
- Long service leave. Set by state or territory law. In NSW, pro rata leave is payable after 5 years when the employer ends the employment for a reason other than serious misconduct. In Victoria, pro rata applies after 7 years.
- Outstanding wages and any contractual amounts. Unpaid hours, allowances owed and anything promised in the contract.
Unused personal/carer’s leave (sick leave) is not paid out. Older guides, including an earlier version of this one, got that wrong.
Worked example
Say you’re a NSW business with 20 staff. You’re making an operations coordinator redundant. They’re 48, have 6 years’ service, earn a base of $1,500 a week and have 3 weeks of annual leave banked. You pay the notice out rather than have them work it.
| Component | How it’s worked out | Amount |
|---|---|---|
| Redundancy pay | 11 weeks × $1,500 | $16,500 |
| Pay in lieu of notice | 4 weeks + 1 week (over 45) × $1,500 | $7,500 |
| Annual leave | 3 weeks × $1,500 (plus loading if applicable) | $4,500 |
| Pro rata long service leave (NSW) | About 5.2 weeks for 6 years × $1,500 | $7,800 |
| Total before tax | $36,300 |
The redundancy pay here sits well under the 2026-27 tax-free limit for 6 years’ service ($54,404), so that line is tax-free. The leave components are taxed separately. Illustrative only: your award, contract and state law decide the real figures.
How is redundancy pay taxed, and does super apply?
A genuine redundancy payment is tax-free up to a limit. For 2026-27 that’s $13,598 plus $6,801 for each completed year of service. Anything above the limit is taxed as an employment termination payment at concessional rates. The limit is indexed every 1 July, so check it again if your redundancy process crosses a financial year.
The ATO applies its own genuine redundancy test, which isn’t identical to the Fair Work one. For example, the employee must be dismissed before they reach age pension age. Fail the tax test and the whole payment loses its tax-free portion.
Super guarantee doesn’t apply to the redundancy payment itself. Ask your payroll provider or accountant to report each component separately through Single Touch Payroll. Lumping everything into one line is where a lot of final pays go wrong.
What extra rules apply if you’re making 15 or more people redundant?
Once you’re proposing 15 or more redundancies for economic, technological, structural or similar reasons, two more obligations switch on. You must notify Services Australia in writing as soon as possible and before any dismissals happen. And if even one affected employee is a union member, you must notify and consult with the union.
Miss these and the Fair Work Commission can make orders against the business. At this scale, get a lawyer to map the timeline before the first announcement.
What we see in Lawpath consultations about redundancy
Redundancy questions come to Lawpath’s employment lawyers from both sides of the table. A few patterns keep repeating.
The “redundancy” that’s really a pay cut. A common request is to make someone redundant, then offer them a reduced version of the same job on lower pay or fewer days. Our lawyers point out that if the role substantially continues, it’s hard to call it redundant. The cleaner path is usually a hardship-based contract variation, negotiated without pressure and put in writing. The employee has to agree. You can’t force a pay cut.
“We’re under 15, so we’re safe.” Small business owners often assume no redundancy pay means no risk. The pay exemption is real. The unfair dismissal exposure from a redundancy that isn’t genuine is also real, and it’s the one that costs more.
Redundancies during parental leave. A consistent source of disputes is a role being restructured away while the employee is on parental leave. Under the NES, a returning employee is entitled to their pre-leave position, or a suitable available one if it no longer exists. If the timing looks connected to the leave, expect a general protections claim.
Using redundancy to exit someone who is unwell. We regularly see redundancy, medical incapacity and a negotiated exit all tangled together in one matter. These are different legal pathways. Mixing them up raises the risk of an adverse action claim, so get advice before you choose one.
Deeds of release drafted after the fact. Many deed reviews we see come after the redundancy is already done, with no extra payment on offer. A deed works best when it’s part of the plan from Step 1 and offers real consideration.
What are the most common redundancy process mistakes?
- Backfilling the role. Advertising a similar job a few months later is the fastest way to show the redundancy wasn’t genuine.
- Announcing instead of consulting. A meeting where the decision is already final isn’t consultation, however kindly it’s delivered.
- Forgetting associated entities. Your redeployment search has to cover related companies, not just the one on the payslip.
- Miscounting headcount. Leaving out regular casuals or a related entity’s staff can wrongly put you under the small business line.
- Using the wrong rate. Redundancy pay uses the base rate, but notice and leave payouts may need loadings or allowances under the award.
- Missing the extra week of notice. Employees over 45 with 2 or more years’ service get it, and it’s easy to overlook.
Almost every one of these comes from rushing. Slowing down by a week costs far less than defending a claim.
Frequently asked questions about the redundancy process
How long does the redundancy process take in Australia?
For a single role, plan on one to three weeks from the at-risk meeting to the outcome letter, then the notice period. There’s no fixed legal minimum for most businesses, but consultation must be genuine. Complex restructures, or 15 or more redundancies, take longer.
Do small businesses have to pay redundancy pay?
Not under the NES, if you have fewer than 15 employees when notice is given. Count regular casuals and staff of associated entities. You still owe notice and leave payouts, and an award, contract or policy may require redundancy pay anyway.
Can I make someone redundant while they’re on parental leave?
Legally, yes, if the role is genuinely no longer needed and you consult them like anyone else. It’s high risk, though. They have a return-to-work guarantee, and any link between the leave and the decision can lead to a general protections claim. Get advice first.
Do I have to offer a lower-paid role instead of redundancy?
If it’s a role the employee could reasonably do, yes, you should offer it. Lower pay doesn’t automatically make it unsuitable. If they refuse acceptable alternative work, you can apply to the Fair Work Commission to reduce the redundancy pay.
Can I rehire for the role after a redundancy?
Only if something genuinely changed after the redundancy, like an unexpected new contract. Refilling the same role soon afterwards suggests it was never redundant, which can expose you to an unfair dismissal claim and put the tax-free treatment at risk.
Is redundancy pay tax-free?
Partly. For 2026-27, a genuine redundancy payment is tax-free up to $13,598 plus $6,801 per completed year of service. The rest is taxed as an employment termination payment. Leave payouts are taxed separately.
Do I pay super on redundancy pay?
No, super guarantee doesn’t apply to the redundancy payment itself. Ordinary wages paid up to the last day still attract super. Ask your payroll provider to check each final pay component.
Can a casual employee be made redundant?
Casuals aren’t entitled to NES redundancy pay, but you should still end their engagement fairly. A regular casual with at least 6 months’ service (12 months in a small business) may be able to claim unfair dismissal, so a clear business reason still matters.
What documents do I need for a redundancy?
At minimum: a written business case, an at-risk letter, consultation notes, a redeployment record, an outcome and termination letter, and a final pay breakdown. A deed of release is optional but useful if you’re offering an extra payment.
Your next step
If you’re reading this before you’ve said a word to anyone, you’re already ahead of most employers. A redundancy process run in order protects the business and treats your people with respect. Your remaining team will be watching how it’s handled, and they’ll remember.
Lawpath has helped more than 650,000 Australian businesses sort out legal steps like this without the big-firm price tag. The one thing to do now: get an employment lawyer to check your redundancy plan before the first meeting.
