On this page:

• What's redundancy?
• Genuine redundancy for the purposes of deciding whether a dismissal may be unfair
• When it's not a genuine redundancy
• What redundancy pay might be payable?
• Not paying redundancy
• Redundancy and small business
• How much redundancy pay?
• Up to and including 31 December 2009

From 1 January 2010, the National Employment Standards (NES) replace the non pay rate provisions of the Australian Fair Pay and Conditions Standard (the Standard). Under the NES, the rules relating to redundancy and redundancy pay are modified.

What's redundancy?

Redundancy under the NES happens when an employer either:

• decides they no longer want an employee’s job to be done by anyone and terminates their employment (except in cases of ordinary and customary turnover of labour)
• becomes insolvent or bankrupt.

Note: What constitutes ordinary and customary turnover of labour will depend on the relevant circumstances.

Redundancy may happen when:

• the job someone has been doing is replaced due to the employer introducing new technology (ie. it can be done by a machine)
• business slows down due to lower sales or production
• the business relocates
• a merger or takeover happens
• the business restructures or reorganises.

Genuine redundancy for the purposes of deciding whether a dismissal may be unfair

Under Commonwealth workplace laws, a person’s dismissal is a 'genuine redundancy' if:

• you no longer need the person’s job to be done by anyone because of changes in the operational requirements of the business
• you’ve followed any consultation requirements in the modern award, agreement, or pre-modern award such as a federal award, a transitional award or a notional agreement preserving state award (NAPSA).

When it's not a genuine redundancy

It's not a genuine redundancy if it's reasonable for the employee to be redeployed in either:

• your business
• the business of an entity associated with you.

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What redundancy pay might be payable?

An employee may be entitled to redundancy or severance pay if each of the following applies:

• a workplace instrument (eg. an award or agreement) that applies to the employee contains redundancy pay entitlements
• the employee works for an employer that employs 15 or more employees (some exceptions apply)
• a permanent employee has more than 12 months continuous service with an employer (some exceptions apply).

If an agreement that included redundancy provisions was terminated in a certain way less than 2 years ago and the employees covered by that agreement aren’t covered by a new agreement, the old redundancy provisions may still apply.

From 1 January 2010, all employees working under Commonwealth workplace laws who:

• have more than 12 months continuous service and
• work for an employer that employs 15 or more employees,

may be entitled to redundancy or severance payments (to a maximum of 16 weeks pay) under the National Employment Standards (NES). However, there are some circumstances when redundancy is not payable.

Important! You may be also liable to pay redundancy pay under certain preserved redundancy provisions.

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When redundancy is not payable

Redundancy pay is generally not payable under the NES to any of the following:

• an employee whose period of continuous service with the employer is less than 12 months
• an employee of a small business employer (see below: Redundancy and small business)
• an employee employed for a specified period of time, for a specified task, or for the duration of a specified season
• an employee whose employment is terminated because of serious misconduct
• a casual employee
• an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement
• an apprentice
• an employee to whom an industry-specific redundancy scheme in a modern award applies
• an employee to whom a redundancy scheme in an enterprise agreement applies if both:
  • the scheme is an industry-specific redundancy scheme that is incorporated by reference (and as in force from time to time) into the enterprise agreement from a modern award that is in operation
  • the employee is covered by the industry-specific redundancy scheme in the modern award.

Often, the terms of an award or agreement will say that an employee may not get redundancy pay if their employer finds an acceptable alternative position for them.

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Redundancy and small business

An employer who is a small business employer is not required to provide redundancy pay on the termination of an employee’s employment.  A small business employer for the purpose of determining redundancy pay, is an employer who, at a particular time, employs fewer than 15 employees (this is based on a head count of employees as detailed below).

When calculating the number of employees employed at a particular time, all the following factors are to be taken into account:

• all employees employed by the employer at that time are to be counted
• a casual employee is not be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis
• associated entities are taken to be one entity
• the employee being terminated, and any other employees being terminated at that time are counted  

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How much redundancy pay?

The amount of redundancy pay under the NES equals the total amount payable to the employee for the redundancy pay period. This is worked out using the table below, at the employee’s ‘base rate of pay’ for his or her ordinary hours of work.

An employee’s base rate of pay (other than a pieceworker) is the rate of pay payable to an employee for his or her ordinary hours of work, but not including any of the following:

• incentive-based payments and bonuses
• loadings
• monetary allowances
• overtime or penalty rates
• any other separately identifiable amounts.

Note: long service leave entitlements provide the rationale for diminishing the redundancy pay entitlement for employees who have a period of 10 years’ continuous service or greater.

It is possible for an employer to apply to Fair Work Australia for a determination reducing the liability to pay redundancy pay to a specified amount (that may be nil), if Fair Work Australia considers appropriate. The employer may apply for the determination if an employee is entitled to redundancy pay and the employer finds other acceptable alternative employment or cannot pay the amount.

Up to and including 31 December 2009

Minimum conditions for redundancy are covered by an employee’s agreement or pre-modern award, such as a federal award, a transitional award or a notional agreement preserving state award (NAPSA).

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