Redundancy is when a business no longer needs an employee’s role to be done by anyone. When an employer makes an employee’s job redundant, they may need to pay the employee severance or redundancy pay.
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Redundancy happens when an employer either:
- doesn't need an employee’s job to be done by anyone, or
- becomes insolvent or bankrupt.
Redundancy can happen when the business:
- introduces new technology (for example, the job can be done by a machine)
- slows down due to lower sales or production
- closes down
- relocates interstate or overseas
- restructures or reorganises because a merger or takeover happens.
Watch our short video on redundancy to learn about:
- when redundancy happens
- which employees are eligible for redundancy pay
- how to work out redundancy pay.
A genuine redundancy is when:
- the person’s job doesn't need to be done by anyone
- the employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.
When an employee's dismissal is a genuine redundancy the employee isn't able to make an unfair dismissal claim.
A dismissal is not a genuine redundancy if the employer:
- still needs the employee’s job to be done by someone (for example, hires someone else to do the job)
- has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
- could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.
All awards and registered agreements have a consultation process for when there are major changes to the workplace, such as redundancies.
The consultation process sets out the things the employer needs to do when they decide to make changes to the business that are likely to result in redundancies. This has to be done as soon as possible after the decision has been made to make these changes.
Consultation requirements include:
- notifying the employees who may be affected by the proposed changes
- providing the employees with information about these changes and their expected effects
- discussing steps taken to avoid and minimise negative effects on the employees
- considering employees ideas or suggestions about the changes.
For best practice tips, see Consultation and cooperation in the workplace.
Source reference: Fair Work Act 2009 s.119, 139, 388, 389
Best practice tip
Our Termination of employment letter – redundancy template includes a step-by-step guide to handling the redundancy process.
If a business is considering redundancy of 15 or more staff, employers need to give written notification to Services Australia of the proposed dismissals. More information and a notification template are available on the Services Australia website.
Source reference: Fair Work Act 2009 s.530
As part of the consultation process, employers can provide the following information about support and resources available to employees being made redundant:
- Affected employees and their partners have immediate access to tailored employment services under the Early Access initiative, prior to becoming eligible for income support. For information about what support services are available, visit Next steps if you lose your job.
- The ‘What’s Next’ website provides an online self-help resource for affected employees and employers.
- The Employer Checklist helps employers who are considering restructuring make the best decisions for their staff and their business. This checklist assists employers know their obligations, entitlements and alternatives to retrenchment.
For information about what to do if you’ve been made redundant or are looking for a new job, visit the What’s Next website on the Department of Employment and Workplace Relations website. This support is provided under Workforce Australia Services.