Who doesn't get redundancy pay
Some employees don’t get redundancy payments when their job is made redundant.
Redundancy entitlements are set by the National Employment Standards (NES) and any award or agreement that applies.
On this page:
The NES are the minimum entitlements that have to be provided to all employees. Learn more at National Employment Standards.
Employees covered by the NES may be entitled to redundancy pay. Understand who is entitled to redundancy pay on our Redundancy page.
The following employees don’t get redundancy pay under the NES:
- employees whose period of continuous service with the employer is less than 12 months
- employees employed for:
- a stated period of time
- an identified task or project
- a particular season
- employees terminated because of serious misconduct
- casual employees
- trainees engaged only for the length of the training agreement
Example: Employee not eligible for redundancy pay – length of service
Fred works part-time for a large tiling wholesaler. He’s worked at the company for 7 months.
Fred is covered by the NES. An enterprise agreement also applies to him. There are no extra rules in the enterprise agreement on redundancy pay.
During a company restructure, Fred is told he will be made redundant.
Because Fred has worked for the company for less than one year, he isn’t eligible for redundancy pay.
Example: Casual employee not eligible for redundancy pay
Marta is a casual employee at a large furniture company. She’s been working at the company for 15 months.
Marta is covered by the NES. An award also applies to her employment. The award has no extra rules for redundancy pay.
The business begins a restructure process and Marta’s role is made redundant. She won’t receive future shifts.
Because Marta is a casual employee, she isn’t eligible to receive redundancy pay. Casuals don’t get redundancy pay unless their award or agreement says so.
There are special arrangements for employees whose employment transfers when the business they work for is sold. Find out more on our When businesses change owners page.
Awards and agreements
Some awards and agreements include different rules for redundancy pay. This means that some employees may still be entitled to redundancy pay under an award or agreement that applies to them.
Are you covered by an award? Select your industry on our Redundancy pay and entitlements page to see what applies.
To find an agreement, search the Fair Work Commission – Find an agreement database. You can then check the rules for redundancy in the agreement.
A small business is one that employs less than 15 employees. Most small businesses don’t have to pay redundancy pay under the NES when making an employee redundant.
Example: Small business employer not required to pay redundancy
Alistair owns and runs a newsagency. He has 11 staff employed, including a combination of part-time and casual employees.
Alistair and his employees are covered by the NES and the Retail Award.
With the business slowing down and new technology available to help complete work, he must make some staff redundant.
Alistair makes 2 part-time employees redundant. He also stops offering 3 casual employees shifts.
As the newsagency is a small business employer, Alistair doesn’t need to make redundancy payments to the part-time employees under the NES. The Retail Award also says that small business employers don’t have to make redundancy payments.
However, Alistair must still give the minimum notice of termination period to the part-time employees when making them redundant.
Some small businesses may still have to pay redundancy under their award or agreement. To check if small businesses need to pay redundancy pay, select your industry in Redundancy pay and entitlements.
To figure out whether the business is a small business, count all employees employed at the time of the dismissal including:
- the employee and any other employees being terminated at that time
- regular and systematic casual employees employed by the business at the time of the redundancy (not all casual employees)
- employees of associated entities, including those based overseas.
The time of dismissal is when an employer provides an employee with their notice of termination. It doesn't matter if an employee works out their notice period or not.
Exemptions to small business redundancy rules
There are situations when a non-small business employer may downsize and become a small business employer during bankruptcy or liquidation.
When this happens, the employer may still be required to pay redundancy entitlements to eligible employees under the NES.
Employees who are made redundant after their employer becomes a small business may be entitled to redundancy payments under the NES in certain situations. These can include where the employer:
- is bankrupt or in liquidation
- has become a small business because they‘ve terminated one or more employees.
Other rules also apply, including about when and how those terminations took place. Access the specific rules from Fair Work Act 2009 s. 121(4).
Example: Employer still required to make redundancy payments
Radios 4 You & Us is a medium-sized electronics retailer with 45 employees.
The business provides sales and repairs online and in a physical shop. It also provides an afterhours service for radios and speakers, music production and DJ equipment.
Due to market factors, Radios 4 You & Us becomes insolvent and goes into liquidation.
An insolvency practitioner is appointed and makes 40 employees in the repair, sales and customer service part of the business redundant due to the insolvency.
5 payroll employees remain employed to help with the winding up of Radios 4 You & Us.
3 months after the 40 employees were made redundant, Radios 4 You & Us permanently closes and the remaining 5 employees are made redundant.
Even though Radios 4 You & Us is classified as a small business now as it employed fewer than 15 people, the employees will still be entitled to redundancy pay under the NES as they would have been before the business became a small business.
The remaining employees get redundancy pay because Radios 4 You & Us:
- is in liquidation
- became a small business because it terminated the 40 employees due to the insolvency of the employer.
Check redundancy entitlements and responsibilities from our Redundancy page.
Source reference: Fair Work Act 2009 s.23, 121 and 123