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Redundancy Pay | Redundancy Notice Periods and Entitlements

Redundancy Pay

An employer can make a role redundant if they:

  • Can show that it’s genuinely no longer required by the business
  • Have consulted the workforce in accordance with requirements in the relevant award or agreement
  • Have offered any affected employees a suitable alternative role, where reasonable

Genuine reasons for redundancy can be because the business has moved to a new location, has restructured or has gone out of business.

Redundancy refers to a specific role — not the person who performs it. Your employer cannot make someone redundant and then hire someone else to continue doing the same job.

If your role becomes redundant you can either be redeployed or retrenched.

Consultation

Employers must consult employees about major changes in the workplace that will affect them. This includes any changes that could lead to redundancies.

The exact rules around consultation vary between different awards and agreements. But generally, employers must:

  • Consult you if they plan to make changes
  • Tell you how the changes will affect you
  • Give you information about what is being done to minimise the negative impacts
  • Give you the chance to have a say about decisions that will affect you before the changes are made

If your employer makes jobs redundant without consulting the workforce beforehand, those actions may be unfair or invalid. If this occurs, you should get in touch with your union immediately to discuss the best course of action.

Redeployment

If your job is made redundant, your employer must offer you another suitable role if they can. This is known as redeployment. 

A suitable role is one that takes into account your skills and experience, current hours and pay, and is at a suitable location.

If you refuse to be redeployed to a suitable new role, then you may not be eligible for redundancy pay.

Your union can give you advice about redeployment if you need it.

Retrenchment

If your job is made redundant and there is no suitable role for your employer to offer you, you will lose your job. This is known as retrenchment.

If you are being retrenched, you may be eligible for redundancy pay.

Redundancy Pay Eligibility

If your job has been made redundant and your employer cannot offer you another suitable role, then you may be eligible for redundancy pay.

Most permanent employees are eligible for redundancy pay. Those who usually do not qualify include:

  • Casual employees
  • Employees of a small business
  • Anyone who has been employed for less than a year

The conclusion of a fixed-term contract or an apprenticeship is not considered a redundancy.

How much redundancy pay you get is calculated according to the number of years you have been working for your employer.

You are paid your base weekly rate of pay at the time that you are made redundant. It does not include extra amounts like allowancespenalty rates, loadings or bonuses.

Length of employmentRedundancy pay
Less than one year
1 – 2 years4 weeks
2 – 3 years6 weeks
3 – 4 years7 weeks
4 – 5 years8 weeks
5 – 6 years10 weeks
6 – 7 years11 weeks
7 – 8 years13 weeks
8 – 9 years14 weeks
9 – 10 years16 weeks
10+ years12 weeks *

(* Entitlements are reduced on the assumption that employees also have long service leave entitlements.) 

This table shows minimum amounts of redundancy pay, as defined by the National Employment Standards. Certain awards, agreements or employment contracts provide for more. Contact your union if you need help working out how much notice you are entitled to.

Please note, you will also be entitled to be given notice of termination, in addition to your redundancy pay.

If you need advice about redundancy pay, your union will be able to help.

Voluntary redundancy in Australia

When an employer needs to make roles redundant, they may instead invite staff to apply for a voluntary redundancy: a financial incentive for some staff to leave voluntarily, to avoid the need for compulsory retrenchments.

Redundancy pay and unfair dismissal

Your employer is not allowed to hire someone else to replace the person whose role is being made redundant. In other words, employers cannot use redundancy as an excuse to get rid of employees.

Nor should your employer fail to consult the workforce about redundancies or fail to offer suitable redeployments to affected staff where possible.

If you have been made redundant in a way that you feel was unfair, you may be able to challenge this decision, including by filing for unfair dismissal. Ask your union for advice if this is the case.

Funding for this factsheet was provided by:

  • the Victorian Government as part of the uTech project; and
  • the Fair Work Ombudsman. 

Please note that the information given here is general information only and is not legal advice. For further assistance, it is recommended you speak to your union.

Frequently Asked Questions

What is redundancy pay?

Redundancy pay in Australia refers to the amount of money that is paid to an employee if they are made redundant.

Redundancy pay is owed when an employer doesn’t need an employee’s services anymore or the business becomes insolvent or bankrupt.

To compensate for this loss of the role, employees will be owed redundancy pay. The amount is calculated depending on an employee’s regular rate of pay and length of employment.

You can calculate the amount of redundancy pay by using this simple formula:

Base Rate x Redundancy Pay Period = Redundancy Pay

Is redundancy pay classed as income?

Redundancy Pay is classed as tax-free up to a limit based on your length of employment. Your employer will report this lump sum on your income statement or PAYG payment summary as a tax-free amount.

Is redundancy pay compulsory?

There are some circumstances where an employer does not need to offer redundancy pay.

This can include if the employee is a casual worker or if the employer is a small business, which employs fewer than 15 employees.

Redundancy pay is also dependent on the worker being continually employed for the period in question. If an employee is eligible for redundancy pay, then it is compulsory for the employer to pay the amount in full.

Are casual workers entitled to redundancy pay?

No, casual employees are usually not entitled to redundancy pay. This is due to the fact that employees need to have been employed for a continuous period of time.

Additionally, casual employees should receive casual loading to make up for not receiving other employment benefits such as annual leave or redundancy pay.

Can you still get redundancy pay after 65?

Yes, in 2019, the government extended the age at which employees can access redundancy pay, from the age-based limit of 65 years to age-pension age.

If an employee was paid redundancy pay before October 2019, and they were 65 years or older, then they would have had more tax withheld. Under the new law, this amount has been revised and the amount of tax withheld has been recalculated.

Does redundancy pay get taxed?

No, redundancy pay does not usually get taxed. As long as the payment is classified by the ATO as a genuine redundancy and below the tax-free limit, then the sum will be tax-free.

The tax-free threshold changes every year. It is the base amount plus a sum for each year of work the employee has completed.

The maximum redundancy entitlement that will classify as tax-free in the 2019/2020 financial year was $10,638, plus $5,320 for each year of completed work.

Am I entitled to redundancy pay working part-time?

Part-time employees are entitled to redundancy pay. There are no time requirements or minimum hours worked to qualify for redundancy pay.

To be eligible for redundancy in Australia, an employee has to have been employed by the business for at least 12 months.

Do you have to pay back redundancy?

No, there are generally no restrictions on accepting another role after your redundancy and this should never require you to pay back any redundancy pay.

However, some employers may stipulate that you do not accept employment for a certain period of time, known as a redundancy notice period.

If this is the case then it is encouraged to discuss the circumstances of your new employment with your previous employer and come to a mutually beneficial agreement.

But ultimately, once an employer has issued a notice of redundancy to employees, then this is legally binding and your redundancy pay cannot be changed, withdrawn or reduced by your employer.

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