Understanding redundancy
Redundancy is about the job, not the person. It occurs when business needs change and a position is no longer required. The Fair Work Act provides protections and entitlements for employees made redundant.
Genuine redundancy
- Job no longer needed by anyone
- Consultation requirements met
- Redeployment not reasonable
- Not unfair dismissal
Non-genuine redundancy
- Someone else hired for role
- No consultation occurred
- Redeployment not considered
- May be unfair dismissal
Redundancy pay entitlements
The National Employment Standards set minimum redundancy pay based on years of continuous service:
NES redundancy pay scale
Small business exemption
Small businesses with fewer than 15 employees are exempt from paying NES redundancy pay. However:
- Notice still required: All employees still entitled to notice or pay in lieu
- Accrued leave: Must pay out annual leave and long service leave
- Fair process: Consultation obligations still apply under most awards
- General protections: Dismissal must not be for prohibited reasons
Consultation is mandatory
Most modern awards require consultation with affected employees before making redundancies. This includes discussing the proposed changes, reasons for them, and measures to avoid or minimise the impact. Failing to consult may mean the redundancy is not genuine.
Redundancy process
Required steps
- Identify genuine operational need
- Consult with affected employees
- Consider redeployment options
- Apply selection criteria fairly
Final pay includes
- Outstanding wages
- Redundancy pay (if eligible)
- Notice or pay in lieu
- Accrued leave entitlements
Common redundancy mistakes
Sham redundancy
Calling a dismissal redundancy when the role still exists or someone else is hired for it. This may be unfair dismissal.
No consultation
Making redundancy decisions without consulting affected employees as required by the applicable award or agreement.
Ignoring redeployment
Not considering whether employees could be redeployed to other suitable positions within the business.
Key takeaways
Genuine redundancy requires that a job is no longer needed, proper consultation has occurred, and redeployment was not reasonable. Eligible employees receive redundancy pay based on their length of service under the NES.
Accurate records of service length and leave balances are essential for calculating redundancy entitlements. RosterElf helps maintain these records for compliant final pay calculations.
