Employer tips for making staff redundant

Redundancies are never easy, but they are sometimes necessary for a business to move forward. When the decision is unavoidable, employers need a clear plan that upholds legal requirements, treats people with dignity and safeguards long-term workplace culture. The right approach protects both your organisation and the individuals affected.

What is the meaning of redundancy?

A redundancy occurs when a business no longer requires a role to be performed. This may happen due to restructuring, automation, budget constraints or changing operational requirements. The focus must always be on the role itself, not the person.

When a redundancy can be considered

A redundancy must be based on an objective business need and supported by clear evidence. This typically includes:

Structural changes that alter how work is delivered
Operational adjustments where tasks are redistributed
New technology replacing or consolidating tasks
Financial pressures or reduced demand
A service that is no longer viable
A function being removed or absorbed by an associated entity

Redundancy must not be used as a shortcut to dismiss staff for performance or conduct issues. If the dismissal relates to a person’s job performance, it will not meet the threshold for a genuine redundancy.

Understanding your legal obligations as an employer

In Australia, redundancy is highly regulated, and employers must follow the rules set out in the Fair Work Act, National Employment Standards, relevant award clauses and any registered agreement or employer's enterprise arrangements. These frameworks govern the legal requirements throughout the redundancy process.

Important considerations include:

Providing the correct notice period based on the employee’s length of service
Redundancy payments and how they are calculated
The applicable modern award or enterprise agreements covering the role
Whether small businesses are exempt from redundancy pay
How continuous service affects entitlements
When redeployment opportunities must be explored

If procedures are not followed, an affected employee may lodge an unfair dismissal application. Employers unsure about their responsibilities should seek professional advice.

Steps for making positions redundant

1. Identify the business reason for the redundancy: Confirm that there is a legitimate operational need for the role to no longer be required and ensure the decision relates to the position, not the person.

2. Check applicable legal obligations: Review the relevant modern award, enterprise agreement, employment contract and the Fair Work Act to understand consultation rules, notice provisions, redundancy pay requirements and any exemptions.

3. Prepare documentation outlining the proposed change: Clearly set out why the redundancy is being considered, which roles are affected, and how the change will impact the organisation.

4. Notify affected employees in writing about the proposal: Provide written notification of major workplace change as required under most awards and agreements, explaining the rationale and inviting feedback.

5. Consult with employees meaningfully: Hold meetings to explain the proposed change, answer questions, consider employee suggestions and explore alternatives. Consultation must occur before any final decision is made.

6. Assess redeployment options: Consider whether suitable alternative employment exists within the organisation or any associated entity. Document your assessment and show genuine consideration.

7. Issue written notice of termination: If redundancy proceeds, provide formal written notice confirming the role is redundant, the termination date and the employee’s notice period. Ensure notice meets NES or contractual minimums.

8. Calculate entitlements accurately: Confirm redundancy pay, notice pay (if paid in lieu), unused leave, long service leave (if applicable) and any other contractual payments. Ensure calculations comply with the NES and relevant industrial instruments.

9. Deliver the decision in person where possible: Meet with each affected employee to discuss the final outcome, the timeline and available support. Provide written documentation during or immediately after the meeting.

10. Provide final pay within the required timeframe: Pay all entitlements promptly and give employees a separation certificate and any other required documents.

11. Communicate with remaining staff: Explain the organisational changes, reinforce stability and outline how work will be redistributed to maintain clarity and trust.

Tips for making redundancies

Do

Prepare clear documentation explaining why the redundancy occurs
Ensure communication is calm, respectful and honest
Offer redeployment where feasible, including suitable roles within your organisation
Check all entitlements under the National Employment Standards and the relevant award
Keep managers well-briefed ahead of conversations
Provide additional support, such as providing references or job application guidance
Consider the impact on remaining employees

Don't

Announce redundancy decisions before the consultation process is completed
Provide inaccurate or incomplete information
Select employees based on personal circumstances rather than business need
Replace an employee soon after they are made redundant
Communicate changes purely by email without a personal conversation
Avoid mishandling written notification of proposed changes and written notice of termination

Redundancy payments

Employers must calculate redundancy pay correctly in line with workplace laws, meet all entitlement obligations and ensure payment is made even during financial challenges.

Eligibility

Employees may be entitled to redundancy pay depending on their circumstances and length of continuous service. Key eligibility points include:

Employees are eligible when their role is no longer required, and the redundancy meets legal criteria.
Employees must have completed at least 12 months of continuous service.
Employees covered by the NES may receive redundancy pay unless a specific exemption applies under the legislation, an award or an enterprise agreement.

What’s included in redundancy pay?

Redundancy pay generally covers monetary entitlements linked to the employee’s length of service. This may include:

Payment is based on the number of weeks outlined in the Fair Work Act.
Payment calculated using the employee’s base rate of pay for ordinary hours.

What’s not included in redundancy pay?

Some payments sit outside the redundancy entitlement and may be handled separately. These typically include:

Payment for overtime, bonuses or allowances that are not part of the base rate of pay.
Payment in lieu of notice, unless applicable.
Unused annual leave or long service leave, which are paid out but not classed as redundancy pay.

Redundancy pay for small businesses

Under the NES, small businesses with fewer than 15 employees are generally exempt from paying redundancy pay. However, they must still provide proper notice and final pay, and should check any applicable award or agreement for any additional conditions.

Supporting your remaining workforce

Redundancy affects everyone, not just the people leaving. The remaining staff often experience uncertainty or reduced morale. Employers can help by:

Communicating the purpose of the restructure clearly
Reconnecting teams to the organisation’s goals
Offering additional support during the transition
Reinforcing role clarity after changes
Encouraging managers to check in regularly with their teams

A thoughtful approach helps restore stability and maintain productivity.

What employers need to remember

Making staff redundant is a significant responsibility. The focus must remain on creating a fair process that considers both business needs and the experience of employees affected by redundancy. Ensuring legally required steps are followed, communicating openly and supporting employees make a difficult situation more manageable.

If your organisation is navigating workforce changes, Hays can help you understand your obligations and access the talent, insights and guidance needed to move forward confidently.

FAQs

What is genuine redundancy?

Under Australian employment law, genuine redundancy describes a specific situation where an employee’s role is no longer required, the employer has met all consultation requirements, and redeployment options have been properly explored. It is used in the Fair Work Act to determine whether an employee can or cannot bring an unfair dismissal claim.

A redundancy simply refers to the broader situation where work changes mean a position is no longer needed. However, a genuine redundancy requires employers to demonstrate that:

The role is no longer needed due to operational changes
Consultation obligations under the modern award or enterprise agreement have been met
Redeployment within the business or an associated entity was genuinely considered

If the employee’s job still exists in a similar form, or if the employer skips required consultation steps, the situation may not be classified as a genuine redundancy. This increases the risk of unfair dismissal claims because the termination may be seen as avoidable or procedurally flawed.

What are redundancy entitlements?

Redundancy entitlements are the payments and benefits an employee receives when their role is no longer required. These may include:

Redundancy pay
Notice or payment in lieu of notice
The payout of unused annual leave
Long service leave

Entitlements depend on the National Employment Standards, the relevant award or agreement and the employee’s length of service.

How is redundancy pay calculated?

Redundancy pay is calculated by multiplying the number of weeks set out in the National Employment Standards by the employee’s base rate of pay for ordinary hours. The number of weeks increases with the employee’s continuous service and may be modified by an award, registered agreement or employment contract.

Employers, excluding small businesses, must provide the minimum redundancy pay as outlined below.

Redundancy pay by period of continuous service

At least 1 year but less than 2 years: 4 weeks
At least 2 years but less than 3 years: 6 weeks
At least 3 years but less than 4 years: 7 weeks
At least 4 years but less than 5 years: 8 weeks
At least 5 years but less than 6 years: 10 weeks
At least 6 years but less than 7 years: 11 weeks
At least 7 years but less than 8 years: 13 weeks
At least 8 years but less than 9 years: 14 weeks
At least 9 years but less than 10 years: 16 weeks
At least 10 years: 12 weeks*

*Although it may appear counterintuitive, the NES reduces redundancy pay to 12 weeks once an employee reaches 10 years of continuous service, due to the way long service leave entitlements interact with redundancy calculations under federal workplace laws.

Do redundancy payments get taxed?

Yes, redundancy payments are taxable. Genuine redundancy payments receive concessional tax treatment up to a tax-free limit, with amounts above that limit taxed at marginal rates. Other final payments, such as unused leave, are taxed separately according to ATO rules.