How Redundancy Pay Works in Australia
When an employer no longer needs an employee's job to be done by anyone (or the employer becomes insolvent or bankrupt), the employee may be entitled to redundancy pay. The National Employment Standards set out the minimum redundancy pay entitlements based on the employee's period of continuous service.
NES Redundancy Pay Scale
The redundancy pay scale under the NES increases with years of service, from 4 weeks' pay for 1-2 years up to a maximum of 16 weeks' pay for 9-10 years. Notably, after 10 years of service, the entitlement drops back to 12 weeks -- this reflects the fact that long service leave kicks in around this point.
Small Business Exemption
Employers with fewer than 15 employees are classified as small businesses and are exempt from paying redundancy pay under the NES. The employee count includes all employees across the business, including casual employees who are employed on a regular and systematic basis. However, some awards or enterprise agreements may still require small businesses to pay redundancy.
What Gets Paid on Termination
When an employee is made redundant, their final payment typically includes: redundancy pay (based on the NES scale), pay in lieu of notice (if the notice period is not worked), any accrued but untaken annual leave (including leave loading if applicable), and any accrued but untaken long service leave.
When Redundancy Pay Doesn't Apply
- Casual employees
- Employees with less than 12 months of continuous service
- Employees of small businesses (fewer than 15 employees)
- Fixed-term contract employees (where the contract is not renewed)
- Seasonal workers
- Employees dismissed for misconduct