How to Handle Redundancy in Australia: NES s.119 Process

A genuine redundancy is one of the few lawful pathways to end an employee’s role without a performance-based dismissal process. Under the National Employment Standards in the Fair Work Act 2009 (Cth), redundancy involves both a process (consultation under modern awards or enterprise agreements) and payments (notice under s.117 and redundancy pay under s.119). Getting either wrong converts a genuine redundancy into an unfair dismissal.

Step 1 — Confirm the Role Is Genuinely Redundant — s.389

Under Fair Work Act 2009 (Cth) s.389, a “genuine redundancy” exists where:

• The employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; AND
• The employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy; AND
• It would not have been reasonable in the circumstances for the person to be redeployed within the employer’s enterprise or an associated entity.

If any of these conditions fails, the dismissal is not a genuine redundancy and the employee may bring an unfair-dismissal claim under s.385.

Operational requirements

Examples of operational changes: business closure, relocation, restructure, automation of the role, decline in demand. The change must be genuine, not contrived to avoid a performance process.

Job no longer required by anyone

The role must be eliminated, not merely reassigned to a different person. If the same duties are still being performed by someone, that is not redundancy.

Step 2 — Consult Under the Modern Award or Enterprise Agreement

Most modern awards contain a “consultation about major workplace change” clause. The Fair Work Commission’s model consultation term, applied across modern awards, requires the employer to:

1. Notify the affected employees of the proposed major change as soon as a definite decision has been made;
2. Discuss with affected employees the introduction of the changes, the effects on them, and measures to avoid or mitigate adverse effects;
3. Consider matters raised by the employees in relation to the changes;
4. Provide affected employees with relevant information in writing.

Failing to consult, or treating consultation as a tick-box, is one of the most common ways redundancies fail at the Fair Work Commission. The FWC has consistently found that meaningful consultation requires genuine consideration of employee responses, not a pre-determined outcome dressed up as consultation.

FWO redundancy guidance: https://www.fairwork.gov.au/ending-employment/redundancy

Step 3 — Consider Redeployment

Section 389(2) requires the employer to consider whether redeployment is reasonable. Reasonable redeployment includes:

• Vacant positions in the same business
• Vacant positions in associated entities (parent company, subsidiaries)
• Roles the employee could perform with reasonable training
• Part-time, casual, or fixed-term alternatives where the employee would accept

Where reasonable redeployment is available and not offered, the dismissal is not a genuine redundancy. The employer should document the redeployment search — vacant role list, location, salary band, why each was or was not suitable.

Step 4 — Calculate Notice Under s.117

Under Fair Work Act 2009 (Cth) s.117, the employer must give written notice based on the employee’s continuous service:

Plus 1 additional week if the employee is over 45 years old and has at least 2 years’ continuous service (s.117(3)).

Notice must be given in writing, specify the date of termination, and be at least the s.117 minimum. The employee may work the notice period or, at the employer’s option, be paid out in lieu of notice.

The employment contract may specify a longer notice period; the contractual amount applies if longer than s.117.

Step 5 — Calculate Redundancy Pay Under s.119

Under Fair Work Act 2009 (Cth) s.119, the redundancy-pay scale is:

The “weeks” are calculated at the employee’s base rate of pay for ordinary hours. This excludes overtime, penalty rates, allowances (other than allowances for ordinary hours), and bonuses.

Small business exemption — s.121

Small business employers (fewer than 15 employees) are generally not required to pay redundancy under s.119. The 15-employee count is at the time of the termination and includes all employees of the employer and associated entities (s.121(2), s.23).

Casual employees

Casuals do not receive redundancy pay under s.119. They are entitled to notice (s.117) only if their employment is regular and systematic.

FWO redundancy pay guide: https://www.fairwork.gov.au/ending-employment/redundancy/redundancy-pay-and-entitlements

Step 6 — Other Termination Payments

In addition to notice and redundancy pay, the employer must pay:

• Accrued annual leave (s.90, paid out at termination at OTE)
• Annual leave loading if applicable under modern award
• Long service leave if applicable under state legislation (e.g. Long Service Leave Act 1955 (NSW); Long Service Leave Act 2018 (Vic); Industrial Relations Act 1999 (Qld) Pt 6) — typically pro rata after 7 or 10 years
• Accrued personal/carer’s leave is not paid out (s.96 right is preserved upon return to work, but redundancy ends the employment)
• Bonuses earned under contract terms

Step 7 — Issue the Termination Letter

The termination letter must:

• State the reason as redundancy due to specified operational change
• State the date of termination
• Specify the notice period (worked or paid in lieu)
• Itemise the redundancy payment calculation
• Itemise other termination amounts (annual leave, LSL)
• Confirm super payment will be made
• Provide a separation certificate or PAYG payment summary on request
• Reference the relevant award/agreement consultation clause

Step 8 — Income Tax Treatment

Redundancy payments receive concessional tax treatment. Under the Income Tax Assessment Act 1997 (Cth) s.83-170, a “genuine redundancy payment” is tax-free up to a base amount plus a per-year-of-service amount. The current thresholds are indexed each 1 July and published at https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-and-paying-tax/leaving-your-job/redundancy-payments.

Amounts above the cap are taxed as an Employment Termination Payment (ETP) at concessional rates up to a separate cap.

Common Redundancy Mistakes

Procedural Fairness — Even in Redundancy

Even where the role is genuinely redundant, the process must be fair. The Fair Work Commission has consistently emphasised that:

• The employee must be told what is being considered and why
• The employee must have an opportunity to respond
• The employer must consider redeployment in good faith
• The employee must be given an opportunity to seek redeployment within the group

Procedural unfairness is the difference between a clean redundancy and a successful unfair-dismissal claim under s.385.

After the Redundancy

• Pay all final amounts within the period required by the award/agreement (typically 7 days)
• Issue PAYG payment summary or report via Single Touch Payroll
• Keep records for 7 years (Fair Work Act 2009 (Cth) s.535)
• Provide a written reference where reasonable

If the employee disputes the redundancy, they must lodge an unfair-dismissal application within 21 days of dismissal taking effect (s.394(2)). The employer should retain the consultation records, redeployment search documentation, and termination letter to defend any application.

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Disclaimer

Legal information, not legal advice. MmowW Scrib🐮 is operated by a licensed Gyoseishoshi (行政書士) office in Japan. We are not Australian solicitors, barristers, or migration agents.

Sources

• FWO redundancy hub: https://www.fairwork.gov.au/ending-employment/redundancy
• FWO redundancy pay and entitlements: https://www.fairwork.gov.au/ending-employment/redundancy/redundancy-pay-and-entitlements
• ATO redundancy payments: https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-and-paying-tax/leaving-your-job/redundancy-payments
• Federal Register of Legislation — Fair Work Act 2009 (Cth): https://www.legislation.gov.au/Series/C2009A00028