Understanding redundancy

Understanding redundancy

It is important to understand what your legal obligations entail before you make an employee redundant.

You must make sure it is a ‘genuine redundancy’. Otherwise, you risk the employee lodging an unfair dismissal claim against you with the Fair Work Commission. Your employee is entitled to make their claim within 21 days from the day after you dismissed them.

A genuine redundancy occurs when:
– the employee’s job is no longer needed;
– and you followed any consultation requirements in the award, enterprise agreement or other registered agreement.

Unfair dismissal occurs when you:
– dismiss an employee in relation to discrimination, or for a reason that would be considered unjust, harsh or unreasonable;
– require someone to do the job (i.e., hire a replacement);
– could have reasonably transferred the employee to another role in your business or associated entity, or did not consult your employees about the redundancy under an award or registered agreement.

Redundancy pay and entitlements
Your employee is entitled to receive a redundancy pay or severance pay when they are made redundant. However, a redundancy pay is not required by some businesses or to casual employees.

A redundancy pay amount is usually based upon your employee’s continuous service. This is the length of time you employed them, minus any unpaid leave.

You may be able to have the redundancy pay reduced if you can not afford to pay the total amount or you find new suitable employment for the employee.

You will be required to provide your employee with written notice. Notice periods will differ depending upon how long your employee has worked for you. You can let your employee work through the notice period or pay in lieu of notice (pay it out to them).


If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.

Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.

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