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How to Make an Employee Redundant

The Fair Work Act defines the meaning of a ‘genuine redundancy’ as follows

  • Due to operational requirements of the employer, they no longer require a job to be performed by anyone;
  • The employer has complied with the consultation required under the applicable modern award or enterprise agreement. Generally, a modern award provision will require the following:
    • the employer must discuss with the employees affected and their representatives, if any, the introduction of the changes; and
    • the effects the changes are likely to have on employees; and
    • measures to mitigate the outcome of redundancy if any; and
    • give prompt consideration to matters raised by employees and/or their representatives in relation to the changes.

The Act further states that a person’s dismissal is not a case of genuine redundancy if the person would have reasonably been redeployed within the employer’s enterprise (business, activity, project or undertaking) or an associated entity.
Examples of when a case is that of a genuine redundancy are provided for in the Explanatory Memorandum to the Fair Work Bill 2009 and are: -

  • a machine is now available to do the job performed by the employee; or
  • the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five people: or
  • the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person's job no longer exists; or
  • a site or business closure; or
  • the completion of a project, or
  • outsourcing.

It is important to remember that whilst the onus is on an employer to validate their operational changes and the need for redundancy, if due process is not followed, this can deem a redundancy to not be genuine.
Whilst the National Employment Standards (NES) provides the severance due for redundancy, these do not apply if: -

  • at the time notice of redundancy is given the employer is a small business employer (employs less than 15 employees**) Note: some industrial instruments provide severance regardless of the size of the enterprise.
  • at the time notice of redundancy is given, an employee has less than 12 months continuous service with the employer.
  • the person is a casual employee.
  • the employee is employed for a specific task, time, and the completion of that specified task or time period occurs.
  • the employee is an apprentice.
  • an industry specific redundancy scheme applies to the employee through an applicable modern award or enterprise agreement.

** For the purpose of calculating the number of employees employed at the time of redundancy the following is to be considered: -

  • all employees (including the employee being made redundant) employed at the time are to be counted including casual employees who are employed on a regular and systematic basis.
  • Associated entities are also counted as one entity.

The total severance due is based on the number of years’ service the employee has completed with an employer. Some absences from work do not count as service for the calculation of redundancy.  These absences may include unauthorised leave or certain periods of unpaid leave.
Where an employee is award/agreement free, the NES applies as to their entitlement to redundancy.
When a transfer of business occurs, redundancy pay is treated in different ways depending on whether the two entities are associated or not and agreements made at the time of transfer.  Carefully documented agreements need to be made to ensure redundancy payments are treated accurately.
Should an employee elect to leave during the notice period following their advice of redundancy, a standard modern award clause provides that the severance that would have been due to the employee at the expiry of the notice period will still apply however the outstanding notice not worked will not be paid out.
The Fair Work Commission deem the failure to consult with an employee in breach of any consultation obligations under their relevant award or agreement is a serious defect in the process and may deem the redundancy to not be genuine.

For assistance with understanding your redundancy obligations, please contact us at [email protected] or 1300 720 004.


Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

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