Redundancy: employer guide to legal obligations and payouts
Last updated: February 2026
Employers' legal obligations for redundancy can be difficult to navigate.
Redundancies are a common part of any business restructure, occurring when certain roles are no longer necessary to an operation.
Business Law WA's Employment Law team outlines the best ways to approach redundancies under the Fair Work Act 2009 (FW Act) and explore employers' legal redundancy requirements and rights.
In short: Redundancy occurs when a role is no longer required due to operational changes, and strict legal obligations apply to ensure it is genuine. Employers must meet consultation requirements, consider redeployment options and correctly calculate redundancy pay under the National Employment Standards.
This guide explains employer obligations, redundancy pay entitlements and how to manage the process lawfully.
What is a redundancy?
Redundancy arises from an employer’s decision to apply significant changes in their business due to a shift in operational requirements.
The Fair Work Ombudsman (FWO) states: "Redundancy is when a business no longer needs an employee’s role to be done by anyone. When an employer makes an employee’s job redundant, they may need to pay the employee severance or redundancy pay."
Redundancy may also occur when an employer becomes insolvent or bankrupt.
Redundancy pay calculator: how much do employers need to pay?
Redundancy pay in Australia depends on an employee’s length of service and their regular pay rate, as outlined under the FW Act.
According to the National Employment Standards, employers must follow specific redundancy provisions, including consultation and severance pay requirements.
Use the Fair Work Ombudsman’s redundancy calculator to estimate payouts.
More information on employers' obligations, the redundancy process and notice requirements can be found here.
More reading
Workplace toolkits and guides
Workplace training
Do you need a redundancy communications plan?
Good communication and consultation aren't just best practice, but mandatory requirements of the redundancy process.
Businesses need to meet the required consultation and notice periods and keep records as proof as they go.
Which businesses must pay redundancy in Australia? Eligibility and exemptions
If your business has 15 or more employees and the relevant workers have been employed for 12 months or more, a redundancy payment most likely applies. Some businesses with under 15 employees, referred to as a “small business employer” may also be required to make a redundancy payment.
The Fair Work Ombudsman lists the circumstances where redundancy payments may not apply, including where an employee is terminated for misconduct.
Employers can apply to the FWO to reduce a redundancy payment by filling out a form on the Ombusdman’s website called F45A.
If a company has found other suitable employment for the worker or if it cannot afford a redundancy payment, the Ombudsman may make allowances.
The FWO will take into consideration the circumstances of the redundancy and potentially reduce the amount of severance to be paid – down to nothing.
Normally, this is just a percentage base reduction based on if the person has found other work and the specifics of that situation.
If a person’s primary role was made redundant but they were given an opportunity to redeploy into another role within the business but did not take it, the FWO may revise down their redundancy payment.
It is vital that written records of these circumstances are documented by a business for consideration by the FWO.
Redundancy FAQs – employer obligations, redeployment options and pay
What is a genuine redundancy under employment law?
A genuine redundancy occurs when a role is no longer required due to operational changes and the employer has met consultation obligations and considered redeployment.
Do employers need to consider redeployment opportunities?
Employers are required to consider alternatives to termination as part of the consultation process. Redeployment is one option.
How is redundancy pay calculated?
Redundancy pay is generally based on an employee’s length of continuous service and their base rate of pay under the National Employment Standards.
Do small businesses have to pay redundancy?
Small businesses with fewer than 15 employees are typically not required to provide redundancy pay under the National Employment Standards.
Can a redundancy still result in an unfair dismissal claim?
Yes. If the redundancy is not genuine or consultation requirements are not followed, an employee may lodge an unfair dismissal claim.
Need more in-depth information to these questions? See our experts' answers here.
Redundancy and restructure FAQs – processes, payment calculation and role allocation
What process should employers follow when implementing redundancies?
Follow a structured process of at-risk discussion, formal consultation and an outcome meeting to ensure compliance and procedural fairness.
How do employers calculate a redundancy payment?
Redundancy pay is based on the employee’s period of continuous service plus notice and outstanding entitlements under the Fair Work Act or applicable industrial instruments.
If a restructure requires reducing the number of employees in a specific role, how do employers determine who to make redundant?
Use an objective, documented selection process based on essential competencies to fairly determine which employees are made redundant.
If the business requires an employee to decrease their working hours, is this classified as a redundancy?
A reduction in hours may trigger a redundancy situation if the original role is no longer required, but consultation and industrial instrument requirements still apply.
Need more in-depth information to these questions? See our experts' answers here.
Other considerations
You may be able to renegotiate staff contracts, rather than reduce your workforce, to reduce costs.
However, if you do scale back your employee’ hours you will need the consent of each employee first or it may be considered a redundancy.
In a Federal Court decision from 2020, an employee was found to be entitled to a redundancy payment because her hours of work were reduced without agreement, even though she continued to work for the employer.
Redundancy can be complex. If you need support navigating redundancy in your business, contact Business Law WA's Employment Law team at [email protected] or 08 9365 7746.
Our Employee Relations Helpline can also offer timely, expert support on 9365 7660 or at [email protected].
CCIWA Members receive a discounted rate on our legal services and free unlimited use of our Employee Relations Helpline. Not a Member? No problem, our team can support you, too!
This article is authorised by Business Law WA, an incorporated legal practice and wholly owned subsidiary of CCIWA. The contents of this article is general in nature and is not legal or professional advice and should not be relied upon as such.
