Redundancy occurs when an employment is terminated by the employer on specific grounds other than the employee’s performance issues or conduct related issues. Since 1 July 2009, most of the Australian companies and workplaces are governed by the new system created by the Fair Work Act 2009 (the Act). This article will provide you some general information about the legal entitlements that employees in most cases should receive where their employment is terminated by reason of redundancy. Redundancy & Redundancy Pay Since 1 January 2010, the National Employment Standards (NES) replaced the non-pay rate provision of the Australian Fair Pay and Conditions Standard. According to Section 119 of the Fair Work Act 2009 (the Act), an employee is entitled to receive redundancy pay if the employer terminates the employee’s employment on:

Their own initiative because the employer no longer requires the job done by the employee to be done by anyone, excepting in case of ordinary and customary turnover of labour; or

Ff the employer becomes insolvent or bankrupt.

Redundancy may occur with an employee if:

The business slows down due to lower sales or production;

The business is relocated;

A merger or takeover happens; or

The employer restructures or reorganises the business.

As per the NES, an employer must provide an employee with a minimum period of notice or payment in lieu of notice before terminating their employment. All employees working under Commonwealth workplace laws are entitled to redundancy or severance payments up to a maximum of 16 weeks’ pay under the NES if:

They have at least 12 months of continuous service; and

They are working for an employer that employs 15 or more employees.

Employees are not eligible to receive redundancy pay on various factors under the NES, which include:

The employee’s period of continuous service with the employer is less than 12 months;

The employees are employed for a specific period of time or task, or for any specific duration or season;

The employment of the employees are terminated due to serious misconduct;

The employees are casual employees;

The employees are trainees or apprentices; or

The employees are eligible to other industry-specific redundancy scheme in a modern award.

The amount of redundancy payable to an employee under the NES is determined by using the employee’s base rate of pay for ordinary hours of work. The rate of pay, payable to an employee for ordinary hours of work other than a pieceworker is known as employee’s base rate of pay. This does not include:

Incentive based payments and bonuses;


Other monetary allowances;

Overtime or penalty rates; and

Any other separately identifiable amount.

The table below provides a guide line in regards to the redundancy pay entitlements of a employee dependant on the length of continuous service with the employer upon termination. Employee’s period of continuous service with the employer on termination Redundancy Pay Period

For additional information or assistance in any related matter, contact our team of experts at Owen Hodge Lawyers.

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Think twice before Dismissing Employees on Workers’ Compensation
Unfair Dismissal – Not Covered By An Award
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