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Redundancy

Redundancy occurs when an employee is no longer required to do a job because the employer has decided that the job will not be done by anyone.

This often occurs as a result of economic difficulties for the business and the need to reduce staff.  Redundancy is not related to the performance or behaviour of individual employees. Employers can consider a range of alternatives before making employees redundant - Labour Relations has prepared a publication that provides an overview of redundancy alternatives [PDF, 1.85MB].

  1. Redundancy entitlements
  2. Severance payments
  3. Exclusions from severance payments
  4. Making a claim for unpaid severance entitlements

Redundancy entitlements

If an employee is being made redundant, employers must provide:

  • any relevant standard termination entitlements; and
  • severance payments if the employee is entitled to them.

If an employer is terminating employees on the grounds of redundancy they must also notify Centrelink in writing, giving the following details:

  • reasons for the terminations;
  • number and category of employees likely to be affected;
  • number of employees normally employed; and
  • period over which the terminations are likely to be carried out.

Severance payments

An employee who is employed by an employer with 15 or more employees is entitled to severance pay when terminated on the grounds of redundancy.  Where awards and agreements contain redundancy provisions that provide particular entitlements that are more favourable to employees, the award provisions will apply over these particular entitlements.
 

Period of continuous service Number of weeks’ pay
Less than 1 year  Nil
1 year and less than 2 years 4
2 years and less than 3 years 6
3 years and less than 4 years 7
4 years and less than 5 years 8
5 years and less than 6 years  10
6 years and less than 7 years  11
7 years and less than 8 years 13
8 years and less than 9 years  14
9 years and less than 10 years  16
10 years and over 12

Employers and employees should note that:

  • severance payments reduce after 10 years to take account of long service leave entitlements;
  • the definition of a week’s pay excludes overtime, penalty rates, allowances, bonuses and any other similar ancillary payments;
  • severance payments may not be applicable during a transmission of business if the employee’s employment continues with the new owner, who recognises prior service; and
  • the calculation of the number of employees includes each casual and part time employee.

Exclusions from severance payments

The following types of employees are excluded from these severance payments:

  • employees being terminated for serious misconduct;
  • employees with less than one year’s service;
  • probationary employees;
  • apprentices and trainees;
  • employees engaged for a specific period of time or for a specified task; and
  • casual employees.

Making a claim for unpaid severance entitlements

Employees who believe that they have not received appropriate severance pay or other entitlements should call Wageline on 1300 655 266.

In situations where employees believe they have not been paid correctly, the Department of Commerce may assist by providing an impartial assessment of the matter, with intervention to ensure that industrial laws are correctly complied with.