Genuine Redundancy in Australia: Consultation, Selection and Payout Rules

By Natasha Silveira | 1 October 2026 | 11 min read

Sales are down 30 per cent and you need to cut two roles from a team of 22. You know what you can afford. What you don’t know is what the law expects. Genuine redundancy in Australia has a precise legal meaning, and an employer who misses one part of it can face an unfair dismissal claim even when the business case is real.

This guide explains the three tests that make a redundancy genuine, how to consult and select fairly, what you have to pay and the mistakes that most often turn a sound restructure into a dispute.

What genuine redundancy means in Australia

Under section 389 of the Fair Work Act, a dismissal is a case of genuine redundancy when the employer no longer needs the job done by anyone because of changes in the operational requirements of the business, and the employer has followed any consultation requirement in the applicable modern award or enterprise agreement. It is not a genuine redundancy if it would have been reasonable to redeploy the employee somewhere in the business or an associated entity.

That definition matters because of what it protects. A genuine redundancy can’t be an unfair dismissal. If the employee lodges a claim, the Fair Work Commission first checks whether the redundancy was genuine. If it was, the claim stops there.

Redundancy pay is a separate question. It sits in section 119 of the Act and the National Employment Standards. You can run a genuine redundancy and still owe redundancy pay, or owe none at all if you are a small business. The Fair Work Ombudsman’s redundancy guide sets out both sides in plain terms.

The three tests every redundancy must pass

1. The job no longer needs to be done by anyone

The focus is the job, not the person. Changes such as new technology, a lost contract, falling demand or a merged function can all mean a role is no longer needed. Spreading the duties across the remaining staff is fine. Hiring someone new to do the same job under a different title is not.

2. You consulted as the award or agreement requires

Most modern awards and enterprise agreements contain a consultation clause. Once you have made a definite decision to make major changes, you must tell affected employees, give them written information about the change and its effects, and discuss ways to avoid or reduce the impact. You must also genuinely consider what they say. Consultation that happens after the decision is locked in does not count.

3. Redeployment wasn’t reasonable

This is the test that changed most recently. In Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, the High Court confirmed that the Commission can look beyond existing vacancies. It can ask whether the employer could reasonably have reorganised its workforce, such as bringing contracted work back in-house, to create room for the employee. Checking the vacancy list is no longer enough.

A step-by-step genuine redundancy process

Follow these steps in order. Each one builds the record you’ll need if the decision is ever challenged.

1. Document the business case and why each role is no longer needed.
2. Check the award or agreement for consultation and redundancy clauses.
3. Consult affected staff in writing and in a meeting.
4. Apply fair selection criteria if choosing between similar roles.
5. Review redeployment options, including reasonable reorganisation.
6. Confirm the decision in writing with notice and payout details.

Give people real time between the first consultation meeting and the final decision. A week is common for small changes. Larger restructures need longer. Keep notes of every meeting, every suggestion staff made and why you did or didn’t adopt it.

Running the consultation meeting

Hold the first meeting in private, with a second manager taking notes. Explain the business reason, the roles affected and the likely timing. Hand over the same information in writing. Invite the employee to bring a support person and to suggest alternatives, such as reduced hours, a different role or voluntary redundancy elsewhere in the team.

Then actually consider those ideas. Write down each suggestion and the reason you accepted or rejected it. That note is often the single most useful document if the Commission later asks whether consultation was genuine.

Selecting who goes

When several people do similar work and only some roles are going, selection is where most disputes start. Use objective criteria such as skills the business needs next, documented performance, qualifications and licences. Apply them the same way to everyone, and score each person against them.

Avoid criteria that touch a protected attribute or a workplace right. Selecting someone because they work part time, recently took parental leave or made a complaint can lead to a general protections claim. That claim does not stop at the genuine redundancy defence.

Redundancy pay and the full payout

Under the NES, an eligible employee made redundant gets redundancy pay based on continuous service with the employer. The scale peaks at 16 weeks for nine to ten years, then drops to 12 weeks from ten years, because long service leave is expected to take over.

The full scale also includes 7 weeks for three to four years, 11 weeks for six to seven years, 13 weeks for seven to eight years and 14 weeks for eight to nine years. Redundancy pay is calculated at the employee’s base rate for ordinary hours.

Not everyone is eligible. The NES scale generally doesn’t apply to small business employers with fewer than 15 employees, casuals, employees with less than a year of service, or fixed-term staff whose contract simply ends. Check your award and contracts too, as they can provide redundancy pay where the NES doesn’t.

The total payout is usually bigger than redundancy pay alone. It typically includes:

• Notice, or pay in lieu, under the NES or award.
• Redundancy pay under the NES, award or contract, whichever is higher.
• Accrued annual leave, plus leave loading where the award requires it.
• Long service leave under the relevant state or territory law.

A worked example

Take an operations coordinator, aged 48, with six and a half years of service on a base rate of $1,200 a week. Her NES redundancy pay is 11 weeks, or $13,200. Her notice is four weeks for more than five years of service, plus one extra week because she is over 45 with at least two years of service. That is five weeks, or $6,000, if paid in lieu.

Add her accrued annual leave and any leave loading, and the total is likely to pass $20,000 before long service leave is considered. Budget for the full figure, not just the redundancy line.

Tax treatment differs too. Part of a genuine redundancy payment is tax free up to a limit set by a base amount plus an amount for each year of service. The ATO’s redundancy guidance publishes the current indexed figures. If your payroll team hasn’t processed a redundancy before, VeiraMal payroll services can calculate the components and report them correctly through Single Touch Payroll.

How small businesses are treated differently

If you employ fewer than 15 people, counting regular casuals and associated entities, you are generally exempt from the NES redundancy pay scale. You still owe notice and accrued leave, and any redundancy pay your award or contracts promise.

The genuine redundancy rules still matter to you. An employee with 12 months of service can claim unfair dismissal against a small business, and the Commission will ask the same three questions about the job, consultation and redeployment. Getting this right protects you even when no redundancy pay is owed.

Headcount can also shift during a restructure. If you are close to the line, count carefully before you decide which rules apply. Our guide to HR obligations that change once you pass 15 employees explains who counts.

Common redundancy mistakes

Redundancies are part of normal business life. The ABS found the annual retrenchment rate was 1.8 per cent in February 2026, down from 1.9 per cent a year earlier. Even so, most owners only run one every few years, so the same errors keep appearing.

1. Deciding first, consulting later. A meeting that announces a done deal isn’t consultation.
2. Using redundancy to exit a poor performer. If the job still exists, the redundancy isn’t genuine.
3. Only checking current vacancies. After the High Court decision, reasonable reorganisation counts too.
4. Rehiring for the same role. Advertising the job a few months later undoes the defence.
5. Underpaying the exit. Missing leave loading or using the wrong service date creates a pay claim.

The rehiring trap deserves a word. If demand picks up, it is fine to grow again, but a new role needs to be genuinely different. When you do rebuild, a structured process such as VeiraMal’s RPO services keeps a clear record of how the new role differs from the old one.

Getting help with a restructure

A redundancy affects the people who leave and the people who stay. Handled well, the remaining team understands the reasons and keeps working. Handled badly, you lose trust as well as headcount.

Plan what you will tell the remaining staff on the day the decisions are confirmed. Keep it short and honest: what changed, which roles are affected, how work will be shared and who to ask. Silence fills quickly with rumour, and good people start looking elsewhere.

VeiraMal’s outsourced HR services help SMEs in Melbourne, Sydney and Hobart plan consultation, run fair selection, test redeployment and write the letters. If you dismiss someone for reasons other than redundancy, our guide on how to terminate an employee legally in Australia covers that process.

For a quick read on a restructure you are planning, call VeiraMal directly or send a message through the contact form. It is much easier to fix a consultation plan before the first meeting than after.

Frequently asked questions