Redundancy Step-by-Step Guide for Australian Employers

Making a role redundant is a sensitive process that must be handled legally, fairly, and compassionately. This comprehensive step-by-step guide walks Australian employers through every stage of a redundancy, ensuring compliance with the Fair Work Act 2009 and National Employment Standards (NES), while also addressing best practices for communication, employee support, and maintaining workplace morale. It is suitable for all employers – including small businesses – and reflects current (2025) legislation and guidance.

Table of Contents:

1. Introduction: What Is a Genuine Redundancy?

2. Step 1: Preliminary Planning and Legal Obligations

3. Step 2: Consultation Requirements

4. Step 3: Calculate Employee Entitlements (Notice, Redundancy Pay, Leave)

5. Step 4: Documentation and Notification

6. Step 5: Communicating the Redundancy to the Employee

7. Step 6: Support for the Departing Employee (Emotional Support & Outplacement)

8. Step 7: Supporting Remaining Staff and Preserving Morale

9. Step 8: Finalising Termination, Record-Keeping & Risk Management

10. Conclusion and Resources

    
    

Introduction: What Is a Genuine Redundancy?

Redundancy occurs when an employer no longer needs a role to be performed by anyone – for example due to a restructure, downturn, business closure, or technological change.

Crucially, a redundancy is about eliminating a position, not about an employee’s performance or conduct. A genuine redundancy under the Fair Work Act is defined by three key criteria:

• Job no longer required: The person’s job will not be done by anyone else (the role is eliminated).

• Consultation requirements met: The employer has complied with any obligations to consult about the change (such as those in a modern award or enterprise agreement).

• No reasonable redeployment: There were no reasonable opportunities to redeploy the employee within the business or any associated.

  
  

If all the above are satisfied, the redundancy is “genuine” and the affected employee cannot bring an unfair dismissal claim over the termination. However, if a redundancy fails these tests – for example, if the employer does not actually eliminate the role, skips required consultation, or could have offered the employee another suitable job – then it may not be a genuine redundancy. An invalid redundancy can be treated as an unfair dismissal or unlawful termination.

Important: It is unlawful to target an employee for redundancy on discriminatory grounds (e.g. due to their race, sex, age, pregnancy, etc.)

Always select roles for redundancy based on legitimate business reasons and documented criteria – never personal attributes – to avoid breaching anti-discrimination laws.

Step 1: Preliminary Planning and Legal Obligations

Objective: Ensure the redundancy is necessary, legally compliant, and properly planned before taking action.

• Review the Business Case: Clearly identify why the role is no longer needed. Common reasons include restructuring for efficiency, a downturn in work, business closure, relocation, or technological. Make sure you can demonstrate the operational rationale for the redundancy (e.g. organisational charts or financial data showing the need to cut that position).

  
  

• Exhaust Alternatives: Before proceeding, consider any reasonable alternatives to avoid or minimise redundancies. Could the employee be redeployed to a different vacancy or adjusted role? Could measures like reduced hours, job sharing, or natural attrition solve the issue? (Exploring such options is not only compassionate but also part of proving the redundancy is genuine. Document any alternatives considered and why they weren’t viable.

• Check Redeployment Possibilities: The Fair Work Act expects employers to consider “reasonable redeployment” within your business or an associated entity, before finalising. For a redundancy to be genuine, you must be able to show there were no suitable alternative positions available for the person (taking into account factors like location, pay, status, and the employee’s skills). Tip: Keep a written record of your redeployment considerations or offers (even if the employee declines a redeployment offer.

• Small Business Considerations: If you are a small business employer (fewer than 15 employees), you are exempt from paying statutory redundancy pay under the NES in most cases (see Step 3), but you must still follow a fair process. Small businesses should adhere to the Fair Dismissal Code, which includes a checklist for fair termination.

  
  

• Plan the Process & Timeline: Map out a timeline for the redundancy process, including time for consultation (Step 2), preparing paperwork (Step 4), holding the redundancy meeting (Step 5), and the employee’s notice period or end date. Coordinate any necessary approvals from upper management or owners. Confidentiality is key in the planning phase – avoid premature communication or rumors before consultation begins officially.

  
  

• Seek Advice if Needed: Redundancy laws can be complex. If uncertain about any obligations (especially if you have unique award conditions or multiple redundancies), consider seeking professional legal or HR advice before taking action. This can prevent costly mistakes.

  
  

Checklist – Preliminary Planning: Have you confirmed the redundancy is genuinely required (and not due to performance)? Have you identified any possible redeployment or alternative solutions and documented your considerations? If a small business, are you following the Small Business Fair Dismissal Code? Are you prepared to explain the business reason clearly? Taking these steps upfront will set a solid foundation for a fair and defensible process.

Step 2: Consultation Requirements

Objective: Fulfill all consultation obligations and engage with employees in a meaningful way before final decisions are implemented.

Most employees in Australia are covered by a Modern Award or Enterprise Agreement that contains a consultation clause. Under these provisions (and as a matter of best practice), employers must consult with any staff who are likely to be affected by a major change such as redundancy.

In practical terms, consultation involves notifying the employee(s) of the proposed change, discussing its impacts, and considering their feedback before finalising the redundancy. Key steps include:

• Notify Affected Employees Early: As soon as a definite decision is made that may result in redundancies, advise the affected employee(s) in writing and/or in person. Explain the nature of the proposed changes and the roles likely to be impacted.

  
  

• Provide Information on Changes: Give employees relevant information about the change, such as the reason for the redundancy, the expected timing, and the impact on their employment. Provide this in writing if possible, so they have time to absorb details.

• Invite Feedback and Suggestions: Genuine consultation means employees should have a chance to respond and contribute ideas. This might include ideas like alternative work arrangements, retraining for other roles, voluntary redundancy expressions of interest, etc. Listen with an open mind.

• Discuss Measures to Mitigate Impact: As part of consultation, talk about steps you’ve taken or could take to avoid or minimise negative effects on employees. For example, you might explain that you froze hiring or cut contractors before resorting to redundancy, or that you will assist the employee with job search support (outplacement) to lessen the impact.

  
  

• Allow Representation: If the employee’s award or agreement allows, they may have the right to a representative (such as a union official) in consultation discussions. Ensure you follow any required process, like notifying the union of major changes if stipulated.

  
  

• Keep Records of Consultation: Document all consultation efforts – dates of meetings, what was discussed, and any materials provided. Good record-keeping of the consultation (minutes, emails, letters) will serve as evidence that you complied. (This is crucial if later challenged.

• Timing of Consultation: While you may have made a decision in principle, consultation should occur before final implementation (e.g. before issuing a termination notice). Provide enough time between the consultation and the final decision for the employee to respond or seek advice. Rushing or conducting consultation as a mere formality could be deemed inadequate.

  
  

• Large-scale Redundancies (15+ employees): If you plan to make 15 or more employees redundant, there is an extra legal step: you must notify the government (Services Australia) in writing of the proposed dismissals before they occur.

  
  

• This written notification (often to Centrelink via the prescribed form) should include the number of employees affected.

  
  

Consultation Best Practices: Consultation is not just a legal box-ticking exercise – it’s also about treating people with respect and transparency. Be honest and empathetic in these discussions. Use plain language (avoid corporate jargon) to explain why the change is necessary. Acknowledge that this news is difficult and that you understand it impacts them significantly. Even if an employee can’t ultimately avoid redundancy, feeling heard and respected during the process can reduce resentment and help them accept the outcome more smoothly. According to best practice guidance, proper consultation and cooperation in the workplace builds trust.

Note: If no award or agreement applies (some senior managers or award-free employees), there may be no strict legal requirement to consult. However, it remains highly recommended to follow a similar consultation approach as a matter of fairness and good HR practice. This can also help show the dismissal was a genuine redundancy (important for any potential unfair dismissal issues).

Step 3: Calculate Employee Entitlements (Notice, Redundancy Pay, Leave)

Objective: Determine the exact entitlements owed to the employee, including notice of termination, redundancy pay, and payout of accrued leave or other benefits, in accordance with the applicable award/agreement.

Before announcing or finalising the redundancy, you should calculate all financial entitlements the employee will receive, so you can communicate and eventually pay these correctly. Key entitlements include:

3.1 Notice of Termination

Under the NES, employers must give a minimum period of notice (or pay in lieu of notice) when terminating employment due to redundancy. The required notice period is based on the employee’s length of continuous service with you (and is the same for redundancy as for any other termination, except in cases of serious misconduct).

The minimum notice periods:

• Less than 1 year of service – 1 week notice

• 1 year up to 3 years – 2 weeks notice

• 3 years up to 5 years – 3 weeks notice

• Over 5 years – 4 weeks notice

Additionally, if the employee is aged 45 or older and has at least 2 years of continuous service, they are entitled to 1 extra week of notice on top of the above.

You can choose to have the employee work through the notice period or end their employment sooner by providing pay in lieu of notice (an immediate termination with full payment of the notice period they would have worked).

Small Business Note: All employers, including small businesses, must give the required notice or payment in lieu (the small business exemption does not apply to notice; it only relates to redundancy pay).

3.2 Redundancy Pay (Severance Pay)

In addition to notice, eligible employees are entitled to a lump sum redundancy payment (also called severance pay)

Who Gets Redundancy Pay? 

Not every employee is entitled to redundancy pay. Under the Fair Work Act, no redundancy pay is required for certain categories of employees:

• Have less than 12 months continuous service;

• Are employed by a small business employer (fewer than 15 employees at the time of the redundancy)

• Are employed for a fixed period/task/season and are let go at the end of that period or task (e.g. a fixed-term contract ending as scheduled)

• Are casual employees;

• Are apprentices or trainees engaged for the length of training (or are otherwise excluded by law, such as certain public sector employees).

  
  

If any of these apply, the employee may not be entitled to redundancy pay under the NES. For example, a full-time employee with 8 months of service gets notice of termination but no severance pay. If in doubt, use the Fair Work Ombudsman’s Notice and Redundancy Calculator to verify.

3.3 Other End-of-Employment Entitlements

In a redundancy, the employee must receive all their accrued statutory entitlements up to the end date, just like any termination:

• Accumulated Annual Leave: Pay out all unused annual leave in full. Under NES, this must be paid at the employee’s base rate for each unused hour/day. (Note: Annual leave payout is always required on termination, regardless of the reason.)

• Pro Rata Long Service Leave: If the employee is eligible for long service leave (LSL) under federal or state law, pay out any accrued LSL as required. In some states/territories, if an employee is made redundant before qualifying for the full long service period, they may still get a pro-rata payout (for example, in NSW pro-rata LSL is payable after 5 years if termination is due to redundancy). Check your state’s LSL legislation for specifics, and include any owed amount.

• Final Pay Timing: Typically, final termination payments (including redundancy pay, notice pay, leave accruals) should be made on the employee’s last day of work or the next regular pay cycle, unless an earlier timeframe is mandated by an award or agreement. It’s best practice to pay as soon as possible to assist the departing employee.

• Superannuation: Redundancy pay and unused leave payouts are generally subject to superannuation under normal rules? (Note: Standard redundancy and notice payments may not attract super guarantee in all cases – check with your payroll or the ATO. As of current law, unused leave and notice in lieu are usually included in ordinary time earnings for super, but genuine redundancy payments may be treated differently for tax and super purposes. When in doubt, confirm with the ATO or an accountant and ensure all owed super contributions are made.)

• Taxation: Be aware that genuine redundancy payments are tax-free up to a certain limit based on the employee’s years of service (this is the “tax free component” of a genuine redundancy as per ATO rules). Amounts above that are taxed as employment termination payments. It may be wise to provide the employee with information about taxation or direct them to the ATO for advice on how their payout will be taxed.

Tip: Prepare a clear entitlements summary for the employee (to be given in writing at termination). This might be a letter or attachment that breaks down: the notice period (dates and whether worked or paid out), the redundancy pay calculation (weeks and amount), payment for annual/LSL leave, any other payments (e.g. pro rata bonus if applicable), and the total gross and net amounts. This transparency helps the employee understand their payout and reduces confusion.

Step 4: Documentation and Notification

Objective: Complete all necessary paperwork and formal notifications, ensuring everything is well-documented and legally sound.

Proper documentation is crucial in a redundancy process – it provides clarity to the employee and protects the employer. Key documents and actions in this step include:

• A termination letter for redundancy should include all essential details, including:

  • The reason for termination – e.g. “your position is being made redundant due to [business reason, such as a restructure or downturn]”. Keep this brief and factual.

  • The effective date of termination – the employee’s last day of work.

  • The notice period (and whether the employee will work through it or receive payment in lieu).

  • The redundancy pay amount (if applicable) and how it was .

  • Any other final payments to be made – e.g. payout of annual leave, long service leave.

  • Instructions on return of company property (if not handled separately) and any other off-boarding procedures.

    
    

Use clear, respectful language in the letter. It’s a formal document, but the tone should be professional and empathetic.

The Fair Work Ombudsman provides a “Termination of employment letter – redundancy template”, which includes a step-by-step guide to handling the redundancy process and can be a helpful starting point.

By completing all the above documentation before the termination meeting, you will be well-prepared to answer the employee’s questions about their entitlements and the process. It also shows professionalism and organisation, which can instil a bit more confidence in the employee that the process is being handled properly.

Reminder: Treat all redundancy-related documents as confidential. Only share details on a need-to-know basis (for instance, payroll will need final pay figures, but other staff should not see termination letters, etc.)

Step 5: Communicating the Redundancy to the Employee

Objective: Conduct a face-to-face (or live video/phone if remote) meeting to inform the employee of the redundancy decision, doing so with clarity, empathy, and professionalism. This is the most critical and delicate step, as it directly impacts the employee’s experience.

Before the Meeting:

• Plan the Logistics: Choose a private, quiet setting for the discussion, free from interruptions. Ideally, schedule the meeting at a time when the workplace is calm (e.g. early in the day and not immediately before a weekend or holiday, to allow follow-up support on the day). Have a second person present if possible, such as an HR representative or another manager, both as a witness and to provide support. Allocate adequate time so the meeting isn’t rushed – though the conversation should be concise (often 10–15 minutes), the employee may need time to process or ask questions.

• Have Documents Ready: Bring the prepared termination letter and an entitlements summary to hand to the employee during or at the end of the meeting. Also have information on support services (outplacement program brochures, Employee Assistance Program info, etc.) ready to give them. Having tissues and a glass of water on hand is a considerate touch in case the news is upsetting.

• Rehearse Key Messages: It’s normal to feel anxious about delivering bad news. To ensure you cover everything, rehearse what you will say. Stick to the script of facts and empathy, and avoid going into unrelated or personal topics. Remember: the goal is to be clear, direct, and compassionate.

During the Meeting:

Get to the Point with Empathy: Start the meeting by clearly and compassionately stating what is happening. Don’t engage in lengthy small talk (which can cause anxiety); instead, lead with the difficult news while showing empathy.

Acknowledge that this decision is not reflective of their performance but is due to business circumstances. Keep your tone serious, calm, and kind. By addressing the core message upfront (“your role is being made redundant”), you avoid confusion and ensure the employee understands the gravity of the discussion from the start.

Explain the Business Reason: Once you’ve stated the outcome, briefly explain why the redundancy is happening. Provide a factual business reason so the employee knows it’s an organisational decision, not personal.

Keep the explanation concise and specific enough to be credible (e.g. “the project you were working on has ended and the role is no longer needed” or “the function is being outsourced, so we no longer require an in-house position”). Avoid wording that blames the employee in any way. Clarity here helps the employee see the logic, even if they are upset by it.

Be clear and thorough in this part, as the shock of the news can make it hard for the employee to take in details. Speak slowly, and after going through the points, offer to go over any of them again. You might say, “I know this is a lot of information; we will give this to you in writing and I can answer any questions now or later.”

If the employee becomes emotional (cries, gets angry, etc.), allow a moment for them to compose themselves. Listen actively to any feelings they express – sometimes they might not ask a question but vent frustration or sadness. You can respond with understanding: “I know this news is very difficult” or “I understand that you’re upset – I would be too. I’m really sorry that we have to do this.” You don’t need to defend the company beyond stating the reason; focus on acknowledging their feelings and reiterating support available.

Close with Care: End the meeting with a respectful closing. Thank the employee sincerely for their contributions to the company, if appropriate: e.g. “I want to personally thank you for all your hard work here over the past X years. This decision in no way diminishes the value you’ve brought to our team.” Offer a handshake (if it feels appropriate and the employee is receptive) or simply a respectful nod and an offer of help: “I’m truly sorry we have to part ways like this. Please let us know if there’s anything we can do to support you in your transition.” Hand over the termination letter and any information packets now if you haven’t already.

What Not to Do: Do not prolong the meeting with unnecessary filler once the key information is delivered; that can make it harder on the employee. Avoid making promises you can’t keep (like false hope of rehiring soon or unconfirmed possibilities). Don’t argue or get drawn into debates if the employee pushes back – just re-emphasise the business rationale and that the decision is final, while acknowledging their feelings. If the employee accuses you or the company of wrongdoing, remain calm and say you understand it’s upsetting; do not retaliate or become defensive in tone. Keep the focus on next steps and support.

Support for the Departing Employee (Emotional Support & Outplacement)

Objective: Provide meaningful support to the redundant employee to assist with their emotional well-being and career transition, demonstrating care for the individual beyond simply paying their entitlements.

Losing a job can be emotionally and financially traumatic for an employee. How you support them during and after the redundancy can make a significant difference to their outlook – and it reflects on your organisation’s values, affecting your employer brand and the morale of remaining staff. Consider the following support measures:

• Emotional Support and Dignity: Treat the employee with respect throughout their remaining time. After the initial meeting (Step 5), they may be in shock or distress. Offer them a private space if they need to compose themselves. If they wish, allow them to say goodbye to coworkers or collect personal items outside of work hours to avoid embarrassment – accommodate their preferences as much as possible. Ensure that managers and team members approach the situation with sensitivity (no gossip or insensitive remarks).

• If your company has an Employee Assistance Program (EAP) or counseling service, remind the departing employee that they (and often their immediate family) can access confidential counseling to help cope with this change. This is often provided for a limited period post-termination as well – clarify the details (e.g. “Our EAP is available to you for the next 3 months, up to X sessions, at no cost.”)

• Outplacement Services: One of the most beneficial supports you can offer is an outplacement program – professional career transition services funded by the employer to help the redundant employee find a new job. Outplacement typically provides one-on-one coaching, resume and LinkedIn assistance, interview preparation, job search strategies, and sometimes even office space or workshops for job seekers. Engaging an outplacement provider (such as a specialist firm) gives the employee practical help and boosts their confidence in a tough time.

  
  

Benefits of Outplacement: 

Offering outplacement isn’t legally required, but it has strong advantages:

• It helps the employee land on their feet faster – research shows professional career support helps people secure new jobs more quickly than searching alone.

• It can reduce the stress and trauma of redundancy for both the departing employee and their colleagues. When remaining staff see that their coworker is being supported and has resources to move forward, it can alleviate “survivor’s guilt” . They know that if it ever happens to them, they would also be treated well.

• It provides expert help to the individual at a time they may feel lost – from identifying new career directions to polishing their interview.

• For the employer, outplacement consultants can sometimes guide you on handling notifications and communications more smoothly, reducing risk of missteps (some providers offer manager training for delivering redundancies, which can be invaluable for small businesses unfamiliar with the process).

If you decide to offer outplacement, arrange it before the redundancy meeting so you can immediately inform the employee (e.g. have a brochure or contact person ready). Ensure the service is of decent quality – ideally a reputable outplacement firm or career coach.

• Respect and Acknowledgment: Where appropriate, acknowledge the employee’s work and time with the company publicly. This might be a farewell note or small gathering (only if the employee is comfortable with it). Celebrating their contributions can give them a sense of dignity in departure. Always check with the individual – some may prefer to leave quietly.

• Handling Emotions: Be mindful that even with support offered, the employee may experience stages of grief (shock, anger, sadness). In interactions after the redundancy notice, be patient and understanding. If they vent or express frustration in the days following, listen and respond calmly. Ensure HR or a manager is available for them to talk to.

• Confidential Counselling: Encourage them again to utilise counselling if they are struggling emotionally. An EAP can provide tools for coping with stress, and it’s confidential.

  
  

By robustly supporting the departing employee, you not only do the right thing by that individual, but you also protect your company’s culture and reputation. Employees (both departing and remaining) will remember how redundancies were handled. Providing outplacement and compassionate treatment sends a message that people are valued beyond their direct utility to the company.

Supporting Remaining Staff and Preserving Morale

Objective: Manage the “survivor” impact on remaining employees after a redundancy, maintaining trust, morale, and company culture.

Here’s how to support your team post-redundancy:

• Communicate Transparently with the Team: As soon as practical after informing all affected individuals, communicate the change to the remaining staff. This can be done in a team meeting or via a thoughtful email from a senior manager. Explain the situation honestly, including the business reasons for the redundancies (in general terms) and the fact that it was a difficult decision. Be clear about what this means for the team going forward. For example: “Due to the recent loss of a major contract, we have had to reduce our staff. Three roles (including [Job Title]) have been made redundant. We want to acknowledge the contributions of those leaving and ensure everyone understands why this happened.” Honesty helps dispel rumors and prevents misinformation from spreading.

  
  

• Reaffirm the Future and Job Security (if possible): One of the first questions remaining employees have is “Will there be more cuts? Is my job safe?” If the redundancies were a one-off needed adjustment, state that clearly: e.g. “We do not anticipate further staff reductions after this.” Only say this if true – false reassurance can backfire severely. If future cuts are possible or business is still unstable, be careful not to make promises; instead, you might emphasise what the company is doing to improve stability. The key is not to leave people in the dark. Uncertainty is breeding ground for fear.

  
  

• Acknowledge Emotions: Recognise that employees may be feeling unsettled or upset. Encourage an open dialogue: “I know many of you may be feeling shocked or concerned. It’s okay to feel this way. Let’s talk about any questions or concerns you have.” By validating their emotions, you help employees process the situation. Managers should be visible and approachable; have an “open door” policy in the days following, so people feel they can seek clarification or just air out how they feel.

  
  

• Address Workload and Role Changes: Often, when someone is made redundant, their tasks don’t disappear entirely; they get distributed among the remaining staff or ceased. Clearly communicate any role or responsibility changes so people know what is expected of them. If you’ve eliminated a role, make sure its critical duties are reassigned and that the person taking them on is given the capacity or training to handle them. If you simply expect everyone to do more with less, resentment can fester. Instead, prioritise projects and possibly drop low-priority work to keep workloads reasonable. Show that you are mindful of not overburdening the team.

  
  

Remember: How you handle the post-redundancy period will impact retention of your remaining talent. Many companies see a wave of resignations after layoffs because survivors feel demoralised or insecure.

By actively managing the cultural impact – being honest, showing appreciation, and providing support – you can prevent a downward spiral and instead help the team recover.

In summary, don’t underestimate the ripple effect a redundancy can have. Investing time and care in your remaining staff is not just kind – it’s smart for your business’s continuity and future success.

Finally, maintain a sense of humanity even as you button up the process. Reaching out to the departed employee later (for example, a quick call or email a few weeks on to see how they are doing, or congratulating them if you hear they got a new job) is not a requirement, but it can foster goodwill. At the least, ensure that their transition out is smooth (no payroll glitches, timely paperwork, etc.). A well-handled redundancy, while never easy, can conclude with the employee feeling that they were treated lawfully and respectfully – which is the outcome every employer should strive for.

Conclusion and Resources

Redundancy is a challenging process for all involved, but by following this step-by-step guide, Australian employers can carry it out fairly, legally, and compassionately. To recap, always verify the redundancy is genuine, consult with affected staff, pay the correct entitlements, communicate openly with empathy, support those leaving (and those staying), and keep thorough records.

Useful Resources and Templates:

• Fair Work Ombudsman – Redundancy: Official information on redundancy, including eligibility.

• Notice and Redundancy Calculator (Fair Work): Online tool to calculate notice and redundancy pay.

• Outplacement Services: If considering outplacement, refer to providers like Nicole Coggan.

• Fair Work Commission – Redundancy Case Decisions: Reviewing some FWC decisions on redundancy (unfair dismissal cases) can provide insight into what not to do. (For example, cases where employers failed to consult and had to pay compensation).

  
  

By leveraging these resources and adhering to the steps above, you can navigate the redundancy process with confidence and care. While making a role redundant is never “easy,” handling it the right way upholds your legal obligations and the dignity of your employees – which is the hallmark of a responsible and ethical Australian employer.