Notice of redundancy letters and your legal duties when making a role redundant

When you decide a position in your business is no longer needed, the notice of redundancy letter is the document that carries most of your legal weight. It is not a courtesy. The Fair Work Act 2009 (Cth) requires you to give an employee written notice of the day of their termination, and that letter is also the record that shows you did everything else the law expects around a redundancy: a genuine reason, consultation where an award or agreement requires it, the correct notice period, and the correct redundancy pay.

The National Employment Standards (NES) set the minimum standards, and modern awards, enterprise agreements and employment contracts can add to them but never take away. This article sets out who these duties apply to, the six duties you need to discharge when you make a role redundant, what your letter needs to say to satisfy the written notice duty, and what it costs if you miss a step.

Who these duties apply to and when they bite

The redundancy duties in the Fair Work Act apply to national system employers, which covers most private sector businesses in Australia. A redundancy, in the legal sense, exists when the employer no longer requires the job done by the employee to be done by anyone, for reasons other than the ordinary and customary turnover of labour (s 119(1)(a)). Restructuring, technology making a role obsolete, closing part of the business and outsourcing all count. What does not count is dismissing someone and having another person quietly take over the same work.

Four thresholds decide which duties apply to your situation:

• Length of service: redundancy pay is only owed once an employee has at least 12 months of continuous service (s 121).
• Small business exemption: an employer with fewer than 15 employees does not have to pay redundancy pay at all (s 23 and s 121). Regular casuals count towards the 15, and associated entities are counted together.
• Employee type: casual employees, and employees engaged for a specified period, task or season, sit outside the notice and redundancy pay provisions (s 123).
• Unfair dismissal access: an employee needs six months of service to challenge a dismissal, or 12 months if you are a small business employer (s 383).

None of these thresholds remove the need for a written notice of termination. That obligation applies to every dismissal, redundancy or not.

Duty 1: Make sure the redundancy is genuine

The first duty is to be satisfied the redundancy is real before you send anything. A dismissal is a case of genuine redundancy only if the employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the enterprise (s 389(1)). The test looks at the job, not the person. If the real reason is that you want the individual gone, or the work is still being done by someone else, the redundancy is not genuine and the dismissal can be challenged.

Genuine redundancy also has a redeployment dimension. The dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances to redeploy the person within your enterprise, or within the enterprise of an associated entity (s 389(2)). This is why the letter should record what redeployment options were considered. A bare statement that no suitable alternative position existed is weak evidence; a file note of the roles considered, and why each was unsuitable, is strong evidence.

Duty 2: Consult before you decide

Consultation is not an NES entitlement. The obligation to consult about redundancy comes from the consultation clause in the relevant modern award or enterprise agreement, and almost every modern award has one. The standard model clause requires you to notify employees in writing about major workplace changes that are likely to have a significant effect on them, invite their views, and genuinely consider those views before finalising the decision.

Do not treat consultation as a formality. Compliance with the award or agreement consultation obligation is part of the definition of genuine redundancy itself (s 389(1)(b)). Skip the consultation and you lose more than a procedural point: the dismissal may not be a genuine redundancy at all, which removes your main defence to an unfair dismissal claim. If no award or enterprise agreement covers the employee, there may be no legal duty to consult, but documenting the process is still the prudent course, and the letter should reflect what was done either way.

Duty 3: Give written notice of termination

The NES requires you to give the employee written notice of the day of termination, and that day cannot be before the day the notice is given (s 117(1)). This is the statutory job your letter performs. The notice period must be at least the minimum set by s 117(3):

• 1 week for up to 1 year of continuous service
• 2 weeks for more than 1 year but not more than 3 years
• 3 weeks for more than 3 years but not more than 5 years
• 4 weeks for more than 5 years

An employee over 45 who has completed at least 2 years of service gets one additional week. Your contract or award may require more notice, and payment in lieu of notice is permitted, but the employee must receive at least the amount they would have earned during the minimum notice period at their full rate of pay (s 117(2)). Your letter should state which option you are using, and if you are paying in lieu, the period it covers.

Duty 4: Draft the letter that proves the process

Because the letter is the compliance record, every element should map back to a duty. A well-drafted notice of redundancy letter includes:

• Date and employee details: the employee's full name, position and location, and the date the letter is given.
• Statement of redundancy: a clear statement that the position is being made redundant, and the operational reason (restructuring, technology, closure, outsourcing).
• Consultation summary: confirmation that the required consultation under any applicable award or enterprise agreement occurred, including when the employee was given the opportunity to respond.
• Final day of employment: the last day of work, which must be on or after the day the notice is given.
• Notice period: the statutory or contractual notice period, or a statement that payment in lieu is being made, with the amount and the period it covers.
• Redundancy pay: the amount payable under the NES scale, or a clear statement of why it is not payable (for example, the small business exemption or service under 12 months).
• Final entitlements: outstanding wages, untaken annual leave, long service leave where applicable, and how and when they will be paid.
• Redeployment efforts: a summary of the alternative roles considered within the business and any associated entities, and why none was suitable.
• Support and contact: any assistance available, such as an employee assistance program or outplacement support, and the name of a contact person for questions.

Keep the language clear and neutral. The letter is not the place for blame or legalese, and it should never suggest the redundancy is the employee's fault. What it must do is state the facts precisely enough that a Fair Work Commission member reading it later can see the process was genuine.

Duty 5: Pay redundancy pay

Eligible employees whose positions are made redundant are entitled to redundancy pay calculated on their base rate of pay for their ordinary hours of work, scaled by continuous service (s 119):

• 4 weeks for at least 1 year but less than 2 years
• 6 weeks for at least 2 years but less than 3 years
• 7 weeks for at least 3 years but less than 4 years
• 8 weeks for at least 4 years but less than 5 years
• 10 weeks for at least 5 years but less than 6 years
• 11 weeks for at least 6 years but less than 7 years
• 13 weeks for at least 7 years but less than 8 years
• 14 weeks for at least 8 years but less than 9 years
• 16 weeks for at least 9 years but less than 10 years
• 12 weeks for at least 10 years

Two points on this table are easy to get wrong. First, the entitlement caps at 16 weeks, and at 10 years of service the period drops back to 12 weeks, so a long-serving employee does not attract the largest payment. Second, redundancy pay is in addition to the notice period, not instead of it.

A worked example: an employee with 6 years of continuous service earning $1,300 a week at their base rate is entitled to 11 weeks of redundancy pay, or $14,300, plus their notice period and accrued entitlements. The Fair Work Commission can reduce the amount in limited circumstances, for example where the employer obtained other acceptable employment for the employee or genuinely cannot pay (s 120), but that requires an application, not a unilateral decision.

Duty 6: Pay final entitlements

The redundancy letter should set out, and the employer must pay, everything the employee is owed on termination: wages up to the final day of employment, payment for untaken annual leave (s 90(2)), long service leave where it has accrued under state or territory law, and the notice period or payment in lieu. Check what your award, enterprise agreement or contract says about when final pay must be made, because some instruments impose specific timing obligations. Get the calculation wrong and the employee can recover the shortfall, regardless of how carefully the letter was worded.

What happens if you get it wrong

The main exposure is an unfair dismissal application to the Fair Work Commission. A dismissal is unfair if it was harsh, unjust or unreasonable, and was not a case of genuine redundancy (s 385). The genuine redundancy defence fails if the job was not truly eliminated, if you breached an award or agreement consultation obligation, or if redeployment was reasonably available. The employee has 21 days from the dismissal to apply (s 394), and the Commission can order reinstatement or compensation capped at the lesser of 26 weeks of the employee's remuneration or half the high income threshold (s 392).

There are other consequences beyond unfair dismissal. Underpaid redundancy pay and notice can be recovered through the Commission or the courts, and the Fair Work Ombudsman can investigate and enforce. If the redundancy is a cover for terminating someone because of a protected attribute such as age, illness or parental leave, the dismissal can also attract adverse action claims. None of this is avoidable by a well-worded letter; it is avoided by a well-run process, with the letter as the written record of it.

A compliance checklist for your redundancy

Run through this checklist before any notice goes out:

• Confirm the position is genuinely no longer required by anyone, for operational reasons, and keep the evidence.
• Check the applicable modern award or enterprise agreement for its consultation clause and consult in writing, allowing the employee to respond before you decide.
• Confirm the employee's continuous service and whether the small business exemption applies.
• Calculate the minimum notice period and redundancy pay from the NES tables, then check whether the contract or award is more generous.
• Draft the letter covering every element in Duty 4 and have it reviewed before it goes out.
• Hand over the written notice on the day, and retain a copy with your consultation notes and redeployment records.
• Pay all final entitlements, including notice, redundancy pay, wages, annual leave and long service leave, on time.

When to bring in a lawyer

The steps above look straightforward on paper, but the details decide the outcome. An employment lawyer can review the applicable award or enterprise agreement to confirm the consultation obligations, check which thresholds apply to your workforce, verify the notice and redundancy pay calculations, and review or draft the letter and the supporting records. That review is inexpensive relative to the cost of an unfair dismissal application, and it is where most of the risk in a redundancy actually lives. If your situation is complex, for example a large-scale restructure, insolvency, or a dispute over whether a role is genuinely redundant, advice before the letters go out is strongly recommended.

The step that decides whether your letter holds up

If there is one duty employers most often miss, it is not the pay calculation. It is the documentation that must exist before the letter is written: the consultation record and the redeployment analysis. A letter that says consultation occurred and no suitable roles were available is only as strong as the file behind it. So this week, before you draft a single sentence, pull the applicable award or enterprise agreement and the employee's service records, and work out whether consultation is required and what the notice and redundancy pay figures actually are. If the process is right, the letter is straightforward. If the process is wrong, no letter can fix it.