Redundancy pay and when Australian employers must pay under s 119 of the Fair Work Act

Making a role redundant is one of the most legally exposed decisions an Australian business can make. When you terminate an employee because their job no longer needs to be done by anyone, s 119 of the Fair Work Act 2009 (Cth) (the Act) obliges you to pay statutory redundancy pay. It is a minimum standard under the National Employment Standards (the NES), calculated on a sliding scale from the employee's period of continuous service, at their base rate of pay for ordinary hours of work.

Get it wrong and you are not just out of pocket for the unpaid amount. Failing to pay is a contravention of the NES that can draw court penalties, and a redundancy handled without proper process can become an unfair dismissal claim with compensation on top. This guide sets out who the obligation applies to, the thresholds that decide whether you are caught, what you must pay and do, how you can lawfully reduce the payment, and what happens if you get it wrong.

Who has to pay redundancy pay

The obligation applies to national system employers, which covers most private sector businesses in Australia that employ staff. Three separate thresholds decide whether a particular termination triggers a payment under s 119.

• The termination trigger: The employment must be terminated at your initiative because you no longer require the job to be performed by anyone, or because of your insolvency or bankruptcy. If the end of employment is due to the ordinary and customary turnover of labour, s 119 does not apply, but that exception is narrow and frequently contested.
• The service threshold: The employee must have at least 12 months of continuous service with you, measured immediately before the termination (or when notice was given, whichever came first). Periods of casual employment do not count towards that service. Unpaid leave does not count towards the length of service, though it generally does not break the continuity of it.
• The small business exemption: If you employ fewer than 15 employees at the time, s 119 does not apply. The headcount is stricter than many owners expect: regular casual employees count, associated entities are counted as one employer, and the employee being dismissed (and any others being dismissed at the same time) are included in the number.

Certain employees are excluded from the redundancy pay provisions altogether. Casual employees are not entitled under s 119, nor are employees engaged for a specified period, specified task or specified season (unless a substantial reason for that arrangement was to avoid the Act's operation), employees dismissed for serious misconduct, and trainees whose employment is limited to the duration of a training arrangement. Apprentices are excluded from the redundancy pay provisions specifically. Finally, if a modern award's industry-specific redundancy scheme covers the employee, the scheme operates in place of the NES entitlement.

The core duty: pay the statutory scale at the base rate

Where the thresholds are met, the amount is not negotiable. Section 119(2) sets out a fixed scale based on the employee's period of continuous service:

Note what happens at the top of the scale. The entitlement rises to a maximum of 16 weeks in the 9 to 10 year band, then drops to 12 weeks once service reaches 10 years, reflecting how other long-service entitlements overlap with redundancy pay at very long tenure. This is the statutory table as written, so calculate from it as it stands.

The payment is calculated at the employee's base rate of pay for their ordinary hours of work. In practice that means their ordinary rate, not a figure padded with incentive payments, bonuses, overtime or most allowances. A worked example: an employee made redundant with 4 years and 6 months of continuous service and a base rate of $1,200 a week is entitled to 8 weeks' pay, or $9,600. An employee with 10 years of service at the same base rate is entitled to 12 weeks' pay, or $14,400.

A separate duty: notice of termination and final payments

Redundancy pay is not notice. It is an additional statutory entitlement, and you still have to comply with the notice requirements in s 117 of the Act. The minimum notice periods are one week for service up to one year, two weeks for one to three years, three weeks for three to five years, and four weeks for more than five years. An employee over 45 who has completed at least two years of service gets an extra week. You can pay in lieu of notice, but only if the payment covers the full rate of pay for the hours the employee would have worked during the notice period.

On top of redundancy pay and notice, you must finalise any accrued but untaken annual leave (and any other accrued entitlements such as long service leave where applicable) in the employee's final payment. Redundancy pay is generally not treated as ordinary time earnings for superannuation guarantee purposes, so super is usually not payable on it, but the interaction with the other components of the final payment is worth confirming with your payroll adviser before you process it.

The genuine redundancy duties: consult and consider redeployment

Paying the s 119 amount is only part of the job. To defend the dismissal against an unfair dismissal claim, the redundancy must be genuine within the meaning of s 389 of the Act. A dismissal is a genuine redundancy only if all of the following are satisfied.

• The job is genuinely gone: You no longer require the job to be performed by anyone, because of changes in the operational requirements of your enterprise. The role must disappear, not simply be given to someone else under a different label.
• You complied with consultation obligations: If a modern award or enterprise agreement applies to the employee, you must comply with its consultation obligations about the redundancy. Most modern awards require you to notify affected employees of major workplace changes likely to result in redundancy and to discuss the changes with them before a final decision is made.
• Redeployment was not reasonably available: The dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances to redeploy the employee within your enterprise or the enterprise of an associated entity. That includes considering roles at other locations or with reasonable retraining, and documenting why any options were not suitable.

The order matters. Consultation must happen before the final decision is made, not as a courtesy after it. A decision already made and announced cannot be genuinely discussed, and the Fair Work Commission has regularly treated pre-decision consultation as central to whether a redundancy is genuine. The same applies to redeployment: you need to be able to show what you looked at, when, and why it was not reasonable.

Cutting the payment lawfully: the s 120 application

You cannot simply decide to pay less than the s 119 scale, and offering the employee another job does not by itself remove the obligation. Section 120 of the Act provides two limited grounds for reduction, and both require an application to the Fair Work Commission:

• Other acceptable employment: You obtained other acceptable employment for the employee, or made an offer of it that they accepted.
• Inability to pay: You genuinely cannot pay the amount.

On application, the Commission may determine that the redundancy pay is reduced to a specified amount, which can be as low as nil. Until it makes that determination, your liability remains the full s 119 amount, so the application should be made before you finalise the employee's payment. Related situations also affect the obligation: in a transfer of employment, service with the first employer can count as service with the second, which can remove the redundancy pay obligation, and an employee who rejects an offer of employment from another employer on substantially similar terms that recognises their service can lose the entitlement. These situations are fact-sensitive, so get advice before relying on them.

The cost of getting it wrong: penalties and unfair dismissal

The consequences of failing to pay redundancy pay are not limited to the debt. Under s 44 of the Act, an employer must not contravene an NES provision, and a contravention is a civil remedy provision enforceable in the Federal Court, the Federal Circuit and Family Court of Australia (Division 2), or an eligible state or territory court. The maximum penalty is 60 penalty units, or 600 penalty units for a serious contravention, and for a body corporate the maximums are five times those amounts. With a Commonwealth penalty unit worth $330 since 7 November 2024, that is up to $19,800 for an individual and $99,000 for a company, rising to $198,000 and $990,000 respectively for serious contraventions. The Fair Work Ombudsman can investigate and litigate these matters.

Separately, an employee who has been dismissed can challenge the redundancy. If the dismissal was not a genuine redundancy, the Commission can order reinstatement, or compensation capped at 26 weeks' pay if reinstatement is not appropriate. That exposure exists even where you paid the full s 119 amount, because the money does not cure a defective process. The employee also has a 21-day window from the dismissal to lodge an unfair dismissal application, so the risk crystallises quickly.

A compliance checklist for your next restructure

Work through this checklist in order before you announce anything to affected employees:

• Confirm the headcount: Count every employee, including regular casuals, any associated entities, and the employees being dismissed, before assuming the small business exemption applies.
• Check award and agreement coverage: Identify the applicable modern award or enterprise agreement, its consultation clause, and any industry-specific redundancy scheme.
• Consult before you decide: Notify affected employees of the proposed changes, invite input, and genuinely consider alternatives such as reduced hours, job sharing or retraining.
• Explore redeployment: Search your own business and any associated entities, including roles that might suit with reasonable training or relocation, and record what you considered.
• Calculate the payment: Work out continuous service accurately, apply the s 119 table, and pay at the base rate for ordinary hours.
• Pay everything else: Give the required notice (or pay in lieu), and finalise accrued annual leave and other entitlements.
• Apply to the Commission if needed: If you rely on other acceptable employment or inability to pay, lodge the s 120 application before finalising payments.
• Document the process: Keep the business case, consultation notes, redeployment assessments, calculations and final letters. If a claim ever comes, your paper trail is your defence.

When to get a lawyer involved

A straightforward, well-documented redundancy with a clear award coverage picture can often be handled in-house. Legal help becomes valuable when the facts are less clean: a headcount hovering near the 15-employee threshold, roles across associated entities, an award with a redundancy scheme, a transfer of employment in the background, or a genuine inability to pay. A lawyer can audit your calculations, run the s 120 application to the Commission, review or draft the consultation process before it starts, and respond if an unfair dismissal application lands. Engaging a practitioner before you announce the redundancy is far cheaper than defending a claim afterwards.

Consult before you decide: the step employers most often skip

If you take one thing from this guide, make it this: the redundancy decision itself is not where the risk lives. The risk lives in the process around it. Businesses that pay the s 119 amount on time still lose unfair dismissal claims because they announced the decision first and consulted afterwards, or because they never seriously considered redeployment within a related entity. Before you tell anyone their role is gone, pull together three things: your exact headcount on the day, the consultation obligations in the award or agreement that covers the employee, and a written list of every role they could reasonably have moved into. If all three are in order before the announcement, you have done most of what the law requires.