Redundancy redeployment obligations for Australian employers

If you are restructuring and a role is no longer needed, you cannot simply dismiss the employee who fills it. Before any redundancy is lawful, you must consider whether that employee could be redeployed to another role in your business, or in a business connected to yours. Overlook that step and a dismissal that looks like a legitimate redundancy can become an unfair dismissal claim.

This obligation is the part of the redundancy process Australian small and medium businesses most often get wrong. This article sets out who the redeployment obligation applies to, what the law requires you to do, how redundancy pay is calculated when a genuine redundancy does proceed, and what happens if you get it wrong.

What the redeployment obligation is

Under s 389 of the Fair Work Act 2009 (Cth) (the Act), a dismissal is only a case of genuine redundancy if all of the following are true:

• The employer no longer requires the employee's job to be performed by anyone, because of changes in the operational requirements of the enterprise.
• The employer complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
• It would not have been reasonable in all the circumstances for the employee to be redeployed within the employer's enterprise, or the enterprise of an associated entity.

The third requirement is the redeployment obligation. The Act does not force you to redeploy in every case, but if redeployment was a reasonable option and you did not offer it, the dismissal is not a genuine redundancy.

Who the obligation applies to

The redeployment obligation applies to any employer in the national workplace relations system who dismisses an employee because their job is no longer required. There is no headcount threshold and no minimum period of service that switches the obligation on. A business of three employees and a business of three hundred both have to consider redeployment before making a position redundant.

That said, there are two scope points worth noting:

• Associated entities are in scope: For these purposes, an associated entity has the meaning given by s 50AAA of the Corporations Act 2001 (Cth). That covers related companies, such as a holding company and its subsidiaries, and commonly controlled entities. If you run several companies that are associated, a role in any of them can be a redeployment option.
• The consultation limb depends on your instruments: Whether you have a consultation obligation, and what it requires, comes from the modern award or enterprise agreement covering the employee, not from the Act itself. In practice almost every award and agreement contains consultation terms about major workplace change, so check the instrument before assuming there is nothing to do.

There is a separate, related obligation worth knowing about: if you decide to dismiss 15 or more employees for economic, technological, structural or similar reasons, you must give Services Australia (Centrelink) written notice of the proposed dismissals before they happen, under s 530 of the Act. Failing to notify is a civil remedy provision and can attract penalties.

The genuine redundancy test

The starting point is to confirm the redundancy is real. The job must no longer be required to be performed by anyone because of changes in the operational requirements of the business. That might be a restructure, new technology doing the work, a downturn, or a site closure.

A redundancy is not genuine if the work still needs to be done and someone else is simply doing it under a different title. Likewise, if the role is redundant but you have not complied with your consultation obligations under the applicable award or agreement, the dismissal fails the genuine redundancy test even though the role has genuinely disappeared.

The Fair Work Ombudsman puts the point simply: a dismissal is not a genuine redundancy if you still need the job done by someone, you have not followed the consultation requirements, or you could reasonably have given the employee another job in your business or an associated entity.

The redeployment duty in practice

The legal test is whether it would have been reasonable in all the circumstances for the employee to be redeployed. That is an objective question, and the Fair Work Commission (FWC) will answer it with the benefit of hindsight. The case law, including Ulan Coal Mines Ltd v Honeysett (2010) 199 IR 363 and more recently Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45, shows the factors that matter:

• What positions were available: This includes vacant roles and roles that could reasonably be made available, in your business and in any associated entity. In Helensburgh Coal, the Full Federal Court accepted that the possibility of redeploying employees to work being performed by contractors at the same site could be considered. The reasonable employer looks beyond the handful of obvious vacancies.
• Whether the employee could do the role: Consider the nature of the position, the qualifications required, and the employee's skills and experience. A role the employee cannot perform, and could not reasonably be trained to perform, is not a realistic redeployment option.
• The employee's circumstances: Location, hours, and the impact of a move to a materially different role all feed into what is reasonable.
• What the employer actually did: The FWC looks for genuine consideration, not a box-ticking exercise. An employer who announces the redundancy and only afterwards realises there was a suitable vacancy has not met the standard.

You are not required to invent a role that does not exist, and you are not required to dismiss another employee to create a vacancy. But where a suitable role exists and the employee could reasonably fill it, the redundancy will not be genuine if you dismiss them instead.

Consulting before deciding

Consultation is the process step that protects the genuineness of a redundancy. Your award or enterprise agreement will usually require you to notify affected employees of proposed major changes, give them information about the changes and their likely effects, and genuinely consider their ideas and suggestions before making a final decision. Doing this in writing, and recording the consultation, is the practical way to show the FWC that the requirement was met.

Making an offer of alternative employment

Where redeployment is identified, the usual path is to offer the employee the alternative role. The offer should be made in writing, with enough detail about duties, pay, hours and location for the employee to make an informed decision.

If the employee refuses an offer of acceptable alternative employment, different consequences follow. Under s 122 of the Act, an employee who unreasonably refuses an offer of acceptable alternative employment can lose the entitlement to redundancy pay. And under s 120, if you obtain other acceptable employment for the employee, you can apply to the FWC for a determination reducing the redundancy payment, potentially to nil. These provisions are why documented offers matter: they are your evidence if the employee declines.

Redundancy pay when the redundancy is genuine

A genuine redundancy does not remove the obligation to pay redundancy pay where the employee is entitled to it. Under s 119 of the Act, an employee whose employment is terminated because their job is no longer required is entitled to redundancy pay calculated on their period of continuous service and their base rate of pay.

An employee qualifies once they have at least 12 months of continuous service, and the base rate of pay excludes bonuses, loadings, allowances, overtime and penalty rates. The NES scale is as follows:

The scale drops to 12 weeks at the ten year mark because employees with that length of service also accrue long service leave. A modern award, enterprise agreement or employment contract can provide for more generous redundancy pay, but none of them can reduce the NES minimums.

The small business exemption

The NES redundancy pay obligation does not apply if the employer is a small business employer. Under s 23 of the Act, an employer is a small business employer if it employs fewer than 15 employees at the relevant time. Regular casual employees count towards the 15, and associated entities are treated as one employer for this calculation, so a group of companies cannot sidestep the threshold by splitting staff across entities.

The exemption from redundancy pay does not exempt a small business from the redeployment obligation, the consultation obligations, or the genuine redundancy test. And if an award, enterprise agreement or contract promises redundancy pay, that promise still binds regardless of the NES exemption.

Consequences of a non-genuine redundancy

If a dismissal is not a genuine redundancy, the employee can apply to the FWC for an unfair dismissal remedy. The application must be made within 21 days of the dismissal taking effect, under s 394 of the Act.

If the FWC finds the dismissal was harsh, unjust or unreasonable, the remedies can include reinstatement or compensation. The compensation available under s 392 of the Act is capped at the lesser of 26 weeks of the employee's pay or half the high income threshold, so a failed redundancy can be substantially more expensive than doing the redeployment analysis properly in the first place. There is also a risk of a general protections claim where the redundancy masks a prohibited reason.

A compliance checklist for making a role redundant

A dismissal will only survive scrutiny if you can show each step was taken and recorded. Work through the following steps in order before you dismiss anyone:

• Confirm the job is genuinely no longer required by anyone, for operational reasons, and document why.
• Identify the modern award or enterprise agreement that covers the employee and follow its consultation process, in writing.
• Notify affected employees of the proposed change, give them the relevant information, and consider their responses before deciding.
• Map every position in your business and in associated entities, including roles held by contractors, and assess each one against the employee's skills, qualifications and circumstances.
• Consider whether short training would make the employee suitable for a role that is otherwise a close fit.
• Record the redeployment assessment: what roles were considered, why they were unsuitable, or why the employee was offered one.
• If you offer an alternative role, put the offer in writing, and if it is refused, keep the record for any later dispute about redundancy pay.
• Calculate redundancy pay against the NES scale, an award, an agreement or a contract, whichever is most favourable, and remember the small business exemption does not remove the redeployment obligation.
• If 15 or more employees are affected, give Services Australia written notice before the dismissals happen.

When to get legal help

The redeployment assessment is a judgement call, and the FWC makes it with hindsight. A lawyer can help you work through whether a particular role is a realistic option, whether the consultation steps in your award or agreement have been satisfied, and how to structure an offer of alternative employment. Legal advice is especially worthwhile where there are associated entities, where a group of roles is being cut at once, or where you are relying on the small business exemption.

The redeployment step employers most often miss

Of the three limbs of genuine redundancy, the redeployment limb is the one that turns otherwise defensible restructures into unfair dismissal claims. Employers document the operational reasons and follow the consultation process, but assume redeployment was not an option without actually testing it. The FWC does not need to find that redeployment would certainly have worked, only that it would have been reasonable in all the circumstances to try. Before you hand out a redundancy notice, list every position in your business and its associated entities, and work through, on paper, why each one is not a reasonable option for the affected employee. That assessment is the difference between a genuine redundancy and an expensive unfair dismissal application.