The restructure is approved. The new structure is mapped, the removed roles are identified, and the termination letters are drafted. Before you sign them, one decision remains open: whether to offer a displaced employee another role instead of a redundancy payout. Get it wrong and the dismissal stops being a genuine redundancy and becomes an unfair dismissal application, with reinstatement or compensation on the line.
Two ways out of a restructure, one real question
Legally, you have two paths. The first is redeployment: offer the employee a different role within your business or an associated entity and keep them on. The second is redundancy: terminate because the role is no longer required, and pay notice plus redundancy pay where it applies.
The choice is not really yours to make freely. Under s 389 of the Fair Work Act 2009 (Cth), a dismissal is a genuine redundancy only if three things hold: the job is no longer required to be performed by anyone because of changes in the operational requirements of the enterprise, you have complied with any consultation obligations in a modern award or enterprise agreement, and it would not have been reasonable in all the circumstances to redeploy the person within your enterprise or an associated entity. If a reasonable redeployment was available and you did not offer it, the dismissal is not a genuine redundancy, and under s 385(d) it can be an unfair dismissal. So the question that actually drives the decision is narrow: is there a role it would be reasonable to redeploy the person into? Everything else follows from that.
Put simply, the two paths look like this:
- Redeploy: the employee stays in a different role, you avoid redundancy pay and the cost of recruiting a replacement, and you keep the skills and institutional knowledge in the business. The catch is that the role must be reasonable and the terms must be agreed.
- Make redundant: you get a clean exit and a defined cost, but only if the redundancy is genuine, the consultation obligations were met, and the notice and redundancy payments are correct. If the redeployment test was not met, you also carry the risk of an unfair dismissal claim.
What to weigh before you decide
Work through these six considerations in order. Each one narrows the choice, and each one should end with something you can point to in writing.
Is the role actually redundant?
Start with the reason for the dismissal itself. Genuine redundancy under s 389(1)(a) requires that you no longer require the person's job to be performed by anyone, because of changes in the operational requirements of the enterprise. That covers restructures, the introduction of new technology, outsourcing decisions and downturns. It does not cover a performance problem dressed up as a restructure. If the real issue is that the employee is underperforming, run a proper performance process, because the Fair Work Commission will look behind the label.
The test is about the work, not the person. If the work still needs to be done, ask who is doing it. In Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45, the Full Federal Court refused to overturn findings that the dismissals of a group of miners were not genuine redundancies. The mine had kept contractor crews performing work at the site while making its own employees redundant, and the Commission found it would have been reasonable to redeploy the redundant employees into that contractor-performed work. The lesson is that an employer cannot assume work done by contractors is off limits when it assesses redeployment options.
What can you genuinely offer?
Redeployment under s 389(2) is assessed across your enterprise and the enterprise of any associated entity. That means the search for alternatives is wider than your own team, and in a group structure it includes related companies. A reasonable search covers current vacancies, roles that will open imminently, and genuinely available fixed-term, part-time or casual positions. You are not required to create a new role, manufacture work to avoid a payout, or invent a position that does not exist. But you are expected to make genuine enquiries and to be able to show what you looked at and why it was not suitable:
- Current vacancies: any open position the employee could perform with reasonable training, even if the duties differ from their old role.
- Imminent openings: roles that will become available shortly, if the timing is practical and the offer is not speculative.
- Associated entities: openings in related companies within the group, where a transfer is practically possible.
- Temporary work: a defined fixed-term placement that bridges to a permanent opening, if it is real and agreed in writing.
Is the fit reasonable, not identical?
The reasonableness question is the heart of the decision, and it is assessed case by case. The factors the Commission and the courts weigh include pay, status and seniority, the nature of the duties, hours of work, location, and the amount of retraining the role would require. A role does not have to be identical to the old one to be reasonable. Some differences are tolerable if the overall fit is sensible and you are prepared to support the transition with training:
- Reasonable fit: a similar pay band and seniority, duties the employee can pick up with modest training, and a location that does not demand an unreasonable commute or relocation.
- Unreasonable fit: a substantial pay cut or demotion, duties well outside the employee's skills where retraining would take months, or a move to another state without relocation support.
Where the fit depends on changing the employee's duties, hours or pay, remember that this is a contract variation. You generally cannot impose it unilaterally. Consult about the change and get the employee's agreement in writing before treating the varied role as accepted.
Have you ticked the consultation box?
Compliance with consultation is not optional. Under s 389(1)(b), a dismissal is a genuine redundancy only if you have complied with any consultation obligations in a modern award or enterprise agreement that applied to the employment. Most modern awards contain a consultation clause covering major workplace change and redundancy, and enterprise agreements often add to it. In practice that means notifying affected employees early, giving them the relevant information about the proposed changes, and genuinely considering their views and any counter-proposals before you decide. Skipping this step can turn an otherwise defensible redundancy into an unfair dismissal, even where the restructure itself was sound.
What happens if the employee refuses the offer?
Employees can refuse a redeployment offer, and that is their right. The question for you is whether the role you offered was acceptable and whether the refusal was reasonable. If you offered an acceptable alternative role and the employee declined it without good reason, you can usually proceed to redundancy. You may also be able to recover part of the cost. Under s 120 of the Fair Work Act 2009 (Cth), where the employer has obtained other acceptable employment for the employee, the Fair Work Commission can reduce the redundancy pay payable, in some cases to nil, on the employer's application. The Commission decides based on what is appropriate in the circumstances.
The word acceptable does a lot of work here, and it is judged on much the same factors as reasonableness: pay, status, duties, hours, location and the practicalities of the move. The safest approach is to document the offer in writing with the key terms, give the employee a reasonable period to consider it and to seek advice, and record the reasons for the refusal. If the offer was clearly unsuitable, for example a large pay cut or a role requiring excessive retraining, the refusal is likely to be reasonable and full redundancy pay applies.
Two further points are worth holding onto. First, the reduction under s 120 is discretionary, not automatic. The Commission weighs what is appropriate in all the circumstances, and it starts from the position that the employee was entitled to redundancy pay. Second, a refusal that is unreasonable does not by itself justify treating the employee badly in the exit process. Notice, accrued entitlements and any redundancy pay that remains due still have to be paid on time, and the termination still has to be handled fairly. If the refusal is contested, the documentation of the offer and the employee's reasons becomes the evidence you rely on.
Do the pay and notice exemptions apply?
Before you commit to figures, check who is entitled to redundancy pay at all. The National Employment Standards scale in s 119 of the Fair Work Act 2009 (Cth) ranges from four weeks' pay for between one and two years' continuous service up to a maximum of sixteen weeks for longer service. Two exclusions in s 121 matter most for smaller businesses. There is no entitlement where the employee has less than twelve months' continuous service, and there is no entitlement where the employer is a small business employer. Under s 23, that means fewer than fifteen employees, counting regular casuals, with associated entities treated as one employer. Some modern awards contain industry-specific redundancy schemes that replace the NES scale, so check the award before relying on the default figures.
Notice is a separate obligation. A terminated employee is entitled to statutory notice or payment in lieu under the NES, calculated on their period of continuous service, plus any accrued entitlements. Settle the redundancy pay question and the notice question before you communicate the outcome, so the final payment is accurate.
Stress-testing the decision with Artificer Legal
The reasonableness assessment is where most restructures come unstuck, and it is usually too late to fix once the termination letters are out. An Artificer Legal employment lawyer can help you make the call before you commit. That means stress-testing your operational case for the redundancy, mapping the redeployment search across your enterprise and associated entities so it can withstand scrutiny, and advising on whether a particular role is likely to be treated as reasonable or acceptable. If you decide to redeploy, we draft the offer letter and any contract variation so the new terms are agreed and enforceable. If you decide to proceed to redundancy, we review the consultation trail, calculate notice and redundancy pay correctly, and, where an employee has unreasonably refused acceptable alternative employment, we prepare and run the application to the Fair Work Commission to reduce the redundancy pay. Early advice is cheaper than defending an unfair dismissal application or re-running a flawed process.
The redeployment reasonableness question
The decision comes down to a single question you should be able to answer in writing before you act: would it have been reasonable, in all the circumstances, to redeploy this person into a role that was available to them? Answer it honestly, document the reasoning, and both paths become defensible. Answer it by assumption, and you hand the Fair Work Commission a reason to find the dismissal was not a genuine redundancy.
The framework is straightforward once the question is framed properly. A genuine redundancy needs a job that is genuinely gone, consultation obligations that were met, and a redeployment search across the enterprise and associated entities that was reasonable in all the circumstances. Redeployment does not mean an identical role, but the pay, status, skills, hours and location all have to add up, and any changes to terms need agreement. If the employee refuses an acceptable offer, redundancy can proceed and the redundancy pay may be reduced. If the employer is a small business, or the service is short, the payment obligations may be different. When the answer to the reasonableness question is not obvious, that is the moment to take advice before the letters go out.