Redundancy is about the role, not the person. That single sentence explains most of what follows, and most of what goes wrong. A redundancy is genuine when the job is no longer required to be performed by anyone because of changes in the operational requirements of the business — and when you have met your consultation and redeployment obligations.
The three tests
- The job is genuinely no longer required. Because of restructure, downturn, automation, closure, or work moving elsewhere. If you make a role redundant and hire someone to do substantially the same work three weeks later, it was not genuine.
- You complied with any consultation obligation. Almost every modern award and registered agreement contains a consultation clause covering major workplace change. Where it applies, you must notify affected employees, discuss the change and its effects, consider their ideas, and do so before a final decision is made. Consulting after the decision is announced is not consultation.
- Redeployment was not reasonable. You must consider whether the employee could reasonably be redeployed within the business or an associated entity. In a small business the answer is often genuinely no — but you have to have looked, and be able to say what you looked at.
Fail any of these and the dismissal is not a genuine redundancy, which means the unfair dismissal exclusion does not apply.
What you owe
Notice is payable under the National Employment Standards, or the contract or award if more generous.
Redundancy pay under the NES scales with continuous service, from four weeks at one year up to a maximum of sixteen weeks. But there is an important exception: small business employers — generally fewer than 15 employees — are not required to pay NES redundancy pay.
Two cautions on that exemption. First, some awards and agreements contain their own redundancy provisions that apply regardless. Second, the headcount includes regular and systematic casuals and associated entities, and it is assessed at the relevant time — a business that has recently crossed 15 may be liable.
Final pay otherwise follows the usual rules: outstanding wages, accrued annual leave and loading if applicable, and long service leave if the threshold is met.
Doing it decently
The legal minimum and the right thing to do are not the same here, and small businesses in particular are judged by their communities. Where you can:
- Tell people early and honestly, rather than letting them work it out from the silence.
- Explain the business reason. People handle bad news considerably better than they handle being managed.
- Offer a reference, and mean it.
- Be flexible about the notice period if they find something else.
- Talk to the people who remain. Survivors of a redundancy round are often the group nobody thinks to support, and they are the ones you need.
The mistakes that cost most
- Using redundancy to avoid a performance conversation. Very common, easily unpicked, and it converts a manageable process problem into an unfair dismissal with a poor defence. If it is performance, run the performance process.
- Selecting the person rather than the role. Where several people do similar work, the selection criteria must be objective, job-related and applied consistently — and written down before the selection, not after.
- Skipping consultation because the outcome was inevitable. The obligation is not conditional on the outcome being in doubt.
- Assuming the small business exemption covers you without checking the headcount or the award.
Redundancy is one of the few areas where the process genuinely changes the outcome. If you are contemplating one, it is worth an hour of advice before you speak to anyone.