All About Redundancy
Understanding redundancy in a small business
How does Australian law define redundancy in 2026?
Redundancy occurs when an employee's job is no longer required and the employer decides that it should not be performed by anyone else. This situation can arise for various reasons, such as business downturns, technological changes, or restructuring for efficiency.
What makes a redundancy genuine to prevent unfair dismissal?
According to the Fair Work Act of 2009 under Australian law, redundancy is only "genuine" if the employer:
no longer requires the job to be done by anyone
follows the consultation requirements in the relevant award or enterprise agreement
exhausts all reasonable redeployment opportunities within the organization
If the redundancy is genuine, the employee cannot apply for unfair dismissal. If the redundancy is not genuine, employees can make claims for unfair dismissal within 21 days of being made redundant. Source: Fair Work Ombudsman - Genuine Redundancy
Following the High Court decision in Helensburgh Coal v Bartley [2025], employers must now consider if work performed by contractors could be "insourced" to provide a redeployment role for a redundant employee. Failure to investigate this may invalidate a genuine redundancy claim. Source: High Court of Australia - Helensburgh Coal Pty Ltd v Bartley (2025)
| Feature | Genuine Redundancy |
Potential Unfair Dismissal |
|---|---|---|
| Operational need | Role eliminated due to tech/downsizing. | The employer hires a replacement for the same role. |
| Consultation | Formal meetings are held as per the award. | The employee is notified via email without discussion. |
| Redeployment | No suitable roles are available in the group. | A vacancy exists that the employee could fill. |
Are small businesses exempt from redundancy pay?
Generally, small business employers (under 15 staff) are exempt from NES redundancy pay. However, critical exemptions apply, for instance:
Redundancy pay is specified in an employee's award, contract, or agreement
The business is covered by an industry-specific redundancy scheme in an award or agreement
The business became a "small business" due to insolvency-related downsizing after December 15, 2023
Source: Fair Work Ombudsman - Who doesn’t get redundancy pay
Since December 2023, a "Closing Loopholes" amendment has eliminated the exemption for large businesses that shrink to small businesses due to insolvency. Source: Fair Work Commission - Closing Loopholes Act
How should small businesses manage the redundancy process?
If you and the employee agree on the redundancy, you could consider signing a Deed of Release in which the employee agrees not to make an unfair dismissal claim against you.
Next Steps
If you need to make an employee redundant, do it the right way, with Law Team to support you every step of the way.
About the Author: Erin Vassallo
Erin Vassallo is the Principal Solicitor and founder of Law Team, a values-led law firm with a strong reputation across New South Wales and Queensland. With over two decades of experience in commercial, construction, and property development law, Erin is a trusted advisor to developers, landowners, and business owners navigating complex projects and legal risk.
Her hands-on experience includes joint ventures, structuring development deals, contract negotiation, risk mitigation, and project governance across residential, commercial, and mixed-use developments. Erin holds qualifications in law, political science, mediation, and disruptive strategy (Harvard Business School) and is the founder of Certified BCorp Law Team, committed to ethical business practices and social impact
Frequently Asked Questions
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The National Employment Standards (NES) specify that notice periods range from one to four weeks, depending on the length of continuous service. Employees over 45 with at least two years of service are entitled to an additional week of notice. You can either have the employee work during this time or pay them "in lieu".
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Yes. You can proceed with a redundancy while an employee is on annual, sick, or parental leave, as long as the reason is genuine and unrelated to the leave. You must still meet all consultation requirements and provide written notice, which may coincide with their leave period. Source: Fair Work Ombudsman - Ending Employment During Leave
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When an employee is made redundant, any accumulated but unused annual leave and long service leave (where applicable) must be paid out as part of their final pay. These leave payouts are separate from redundancy severance and do not qualify as a genuine redundancy payment for tax purposes. While genuine redundancy payments may include a tax-free component under ATO guidelines, unused leave is generally taxed at the employee’s marginal tax rate. Employers must report these amounts separately on the employee's income statement.