Introduction to redundancy

Redundancy happens when an employer either:

  • doesn't need an employee’s job to be done by anyone, or
  • becomes insolvent or bankrupt.

Redundancy can happen when the business:

  • introduces new technology (eg. the job can be done by a machine)
  • slows down due to lower sales or production
  • closes down
  • relocates interstate or overseas
  • restructures or reorganises because a merger or takeover happens.

aka they're not needed

"Genuine" redundancy vs other redundancy 

Genuine redundancyOther redundancy 

A genuine redundancy is when:

  • the person’s job doesn't need to be done by anyone
  • the employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.

A genuine redundancy occurs when the employer has made a decision that the job no longer exists and terminates the employee's employment. - Last modified: 20 Jul 2020 QC 26218

A dismissal is not a genuine redundancy if the employer:
  • still needs the employee’s job to be done by someone (eg. hires someone else to do the job)
  • has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

A non-genuine redundancy occurs when the employee:

  • is dismissed because they've reached normal retirement age
  • is their age-pension age or older on the day of dismissal
  • leaves voluntarily
  • has their contract terminated
  • is dismissed for disciplinary or inefficiency reasons.

Last modified: 20 Jul 2020 QC 26218 

Last modified: 25 Jun 2020 QC 27128

Genuine redundancy for tax purpose only occurs when the position becomes unavailable (eg company takeover, restructure), NOT because of voluntary termination/dismissal. See below


Payments included in ETPs
Payments NOT included in ETPs

Last modified: 20 Jul 2020QC 26218

Tax-free part of genuine redundancy and early retirement scheme payments

Base amount + (service amount x years of service)        Last modified: 20 Jul 2020 QC 26218


Table 20: Genuine redundancy and early retirement scheme payment limits

Last modified: 22 Jul 2020QC 18123 

Income yearBase limitFor each complete year of service

Table 33: Tax free limits for bona fide redundancy and early retirement scheme payments (prior 2007)

Last modified: 22 Jul 2020QC 18123


Income yearBase limitFor each complete year of service


For FY2017:

Base amount = $9,936

Service amount = $4,969 (indexed annually).

Eg: if employee worked 17 years, the tax free threshold is 9,936 + 4,969 x 17 = $94,409

If he was paid $100,000 as redundancy payment, the amount in excess 100,000 - 94,409 = $5,591 is taxed as ETP. $94,409 is tax free.

Time in Lieu of notice table

see here


Redundancy table

Redundancy pay does not apply when

  • The job can be replaced by someone else (definition of the redundancy)
  • The business employs fewer than 15 staff

Who doesn't get redundancy? 

Some employees don’t get redundancy payments when their job is made redundant.

The following employees don’t get redundancy pay:

  • employees whose period of continuous service with the employer is less than 12 months
  • employees employed for:
    • a stated period of time
    • an identified task or project
    • a particular season
  • employees terminated because of serious misconduct
  • casual employees
  • trainees engaged only for the length of the training agreement
  • apprentices
  • employees terminated because of ordinary and customary turnover of labour.
  • employees of a small business. 

There are special arrangements for employees whose employment transfers when the business they work for is sold. Find out more on our When businesses change owners page.

What is a small business?

A small business is one that employs fewer than 15 employees at the time when notice is given. 

Some small businesses don’t have to pay redundancy pay when making an employee redundant. To see if small businesses need to pay redundancy pay, select your industry in Redundancy pay and entitlements. 

An award or agreement may have different redundancy provisions which could apply instead of those listed above. These provisions, such as industry-specific redundancy schemes, can override the listed exceptions. For example, the industry-specific redundancy scheme in the Building and Construction General On-site Award means that small business employers may need to provide redundancy payment.

To figure out whether the business is a small business, 

  • count all employees employed at the time of the dismissal including:
    • the employee and any other employees being terminated at that time
    • regular and systematic casual employees employed by the business at the time of the redundancy (not all casual employees)
    • employees of associated entities, including those based overseas.
  • a casual employee is not to be counted unless, at that time, they have been employed on a regular and systematic basis
  • associated entities are taken to be one entity
  • the employee being terminated and any other employees being terminated at that time are counted.

The time of dismissal is when an employer provides an employee with their notice of termination. It doesn't matter if an employee works out their notice period or not.