Redundancy entitlements in Australia: what a redundancy package must include

As an HR leader conducting a redundancy process, you need to balance the needs of the business with a human-focused approach towards the affected employees. Including optional benefits alongside legally mandated Australian redundancy entitlements will ensure the organisation remains compliant whilst positioning it as a people-first employer of choice. 

Redundancy entitlements in Australia cover both pay and notice. 

When an employee’s role no longer exists, they may be eligible for redundancy payment in Australia if: 

• They have worked for their employer for at least one year.
• They are covered under the national workplace relations system.
• The employer employs at least 15 people.

The exact amount the employee is entitled to depends on how much continuous service they have with the company, with longer service resulting in higher payments. Unpaid leave does not count towards continuous service. 

The amount of redundancy pay increases for every year of service. For example: 

• An employee with service of 1-2 years is entitled to 4 weeks’ pay
• An employee with service of 5-6 years is entitled to 10 weeks’ pay

The Fair Work website has the full breakdown. After 10 years, the redundancy pay drops as long service leave is usually paid at the same time. Accrued leave must also be paid. 

There is no entitlement to redundancy pay if: 

• The employee has been with the business for under a year.
• The engagement was not permanent (e.g. seasonal, project-based, casual, or set period contracts).
• The employee is terminated for serious misconduct.
• They are trainees or apprentices.
• The business employs fewer than 15 people in total.

The National Employment Standards set the minimum notice period employers must give to employees to end their employment. They may also offer payment in lieu of notice. Notice of termination must be given in writing. As with redundancy payments, notice periods increase based on the employee’s length of service. For example: 

• An employee with under a year of service is entitled to one week’s notice.
• An employee with over five years’ service is entitled to 4 weeks’ notice.

Employees aged over 45, with a minimum of two years’ service, receive an extra week. The full breakdown, including exemptions, can be found on the Fair Work website. 

The Fair Work Act and National Employment Standards set out the legal minimum that an employee is entitled to. In reality, however, many businesses choose to go beyond the legal minimum. 

While it may seem counter-intuitive to spend additional money on employees who will no longer be contributing to the business, there are, in fact, valuable benefits:

• Generous packages mean employees are more likely to volunteer for redundancy, thereby reducing compulsory lay-offs and minimising the potential for unfair dismissal claims.
• Productivity and the morale of staff surviving the redundancy process are maintained, as they see affected employees being well supported. 
• The company can show it cares for its staff, in good times and bad, as their employer brand directly affects future talent attraction and retention. 

Minimum redundancy pay and notice periods are non-negotiable. What other redundancy entitlements do Australian businesses offer? 

Employee assistance programs are designed to offer counselling and support services for employees dealing with a range of issues. Most aren’t specifically designed for redundancy support, but existing programs can be leveraged during lay off processes. 

Elements of EAPs, such as stress management workshops, counselling, and budget advice, are directly applicable to redundancy.

Many employers offer above-minimum redundancy payments. The exact amount can be dictated by the original employment contract, a company-wide redundancy policy, or an Enterprise Agreement. 

The enhanced pay can be determined in various ways, with options including: 

• An additional weeks’ pay per year of service.
• One-off bonuses.
• Calculations based on total earnings (for example, including bonuses and overtime), rather than the base rate of pay.
• Leave payments, such as for unused sick leave.

Outplacement services are designed specifically for businesses and employees going through a process of redundancy. Providing direct support to affected employees, the aim of these services is to ensure the exiting workers transition into new, meaningful work as quickly as possible. 

Typical outplacement services include: 

• Career coaching.
• Job search strategies.
• Resume and LinkedIn profile writing. 
• Interview preparation. 
• Offer negotiation.

Some outplacement providers also offer services tailored to the needs of displaced executives, which will include: 

• Networking strategies.
• Coaching tailored to consulting, retirement, board roles, private equity, or portfolio careers.
• Executive coaching.

All outplacement firms will also offer emotional support, enabling affected employees to cope with the complex feelings associated with job loss, such as financial concerns, loss of identity, betrayal, anger, shock, grief, anxiety, and shame. 

This support ensures your departing employees can leave with their heads held high and with a coach in their corner to ease the transition. 

To minimise exposure to legal risk and protect your employer brand, follow these 5 steps to structure redundancy entitlements in Australia.

1. Check statutory requirements for each affected employee

The first, and most basic step, is to determine what each employee is entitled to by law. Use the Fair Work website to assess the pay, notice, and leave entitlements for each individual employee, based on the length of their continuous service with the business. 

2. Check existing awards and enterprise agreements 

When employees joined the company, their award or enterprise agreement may have specified enhanced conditions, which will affect the final redundancy package. Determine how these agreements impact each affected member of staff. 

Explore internal redeployment before moving straight to redundancy, as this can keep valuable institutional knowledge within the business, reduce hiring costs, and avoid the need for redundancy pay.   

3. Compile enhanced redundancy entitlements

Decide what additional redundancy support the business can offer to affected employees, based on budget, goodwill, legal and reputational risk, past precedents, and industry norms. 

4. Source transitional support 

Engage an outplacement company to work with affected employees, minimising the time it takes them to land a new role. Outplacement is not a legal requirement, but is increasingly viewed as best practice by Australian employers carrying out redundancies. 

5. Consult with employees 

To ensure the redundancy is genuine, consultations must be held in line with the requirements of the relevant award or enterprise agreement. Including details of enhanced redundancy entitlements at this stage can ease the blow and ensure employees are aware of the support available immediately. 

For that reason, it is advised to engage with an outplacement provider before the redundancy process reaches this stage. 

Redundancy entitlements in Australia are not set in stone and can be negotiated between the employee and the employer. 

As part of the redundancy consultation process, employees are entitled to representation during the consultancy. That could be from a union representative or another support person of their choice. Negotiations are most likely to focus on pay, notice, or leave, or a combination of those factors, but could also include additional benefits such as outplacement support. 

While HR teams should decide on redundancy entitlements at an early stage, they should also be prepared to negotiate if necessary. Negotiating a redundancy package in Australia does not need to be expensive – options such as offering LinkedIn recommendations and references or transferring ownership of company phones and laptops come at minimal cost to the business. 

Minimum levels of redundancy pay are calculated based on the length of continuous service an employee has with the company. The Fair Work Ombudsman has a redundancy calculator covering both pay and notice periods, showing you how to calculate redundancy pay in Australia.

Employers can offer notice periods, as set out by the Fair Work Act, or can offer payment in lieu of the same period. 

A good redundancy package goes beyond the legal minimum and includes outplacement services, enhanced severance pay, and extended notice periods. 

To maintain productivity and morale, avoid unfair dismissal claims, and enable talent attraction and retention in the future, redundancy entitlements must go beyond the bare minimum. 

The sooner your company engages with an outplacement specialist, the smoother the process will run. Contact Careerminds today to find out whether we’re the right partner for you. We’re proud of our 98% placement rate and have experts on hand ready to discuss your requirements.